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Copyright © 2002 Express Publishing Inc.
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For the week of January 22 - 28, 2003


Hailey losing money on new development

Most land uses, including business, costs city

Express Staff Writer

A financial consultant told Hailey city officials last week that the city could lose substantial amounts of money in the future if it doesn’t take measures to offset the costs of most types of residential and commercial development.

Paul Tischler, a representative of Maryland-based consulting firm Tischler and Associates, issued the findings Monday, Jan. 13, to the Hailey City Council and select members of the city staff.

After examining the city’s costs and revenues from 10 different residential and nonresidential prototypes, Tischler said nine of the 10 land-use categories generate annual net deficits for the city.

"To me it’s foreboding, quite frankly," he said.

Tischler ultimately told council members that he recommends the city pursue a plan to assess various one-time impact fees on new developments or impose a 1 percent local option tax on citywide retail sales, lodging and liquor sales.

Mayor Susan McBryant said after the hearing she "wasn’t alarmed" by the news, but does intend to direct the City Council to address the problem.

"I feel like we have some time," she said. "I feel like we don’t have a lot of time."

The report issued to city officials by Tischler and Associates outlines in detail a scenario in which the city is currently paying out significantly more money to provide services to most new developments than it is bringing in to pay for those services.

In short, the report concluded, most developments cost the city more in providing services such as police and fire protection than developers or landowners are required to pay for in local taxes and fees.

The report was commissioned by the city last year. Tischler made his determinations by measuring the city’s costs for serving the 10 selected land-use categories during the 2001-2002 fiscal year against the revenues for the city’s General Fund generated by each land use.

Tischler concluded that single-family-home developments in the city’s Limited Residential and General Residential zoning districts generate deficits for the city, as do duplex and apartment developments.

"The greatest annual net deficit is generated by the apartment prototype at $466 per unit," the report states.

Of the six residential land-use categories studied, only single-family homes on minimum one-half-acre lots generate a net revenue for the city. Tischler estimated that such developments generate an average of $162 per unit annually for the city.

In examining commercial land uses, the consultants concluded that industrial, office, lodging and commercial uses all generate deficits for the city. Hotel rooms on average produce an annual net deficit of $30 per room, while commercial developments cost the city an exorbitant $735 per 1,000 square feet on an annual basis.

Tischler said the overriding problem is that the city relies heavily on property taxes and shared revenues from the state of Idaho for its operating budget revenues. "This is fiscally constraining to the city since state law limits the city’s growth in (the) existing assessable property tax base, and a downturn in the economy will likely result in less shared revenue from the state," he noted.

Of the city’s General Fund revenue of $2,481,145 in the 2001-2002 fiscal year, property taxes and state shared revenues made up 72 percent of the total figure, he said.

The consultant explained to council members that the city has been able to keep its budget balanced by deferring certain necessary capital improvement projects.

Tischler provided city officials with a long list of recommendations for the city to plan more effectively, reduce its costs and generate more revenue for its operating budget

In his presentation to council members, Tischler focused on two particular recommendations to raise revenue.

"The local option sales tax is what we suggest you give serious consideration to," he said, noting that he estimated a 1-percent LOT could generate approximately $785,000 annually for the city.

Tischler also said impact fees—one-time assessments levied on developments to ensure new or additional city services required by the development are paid for—would also be an effective means for the city to eliminate the associated deficits.

"If you do nothing, your level of service goes down, and your quality of life goes down," he said.

McBryant after the meeting noted that imposition of a LOT in Hailey is a possibility, but would take a considerable effort.

Indeed, the measure would need council support, a state designation of Hailey as a resort city that is impacted heavily by tourism, and the support of 60 percent of voters.


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