The city of Sun Valley called on voters Tuesday for permission to lower a portion of the local option tax in a special election—and the voters responded with resounding support.
The May 22 special election saw 261 voters, with 209, or 80 percent, voting in favor of lowering the tax and 52, or 20 percent, voting to keep it the same. The change required at least 60 percent voter approval. Sun Valley saw 29 percent of registered voters turnout for the Special Election.
The City Council is expected to pass the ordinance approved by voters in an open meeting today, May 23.
It will lower the tax for retail hard goods from 3 percent to 2 percent, a rate closer to Ketchum's 1 percent retail tax. The change will go into effect in October 2007, and will remain in place for 10 years.
For years, merchants in Sun Valley have voiced agitation over the increased tax shoppers face when they leave Ketchum and head a mile up the road.
"This is good for the retailers," Sun Valley City Councilman Nils Ribi said. "Lower tax rates mean more business."
The 1 percent drop in the tax on select hard-good retail sales will represent an estimated $89,000 loss for the city. To fill a small portion of the revenue gap, the city proposes to subject lift ticket sales in the city of Sun Valley to local option tax collections. That is expected to bring in about $7,400 annually.
Mayor Jon Thorson said he expects the growth of the community will increase local option tax revenue naturally over time.
Sun Valley's local option tax on lodging and liquor by the drink will remain at 3 percent, as will its tax on restaurant meals and intangible goods such as golfing greens fees.
Tuesday's vote could head off a potential effort in the state Legislature to mandate an across-the-board cap of 2 percent on local option taxes. Sun Valley officials have said that one of their motivations in putting the issue to local voters was to nullify that effort in order to keep the city's remaining 3 percent taxes.
By state law, only resort towns with populations of fewer than 10,000 can collect local option taxes. The intent is to use the additional revenue to help mitigate the impacts of tourism on a community. Sun Valley's local option tax contributes about 32 percent of its general fund revenues.
"The importance of the favorable vote is really significant," Ribi said. "It will help ensure a town like Sun Valley has the power to mitigate the effects of tourism on property tax payers. And it shows the Legislature that we are attempting to be very reasonable."