Wednesday, November 2, 2011

‘Tourist tax’ brings in a LOT of money

Ketchum voters to decide local-option tax renewal

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By REBECCA MEANY
Express Staff Writer

The Toy Store in Ketchum is one of many retailers that has to add the city’s 1 percent local-option tax on sales of merchandise. Express file photo

Ketchum hasn't seen major budget cuts in a couple of years, but if voters decide against renewing the local-option tax, city revenue would decline—though so would taxes on certain items they buy.

The LOT ordinance expires Dec. 31, 2012. Ketchum residents will decide next week whether the tax, sometimes referred to as the "tourist tax," has been a valuable tool to promote and improve the city, or whether its imposition has hurt businesses and therefore should be scrapped.

Ketchum charges a 2 percent sales tax on lodging and by-the-drink sale of beer, wine and liquor, and a 1 percent tax on retail sales and building materials.

The ordinance up for a vote on Election Day would be identical to the one currently in place.

LOT collections make up about 13 percent of city revenue, according to City Administrator Gary Marks.

Ketchum's support of agencies such Mountain Rides, Sun Valley Marketing Alliance, the Ketchum Community Development Corp. and others comes from LOT revenues. The tax also provides the "major portion" of city support for community events and community promotion, Marks said, including the bulk of funding for the annual Wagon Days event.

"(It) also makes a pretty good contribution to the upkeep of our streets," he said.

According to the ordinance, LOT revenues may be used for municipal transportation; open space acquisition and recreation; capital improvements for roads, water, sewer, parking and the Ore Wagon Museum; emergency services; city promotion, visitor information and special events; property tax relief; and the administration of the tax.

Despite the tax's potential to impact sales, a brief survey of downtown business owners didn't turn up any who oppose it.

Terry Ring, owner of Silver Creek Outfitters, said the tax doesn't make or break a sale.

"I don't think it's a primary consideration in most people's purchasing decisions," he said. "To the higher-income people, which drive business in the north valley, it's a very small percentage of their income and something that's not going to play into their decision-making process.

"Most people understand the need for a resort tax when you have a tourist-based economy."

If voters don't approve the LOT extension, it's unclear what would happen in 2013 without that revenue.

"That's a question that doesn't have an answer right now," Marks said.

The city has made significant budget cuts in recent years.

"We went pretty deep," Marks said. "With another 13 percent, we'd be getting into bone. If it doesn't pass, we've got some difficult decisions ahead."

If voters give it the thumbs down, city officials would start a new round of review.

"The mayor and I would take an initial stab (at where to cut)," Marks said. "Ultimately, it would be up to the council to make whatever cuts would be appropriate."

The current ordinance was approved in November 1997 with 87 percent support.

The new ordinance, which would be in effect for 15 years, needs 60 percent approval to pass.

If the measure is not approved, the city would have to wait one year before trying again.

Rebecca Meany: rmeany@mtexpress.com

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