Wednesday, September 26, 2012

LOT to be on ballots across the valley

Total tax on lodging could reach 10 percent in Hailey


By KATHERINE WUTZ
Express Staff Writer

A Horizon Air flight prepares for boarding at Friedman Memorial Airport in Hailey. Express file photo

The cities of Ketchum, Sun Valley and Hailey all approved ballot language earlier this month to ask voters if they support a new 1 percent local-option tax on items such as retail sales, lodging and liquor by the drink. It would be used to fund minimum-revenue guarantees for air service.

These guarantees help mitigate the risk to airlines operating new service in seasonal resort markets—essentially, if airlines’ revenues fail to cover the cost of operating the flights, the guarantees help fill that gap.

Eric Seder, president of the organization Fly Sun Valley Alliance that works to fundraise for these guarantees, said that the Horizon Air’s direct flights to Seattle and Los Angeles are secured through MRGs, though year-round flights to and from Salt Lake City on SkyWest Airlines are not.

Currently, Sun Valley Co. is footing the bill, but Seder and Fly Sun Valley Alliance Executive Director Carol Waller said that funding gained through the new taxes—approximately $2 million, if each city passes the measure—would allow Fly Sun Valley Alliance to negotiate for new nonstop service to up to three more markets.

 

Nuts and bolts

The city of Hailey currently collects a tax of 3 percent on rental car and hotel bed revenues, 2 percent on liquor by the drink and 1 percent on restaurant food sales. The city approved language to put a 1 percent supplemental LOT on lodging and rental cars only, boosting total taxes—including state sales tax—on those items to 10 percent. The tax would raise $60,600 per year from Hailey for air service.

Ketchum charges a 2 percent local option tax on lodging and by-the-glass liquor, and a 1 percent tax on retail sales, including ski-lift tickets, and building materials. Sun Valley imposes a 3 percent sales tax on lodging, by-the-glass liquor sales and event tickets. It also collects a 2 percent tax on most retail sales, and a 1 percent tax on ski-lift tickets.

The additional 1 percent tax in Ketchum and Sun Valley would help collect the remainder of the roughly $2 million that the Fly Sun Valley Alliance estimates the LOT would raise.

 

Voting power

Each city would have representatives on a Sun Valley Air Service Board created by a joint powers agreement. The board would govern how the collected money is used, and each representative’s vote on board issues would be weighted according to how much money the municipality is contributing. An additional 10 percent vote would be given to the owner of the airport, a role currently assigned to the city of Hailey. If Hailey does not pass the tax, Blaine County—which owns the airport along with Hailey—would take the seat.

Early estimates for LOT projections show that if all three cities approve the new tax, Hailey will get slightly under 25 percent of the votes on the board, Sun Valley will get slightly more than 25 percent and Ketchum will receive 50 percent of the vote.

Seder said that if any of the cities votes against the new LOT, goals and plans would need to be altered.

“It depends on which city,” he said, adding that if Hailey does not pass the LOT, two new markets over five years might be a more realistic goal than three. However, as Sun Valley and Ketchum will be contributing significantly more revenue, failure of either city to pass the tax would result in a more complicated reconfiguration.

“If Ketchum didn’t pass the tax, that goal would be absolutely unrealistic,” he said. “If you have less money, you can’t do as much.”

 

Sun Valley’s part

Sun Valley Co. has been putting up funding for the MRGs and signing air service contracts. Waller said that the resort also donates a significant number of ski passes and other items for Fly Sun Valley Alliance fundraising events, though the organization does raise some additional funding for air service and provides public outreach and education.

Seder said that the new LOT for air service, if passed, would not replace Sun Valley Co.’s contribution.

“Some people have been confused,” Seder said. “What [Sun Valley Co.] has said is that they will underwrite or fund 50 percent of the MRGs.”

That means that however much the Sun Valley Air Service Board pays directly to airlines for air service, Sun Valley Co. will match it, Seder said. However, some of the LOT funding will go toward marketing Sun Valley as a destination—which Sun Valley Co. will not contribute to.

“Sun Valley Co. is actually doing a lot of marketing itself, and it’s substantial,” Seder said. “They have not said anything about what exactly they are going to do on marketing, but we are sure it will be substantial.”

Kate Wutz: kwutz@mtexpress.com




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