Wednesday, October 31, 2012

Finally, voters will decide on LOT

Proposed new tax needs 60 percent approval to pass

Express Staff Writer

Proponents of the proposed new LOT for air service say the tax would enhance the community’s ability to guarantee flights from important markets. Express file photo

Buzz over a proposed local-option tax for air service has reached a fever pitch across the county as voters decide whether to support the supplemental tax.

Voters in Hailey, Ketchum and Sun Valley on Tuesday, Nov. 6, will be able to mark boxes “in favor” or “against” a 1 percent local-option tax for air service. Sixty percent of voters in each city must be in favor for the tax to pass.

The tax was proposed by Fly Sun Valley Alliance over the summer as a way to raise more money for minimum revenue guarantees. MRGs are payments guaranteed to airlines to reduce their financial risk of flying into seasonal resort markets such as Sun Valley, guaranteeing that they will make a certain amount of money even if there is not as much demand for the flights as anticipated.

Currently, Fly Sun Valley Alliance and Sun Valley Co. bear the brunt of MRG funding, but as Sun Valley has said it cannot afford to boost its contribution, Fly Sun Valley Alliance came up with another option.

If the tax is approved by 60 percent of voters, $2.1 million would be collected through local-option taxes in Ketchum, Sun Valley and Hailey. In Ketchum and Sun Valley, the tax would be added to retail sales, restaurant sales, liquor by the drink, hotel rooms and ski lift passes and tickets.

In Hailey, the tax would be collected only on rental cars and hotel rooms. No supplemental tax would be levied on gas or groceries in any of the three cities. 

Once collected, funds from the tax would be administered by a newly formed group called the Sun Valley Air Service Board. The board would be made up of representatives from Ketchum, Sun Valley, Hailey and Blaine County, and the amount of voting power each city has will be proportionate to the amount of tax funding that city is contributing. The county will not have a voting seat, but a representative will sit in an advisory capacity due to the county’s status as an airport owner.

Each city’s representative will have the right to direct the use of the tax funds contributed by the city, with the provision that some of the money must go to administrative costs. Ketchum is expected to contribute $1.4 million in revenue, Sun Valley $587,500 and Hailey under $50,000.

The Air Service Board also has the power to contract with an outside party—likely Fly Sun Valley Alliance—to negotiate the exact amount of the minimum revenue guarantees with the airlines and otherwise contribute to air service maintenance and development, as well as marketing.

Fly Sun Valley Alliance has already put together a proposed budget for fiscal 2013, predicated on all three cities’ passing the 1 percent local-option tax for air service.

Though tax revenue would not be available until March, nearly halfway through the fiscal year, Fly Sun Valley Alliance Executive Director Carol Waller has said she believes the alliance could have a new direct route to San Francisco up and running by the end of the fiscal year.

Minimum revenue guarantees for the existing flights to Los Angeles and Seattle, as well as a new flight to San Francisco, would run $1.8 million, half of which would be paid by Sun Valley Co. and the other half of which would come out of LOT revenue.

The remainder of LOT funds would go toward promoting the three flights, as well as research and administrative costs, as well as $300,000 that would go into a contingency fund for future minimum revenue guarantees.

Kate Wutz:

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