A little more than a year after his election on a platform that called for increasing the supply of housing citywide, Ketchum Mayor Neil Bradshaw is proposing a tax increase to fund employee housing and transportation.
The move would require 60 percent voter approval. During a City Council meeting on Monday, Bradshaw said he wants to gauge voter support for an increase to the local-option tax in Ketchum.
“We want to hear from the voters,” Bradshaw said during Monday’s meeting. “If they vote it down, so be it. If we don’t ask, if we don’t try, certainly we won’t get it.”
Local-option taxes are assessed in a variety of sales transactions in town, and is on top of state sales tax. In Ketchum, LOT is assessed on room sales, retail sales aside from groceries, liquor-by-the-drink sales, and building-material deliveries.
Bradshaw said he wants to test the idea of adding 1 percent to LOT, which could apply narrowly to a few of the sales categories, such as those generated by hotel and short-term occupancy rentals, or it could apply to all categories currently assessed.
Revenue from the proposed tax would be split on a 50-50 basis to pay for housing and transportation, including acquisition of land for housing projects. The city could bank land that comes up for sale, Bradshaw said.
Councilman Michael David said revenue could go for sidewalk projects and street maintenance, and free up the more than $600,000 in existing LOT that the city currently provides the Mountain Rides Transportation Authority on an annual basis.
A local-option-tax increase requires 60 percent voter approval in an election.
“Getting 60 percent, you need to have everyone behind it,” Bradshaw said. “We know that money is kind of the key.”
In 2013, Ketchum voters added 1 percent to the LOT to fund commercial air service at Friedman Memorial Airport, as well as additional marketing for those flight markets. In the 2018 fiscal year, the 1 Percent for Air tax generated $2.15 million total in Ketchum.
“I want to go out to the community and gauge the appetite for this,” Bradshaw said. “Do people have tax fatigue? We were voted in because of the support for our housing policies.”
Two new members to the City Council, Councilwomen Amanda Breen and Courtney Hamilton, were elected with Bradshaw.
Breen said she is concerned about the existing tax burden.
“It’s a lot to put on our taxpayers’ plate,” Breen said.
Hamilton asked if the voters are tired of hearing the same discussions from City Council members about procuring affordable housing. She said she didn’t want the proposed LOT to add burdens to retailers in Ketchum.
“Is it LOT fatigue or is it fatigue with us talking?” Hamilton asked. “This is kind of our only option unless we want to go out for a housing bond.”
Ketchum is one of the few cities in Idaho with the authority to assess additional sales taxes. The Idaho Legislature granted Ketchum that authority in the late 1970s, to offset costs of hosting large volumes of tourists. Since then, Hailey and Sun Valley have joined in assessing LOT.
In 2012 and 2013, the voters of the three cities supported a ballot measure to assess an additional 1 percent on LOT categories. That funds the air service and marketing programs with the Fly Sun Valley Alliance and Visit Sun Valley.
Councilman Jim Slanetz pressed alternative options. He said the city should try to get more sales-tax revenue remitted from online sales transactions; Finance Director Grant Gager said he is working with online retailers and national companies to remit that tax revenue to Ketchum, with some success.
“Local retailers don’t have a level playing field,” Slanetz said. “That’s an avenue I’d like to explore before.”
Slanetz also pitched another idea. He said he would like to craft agreements among employers to raise wages by 10 to 15 percent. Participating retailers, restaurants or other enterprises would then offer discounts for those employees, spurring more business and sales activity in town. Slanetz said this would increase rents and make the kind of market-rate, workforce housing development Ketchum wants more financially feasible.
“If rents were a little bit higher, the developers would come in,” Slanetz said. “Part of it is wages are low. We’re trying to adjust the market by lowering the cost of housing, which is false.”
David said the cost of a tax increase is relatively small on a single-transaction basis. He said Ketchum should reach out to Hailey and Sun Valley about adding 1 percent to their local-option taxes for housing and transportation.
“We need money to get housing,” David said. “The LOT tax is really our only tool that we have available.”
Ketchum City Attorney Matthew Johnson said using local-option-tax revenue for housing is permissible under state statute. He said the revenue can be used for affordable housing under the municipal authority section of Idaho code.
“The LOT statute itself is pretty broad,” Johnson said.
Breen said that was a surprise.
“I’m surprised that the Legislature has allowed that to be so broad,” Breen said.
“For now, it’s there,” Johnson replied.