Next spring, residents of Hailey will have the opportunity to approve or deny a city-backed ballot measure to implement a local option tax.
If approved by a required 60 percent majority on May 23, funds from the LOT would help offset the impact tourists have on city amenities like parks, streets and sidewalks.
During a public workshop held Monday, Jan. 2, the council and other participants discussed the recommendations of an ad-hoc committee that was appointed by Mayor Susan McBryant in early 2005 to look into the feasibility of placing the LOT question to a vote.
One of the primary questions the ad-hoc committee sought to answer was whether Hailey can legally use a local option tax to generate tax revenue. To implement a local option tax, Idaho statute says a city must derive a major portion of its economic well-being from tourist-related activities.
Because many Hailey commercial operations, such as the airport, car rental companies, restaurants and motels, cater heavily to tourists, the committee decided the city does qualify as a tourist destination and should put the LOT to a vote.
"In essence, they (the ad-hoc committee) felt the legislative requirements were met," McBryant said.
The City Council also decided to accept the ad-hoc committee's recommendations in terms of what business activities to tax and at what percentage rate. Specifically, the committee said the city should enact a sales tax of 1 percent on restaurant food, 2 percent on liquor by the drink and 3 percent on rental cars and hotel rooms.
If approved by voters, the LOT would yield approximately $326,000 in its first year, the committee estimated.
The ad-hoc committee originally considered other sources of tax revenue like building supplies and retail beer and wine, but in the end rejected them because they were deemed to be too burdensome on city residents.
The city's next step is to finalize a draft version of the LOT ordinance and make a call for the election by March 27. Additionally, the council will also have to decide what the duration of the tax should be.
Council members generally agreed that a four-year duration would best suit Hailey's needs. If the LOT is approved in May, the city would likely ask Hailey voters to reauthorize the LOT before it expired in 2010.
During the coming months, city officials and members of the Hailey Chamber of Commerce will be conducting several open-house sessions to educate voters on the LOT issue.
Hailey voters shouldn't fear the LOT, said Jim Spinelli, executive director of the Hailey Chamber, because approximately 90 percent of the tax will be borne by visitors and owners of second homes.
"They're not on people who live here," he said. "I feel good about it. I think it will go through."
