The supplemental “1% for Air” taxes were introduced a decade ago to add an additional sales tax to existing city local-option taxes to support commercial air-service routes to the Wood River Valley and visitor-related marketing. They are assessed in different sales categories in the three cities, though they have all been targeted to mostly impact tourists.

In Ketchum and Sun Valley, voters will also determine whether to extend the supplemental tax, which is set to expire in those cities at the end of the year.

Each of the city measures needs 60% voter approval to pass. The votes in the three cities will take place Tuesday, May 16, with early voting open through May 12 at the Old Blaine County Courthouse in Hailey.

The three cities are authorized by the state to collect local-option taxes through a law that allows small resort cities to tax specific sales categories to offset in their budgets the financial impacts of hosting large numbers of visitors. The taxes are applied to a range of categories in the cities, from by-the-drink alcohol sales to charges for hotel rooms. The funds are used to support a variety of city services and projects, including funding emergency services, repairing streets and providing public transit.

The supplemental “1% for Air” tax funds are set aside and transferred monthly to the Sun Valley Air Service Board, which allocates the money to subsidize and market commercial flights into Friedman Memorial Airport in Hailey, as well as to support other tourism-related marketing and outreach. The funds have regularly supported two organizations, the Sun Valley Tourism Alliance—which uses the name Visit Sun Valley in most of its operations—and the Fly Sun Valley Alliance.

It has been determined by some Wood River Valley leaders and officials that a full 1% supplemental LOT is no longer needed to support air service and marketing, though several have stressed that they believe maintaining strong commercial air service to the valley is critical for the economy and the quality of life for many locals.

At the same time, numerous elected officials have prioritized maintaining and establishing community housing amid what has been determined to be a crisis-level shortage of affordable housing and workers in the region.

In all three cities, supporters of the measures and some elected officials are stressing that none of the proposals would raise taxes.

Hailey ballot measure

Hailey’s supplemental LOT—applied to car rentals and revenues from hotel rooms and short-term rentals—has been approved through 2050. Its measure asks if its 1% tax proceeds—approximately $165,000 in fiscal year 2021—should be split evenly between support for air service and housing for Hailey citizens and workers who are housing-burdened.

If the Hailey measure fails, the city would continue to collect the “1% for Air” as it currently exists. If the measure passes, the city would “conduct a robust public process to ask the Hailey community what types of community housing projects they wish to fund,” the city states on its website.

The city has determined that if the measure is approved by voters, it will have approximately $79,000 in the first year to spend on housing initiatives.

Hailey’s “original LOT”—which taxes restaurant food, by-the-drink alcohol, lodging and car rentals—will not be affected by the vote on the supplemental LOT this month. It was also previously approved by voters to be in place until 2050.

Ketchum ballot measure

Ketchum’s supplemental 1% LOT was first approved by voters in 2013 and eventually extended to the end of 2023. It is collected on receipts from hotel rooms, short-term rentals, by-the-drink liquor and general retail goods, including building materials but excluding groceries. In the 2021-22 fiscal year—which ran from October 2021 through September 2022—the city’s 1% LOT yielded slightly more than $3.1 million.

Through its original city local-option taxes, Ketchum assesses a 1% LOT on retail sales, 2% on lodging, 2% on by-the-drink liquor and 1% on building materials. In addition, the “1% for Air” LOT is assessed in the same categories.

The Ketchum ballot question asks voters whether they are in favor of or against extending the 1% supplemental tax for five years starting on July 1, 2023, and splitting the revenue to allocate 0.5% to support air service and 0.5% “for the preservation and creation of community housing.”

The original city LOT will not be affected by the vote.

The city put an initiative to increase LOT percentages charged in Ketchum before voters last May but the measure did not pass. By law, the city had to wait a year before putting a similar initiative on the ballot again.

The ballot last May asked citizens if they approved of using LOT revenue for housing initiatives and if they concurrently approved raising the LOT percentages charged in specific categories. A significant difference between last year’s and this year’s measures is that this year’s proposal does not include any tax increases—only an extension of an existing tax.

Through analysis, Ketchum has determined that it needs to develop, preserve or convert 660-980 affordable-housing units over the next decade or so.

If voters pass the measure, the housing funds “would be placed in a designated account to be used solely for the provision and support of community housing,” the city website states. If the measure does not pass, the city would have no funds for housing “for the next several years” and the Fly Sun Valley Alliance would lose funding from Ketchum when the existing 1% LOT approval expires, the website states.

Sun Valley ballot measure

In Sun Valley, voters will be asked two separate questions. They will have the choice of supporting either, both or neither.

Sun Valley’s ballot asks these two questions:

• Should the city replace the existing 1% LOT with a 0.5% LOT for five years starting on July 1, 2023, for the purpose of supporting commercial air service?
• Should the city replace the 1% supplemental LOT with a 0.5% LOT for affordable housing for a period of five years starting July 1, 2023?

Sun Valley assesses its original city local-option tax and the 1% supplemental tax in the same categories. Including the supplemental tax, it collects a 4% LOT on room sales (including both hotel rooms and short-term rentals); a 4% LOT on food, beverage and by-the-drink liquor sales; a 4% LOT on recreation fees, product rentals and event tickets; a 2% LOT on building and construction materials; a 2% LOT on lift tickets and ski passes; and a 3% LOT on general retail sales.

In the 2021 fiscal year, Sun Valley collected nearly $1.1 million from the “1% for Air” tax.

If both measures pass, a 1% supplemental LOT would divided equally between air service and housing for five years starting July 1. If neither passes, the “1% for Air” will expire on July 1 and no LOT would be assessed for housing.

If the 0.5% for air service passes and the additional 0.5% for housing does not, the current “1% for Air” LOT will be reduced on July 1 and no LOT for housing would be collected. If the air-service initiative does not pass but the housing initiative does, the air tax would expire on July 1 and the 0.5% housing tax would be implemented on July 1. 

In Part 2, a look at why the cities are proposing the changes.