Wednesday, August 15, 2012

What would planned new LOT mean?

Cities mulling proposition to add tax to support air service


By BRENNAN REGO
Express Staff Writer

All the buzz about the cities of Hailey, Ketchum and Sun Valley potentially adding a 1 percent increase to their local option taxes has left many valley residents wondering what items will be taxed and how the money will be stewarded and spent.

"I'm not for or against [the local option tax increase]. I don't know where I stand on it," Ketchum resident Joel Graff said at a Sun Valley City Council meeting on Aug. 1. "As a community, what are we going to get? What is Fly Sun Valley Alliance going to guarantee us? Is it a comprehensive sales tax or is it specific to hotel rooms, etc?"

Fly Sun Valley Alliance Executive Director Carol Waller addressed some of the confusions surrounding the proposed local option tax increase at the meeting.

"One point I wanted to clarify is that the 1 percent LOT tax increase does not include groceries or fuel," she said.

What items, then, will be subject to the tax increase? The answer depends on the city. According to Idaho statute 50-1044, "resort" cities whose populations are under 10,000 can collect "one or more local-option non-property taxes" if approved by the required majority of city voters. The funds raised are meant to offset costs to the city caused by visitors who do not pay property taxes.

By state law, local option taxes are not to be used to support private organizations. However, Idaho Attorney General Lawrence Wasden's office recently deemed that Hailey, Ketchum and Sun Valley could legally pool local option tax resources to pay minimum-revenue guarantees to airlines that provide air service to the Wood River Valley. According to the attorney general, support for air service to a resort community such as Sun Valley can be considered a "public purpose" and is therefore "legally defensible" as an appropriate use of public funds.

Based on the attorney general's opinion, the nonprofit Fly Sun Valley Alliance is charging forward to add a five-year, 1 percent increase to Hailey, Ketchum and Sun Valley's local option taxes in order to support air service. Voters in the three cities are expected to decide in November if the additional tax will be levied.

Currently, Wood River Valley residents pay a 6 percent sales tax to the state on all purchases. Local option taxes then kick in, depending on the city, to jack sales taxes up as high as 9 percent for certain items. If the 1 percent increase passes in November, this could go up to 10 percent, depending on the purchase.

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Hailey currently charges a 3 percent tax on lodging and rental cars, a 2 percent tax on liquor by the drink and a 1 percent tax on restaurant food.

Ketchum charges a 1 percent tax on retail, including ski lift tickets; a 2 percent tax on short-term housing, including hotel and motel rooms, apartments, condominiums and homes; a 2 percent tax on liquor by the drink; and a 1 percent tax on building materials.

Sun Valley charges a 3 percent tax on golf memberships and fees, car rentals and event admission sales; a 2 percent tax on all other retail sales; a 1 percent tax on ski lift tickets; a 3 percent tax on hotel rooms and vacation rentals; and a 3 percent tax on liquor by the drink.

All of these taxes would go up 1 percent under the Fly Sun Valley Alliance proposal.

If the tax hike is passed in November, Hailey expects to collect an estimated additional $190,000 a year; Ketchum, an additional $1,518,000; and Sun Valley, an additional $450,000. This could total just over $2 million a year that could be used to subsidize air service.

Although no city has committed to a specific ballot proposal yet, Fly Sun Valley Alliance and the three cities are currently drafting a "joint powers agreement" that would determine how the collected funds would be expended.

The joint powers agreement does not have to be ready by the time the measure hits the ballot in November. However, Fly Sun Valley Alliance predicts that Hailey, Ketchum and Sun Valley voters will be more likely to pass the tax increase if they know exactly how the money will be stewarded, and by whom.

Initial drafts of the joint powers agreement are currently being reviewed by the Hailey, Ketchum and Sun Valley city councils. The agreement would most likely not be approved by the cities until after the November vote. If one or more cities does not pass the tax increase, the city or cities that do would have to reexamine their position and determine whether they want to move forward with the tax increase.

The three cities must present a final draft of the proposed ballot question to the Board of Blaine County Commissioners no later than Sept. 7 if they want it to appear on the November ballot.

Brennan Rego: brego@mtexpress.com




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