October 17, 2007 in Idaho

Eat, drink and pay taxes

By The Spokesman-Review

Ordering that glass of Merlot with a prime rib dinner in Sandpoint could cost a little extra next year.

On Nov. 6, city voters will head to the polls to consider a 2 percent tax on individual drink sales of beer, wine and liquor. The tax, patterned after a similar assessment in Ketchum, would generate an estimated $50,000 annually for the city’s budget.

Mayor Ray Miller predicts that few restaurant and bar patrons would notice the tax, which would amount to 8 cents on a $4 microbrew or 16 cents on the purchase of an $8 glass of wine. He’s also touting the drink tax as a way to tap into tourists’ wallets, spreading the cost of providing city services to the hundreds of thousands of people each year who visit the resort town of 8,000 on the shores of Lake Pend Oreille.

Those visitors drive city streets, stroll along city sidewalks, swim at City Beach and use the city’s police services, he noted.

“I’m not trying to be a temperance person or a Carrie Nation,” Miller added, referring to the hatchet-wielding temperance leader who was arrested in the early 1900s for smashing up bars. “But alcohol creates issues that we deal with, including DUIs, traffic accidents and domestic violence.”

In Idaho, smaller cities are hitting up tourists for new sources of revenue. Many communities find themselves in economic transition, with high-end condos and wine bars springing up in place of sawmills and blue-collar bars. Cities are seeking to tap the growing affluence of those tourists and seasonal residents, who are drawn to their area’s scenic beauty and outdoor recreation.

The trend has led to some creative assessments. In Sun Valley, ski equipment rentals are taxed. Ketchum levies a 1 percent fee on the cost of new building materials, plus a tax on wine purchased by the bottle. The money goes to providing city services.

“The people who are building those fabulous homes need extra snow removal,” said Karen Ballard, a tourism development specialist for Idaho’s Commerce Department.

Ballard’s office has been tracking the resort city tax on lodging sales, which is on the November ballot for renewal in Sandpoint.

First passed by city voters in late 2002, the resort tax adds a 5 percent fee to hotel and motel rooms, and vacation rentals in Sandpoint. It raised nearly $230,000 last year, which helped pay for city services in Sandpoint’s tourist-heavy downtown, including street and sidewalk repairs, police bike patrols and a pedestrian overpass to City Beach. Some of the money also went toward property tax relief.

If Sandpoint’s drink tax passes in November, the revenue collected would be spent on the same type of services.

Idaho law allows cities with populations of 10,000 or fewer to levy the resort lodging tax. Nine cities have adopted it, according to the state Tax Commission. In Kellogg and Bonners Ferry, city leaders are considering putting the resort tax before their voters in February.

While city leaders are embracing the new taxes, hoteliers, restaurant owners and drinking establishments are raising concerns.

Steve Meyer and his wife, Julie, own the Pend Oreille Winery in Sandpoint. They oppose the 2 percent drink tax. The customers sipping wine at their establishment’s wine bar are overwhelmingly local, said Steve Meyer, who estimates that 35 percent of his drink sales are to tourists.

“It ends up being local taxpayers who pick up the bill,” Meyer said. “It’s a tax shift to a ‘sin tax.’ ”

Despite the stereotype of Sandpoint being overrun with wealthy tourists, it remains a “very value-oriented place,” said Jim Lippi, the owner of Ivano’s Ristorante & Café, where the most expensive glass of wine costs $7.50.

“If the city needs more tax revenues,” he said, “they need to raise taxes on everyone.”

In Kellogg, hotel owners are waiting to hear more about the city’s proposed resort tax, said Vern Hanson, manager of the 61-room Baymont Inn and Suites.

“We’re not necessarily opposed to it,” he said. Hotel owners just want to know how much money would be collected and whether tourists would see a direct benefit, Hanson said.

People calling the Baymont for reservations frequently ask about room taxes, according to Hanson. They’re already paying a 6 percent sales tax, plus a 2 percent “bed tax” that’s used for state and local tourism marketing. If the city added a 5 percent resort tax, the taxes collected from an overnight stay would jump to 13 percent of the room rate, Hanson noted.

Many of the Baymont’s customers are regulars who bring their kids to ski at Silver Mountain. “They’re families on a budget,” Hanson said.

Mac Pooler, Kellogg’s mayor, said the resort tax is still in the conceptual phase. But he believes it’s a legitimate revenue source for the city of 2,300 to address rapidly rising costs. In the past year, Kellogg’s fuel costs have risen 38 percent, while medical insurance for city employees rose 22 percent.

Meanwhile, 3,000 new ski condos and single-family homes have been approved for the former mining town. Many of them are likely to end up in rental pools, Pooler noted.

Most travelers are already accustomed to paying the equivalent of a resort tax, he said.

“I fly to Boise tomorrow,” Pooler said last week. “I can guarantee you that when I look at the bottom of the hotel bill, there will be some kind of extra charge, some kind of revenue creator for the city or someone else.”

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