Sales taxes are the thermometer for reading a city's temperature.
And all signs point to the economies of Sun Valley and Ketchum having more than a cold. In comparison with American cities, Ketchum and Sun Valley's sales tax declines are on par with one of the sickest economic performers in the nation—Cleveland.
That's the message Sun Valley City Councilman Bob Youngman has been spreading in his presentations to the Sun Valley and Ketchum city councils. The fact that the area is suffering through a recession is common knowledge, but are Ketchum and Sun Valley worse off than other resort towns and other American municipalities?
Youngman has spent weeks compiling data on the towns' local-option tax revenues dating back to 1991 in an effort to objectively analyze the depth of the decline. He accounted for inflation to make year-to-year comparisons fair.
And Youngman's findings have confirmed lawmakers' fears.
"I saw this (presentation) last week and got sick to my stomach," said Ketchum Mayor Randy Hall after a presentation by Youngman on Monday during a Ketchum City Council meeting.
Ketchum imposes a 2 percent sales tax on lodging and by-the-glass liquor sales, and a 1 percent tax on retail sales and building materials, with the goal of offsetting the impacts of tourism on city services and infrastructure.
Sun Valley imposes a 3 percent sales tax on lodging, by-the-glass liquor sales and tickets to events in the city. A 2 percent tax is imposed on most retail sales and a 1 percent tax on ski lift tickets and season passes.
Both cities saw their LOT collections grow from 1991 to 2000 as more business was being done. Ketchum's LOT grew by more than 40 percent, and Sun Valley's by about 85 percent.
But the next decade wasn't so kind.
From 2001 to 2009, Ketchum's LOT decreased by about 35 percent and Sun Valley's by 23 percent. If Ketchum's LOT had stayed at least constant from 2001 to last year, it would have made about $2 million more, and Sun Valley about $1.8 million more.
"All that money is gone," Youngman said. "It's down the river. It will never come back."
And the area is "clearly the worst performer" in comparison to the six other Western resort towns that Youngman studied—Park City, Utah; Jackson Hole, Wyo., and Colorado resorts Vail, Steamboat Springs, Breckendridge and Aspen.
Even with the recession draining LOT during the past couple of years, five of the six ended 2009 with a LOT percentage gain over the decade. Only Vail lost LOT dollars over the decade, but wasn't nearly as bad off as Sun Valley and Ketchum.
"This isn't a finger-pointing exercise," Youngman said, "but a study based on data and not opinion ... There's no two ways about it—we're by far the worst performer."
Youngman then displayed the percent change in Cleveland's sales tax over the last decade and overlaid Sun Valley/Ketchum's. They matched.
But, he said, the good news is that other resorts are making money.
"The question is, 'How did these other resorts do it?'" he said.
As for the Sun Valley area's decline, Youngman suggested lost return visitors as the culprit. He said the area needs to re-evaluate its marketing strategy.
"We can't successfully market to everyone," he said.
He said Aspen has done so well because it had a case study done to evaluate market forces. It didn't automatically build more hotels but actually decreased its number of available rooms and made them more luxurious, playing to the elite crowd.
"The average room rate has increased by almost 40 percent over the past five years," Youngman said.
And Aspen isn't worried about building a large airport nearby. The study revealed that only 35 percent of Aspen's guests fly to Aspen. The other 65 percent either drive or fly into Denver and then drive, therefore staying longer in Aspen. And Denver International Airport is 240 miles away, farther than the Boise airport is from Sun Valley.
Youngman said the Sun Valley Resort area needs to decide what to focus on.
"(In the short-term) we could change our focus and promote the Boise airport," he said.
But to discern Sun Valley's demographic and a strategy, Youngman said, the area needs to hire a "world-class marketing consulting firm" to conduct an economy study, like Aspen did.
"Underlying it all is effective marketing," he said.
He told the Ketchum council that the next step should be to appoint a committee to search for a firm and report the estimated cost of a study. He said Sun Valley Mayor Wayne Willich appointed him to lead the effort, and he is now searching for possible committee members.
Youngman emphasized that "current marketing decision makers" should not be involved in the committee, to allow a fresh perspective.
Ketchum council members said they liked the idea of a committee.
"The city should support the consultant financially however it can," Councilman Larry Helzel said.
Youngman's research was also warmly received by the Sun Valley City Council on Jan. 21.
"Facts are very important," Councilman Nils Ribi said.
He said the research has "confirmed suspicions" that many people have had.
At that meeting, Youngman said the economy must be approached by way of research.
"Without the analytical approach, you're really just throwing bricks," he said.
To see Youngman's presentation, go to www.bobyoungman.com, click on the "Sun Valley Economic Study" tab and scroll down to the link.
Trevon Milliard: tmilliard@mtexpress.com
