'Local' option tax or 'loco' option tax?
In May, McCall voters will face renewing a tax with a quaint and quirky history
They are calling it an ‘option’ tax. But it says here on McCity’s website that if we don’t vote for it, we can just forget about decent streets (Tomi’s note: see Infrequently Asked Questions following the post)
South of New Meadows, the Little Salmon River loops in a comically mindless course just before tumbling down a chute to join its big brother. I could think of no better metaphor for McCall's local option taxes. Since 1982, they have been the Goofys of our local tax structure.
Next week:
• How local interests (and one special one of mine) faired in this year’s Idaho legislature
NEW READER or forgot what I said about something? Find past posts HERE
In Idaho, only small towns of under 10,000 that rely heavily on tourism can levy an option tax. It is usually a tax on lodging that is paid by visitors, but that is where the similarities end. Cascade and Donnelly each have one (see Afterthoughts).
McCall, never to be outdone in the spending department, has two. This has been making citizens dizzy for over a decade.
Personally, I prefer all my whirlies to be due to pleasurable pursuits, don't you? So take a few minutes to anchor your option-tax sea-sickness with some history:
First, the dry particulars, then the fun stuff:
McCall's 'Tourism' Tax is a reiteration of an option tax enacted in 1982. Visitors who rent accommodations, including short-term rentals (AirBnB, Vrbo, etc.) get 3% added to their bills. This tax funds what I politely call a hodge-podge of stuff. McCity calls it a variety of community initiatives (of course they do:). The tourism tax was renewed in 2018 and will sunset in 2028.
The 'Streets' Tax is the one up for renewal in the May election. Currently, it is also a 3% tax on lodging, but it is also a 1% general sales tax that everybody pays on everything except groceries (there are more exemptions but I'm trying to keep this simple). This tax funds city street maintenance, which includes stuff like chip sealing, repaving, and rebuilding streets with sidewalks, trees and street lights. The streets tax had a ten year term and McCity wants it to stay that way. But the term lengths for option taxes can be anything. Keep that in mind.
Everybody pays the state sales tax, which currently amounts to 6%. Tourists also pay a 2% state levy on lodging that funds the Idaho Travel Council. To sum up:
McCall citizens currently pay: 1% local sales tax (option) + 6% state sales tax. Total: 7%
Visitors who rent lodging currently pay: 3% streets tax; 3% tourist tax; 1% retail sales tax; 6% state sales tax; 2% state travel promotion tax. Total: 15%*
*In addition to the lodging taxes, visitors pay the 6% state sales tax + 1% local tax on retail goods purchased during their visit.
McCity wants to sock tourists for another 1% of their lodging bill to fund street improvements. If the tax passes, the total lodging tax will rise to 16%. Just for fun, I looked on some travel sites for their mark-ups. In Driggs/Victor, it's 14%. In Ketchum/Hailey it's 11%/12% respectively.
The Brawly Bed-and-Booze tax
If ever there was an exquisite name for a tax, the BnB had it. It was passed in 1982 when McCall was trying to shake off the shock that it was no longer TimberTown. What did lumberjacks know, or care, about tourists? But, in the minds of the idealists of the day, downtown was a dump. Something had to be done about it.
The initial 'tryout' term was 5 years. The tax was 4% on lodging and liquor-by-the-drink. It didn't even make it three years before disgruntled hoteliers and barkeeps launched an assault. They fell just short of the required vote to repeal. Plan B was to cut the tax to 2%. That didn't cut it with voters either.
Then, the real high-noon square-off began. Shore Lodge, which had an 'arrangement' with Brundage Mountain Ski Area, was the big Kahuna in town. All the other lodging enterprises were rustic mom-and-pop operations. But, as you might expect from a town still with one foot set in logging culture, there were some mighty salty bar owners who thought this tax was theft, same as if they had been held up at gunpoint and forced to open the safe.
Shore Lodge was managed by an obstreperous Brit with a thunderous voice named John Edwards. He was once sued by one of his native American desk clerks because he kept calling her Pocahontas. John decided that the way out was to argue that McCall was not yet a tourist-dependent economy and therefore ineligible to have an option tax.
So he used a strategy that my readers will recognize. He "commissioned" a "study." He offered a BSU professor and his marketing class a luxury, all-expense-paid summer vacation at Shore Lodge in exchange for a document that wrote his premise. 'Official' booty in hand, he advanced on the city council and threatened to take them to court if they didn't immediately cancel this egregious affront to his bottom line.
The city, who at the time, had an equally intransigent administrator (I miss him), took Edward's ultimatum as fightin' words. So he rounded up a couple academes-for-hire from Washington State who...you guessed it...miraculously came up with a completely, uh, objective counter study. WSU's guns called the BSU guns "flawed, inadequate and suspect." So there.
While all of this expert testimony was being assembled and the two sides were ducking each other's insults, the city administrator noted that the hospitality taxpayers, mostly bars, were $40,000 behind in their tax payments (about $116,000 today). He feared an open tax revolt. Unlike our current city manager, this guy didn't make any claim to ever having been a diplomat. He initiated draconian collection procedures that doubled the tax for the scofflaws and nailed them for an 18% interest penalty on top of it. Ouch!
On September 30, 1987, the B&B tax quietly died, mercifully before anybody else did. After five tries in the interim, a local option tax wasn't passed again for another 17 years (2004)
Since 2004, a number of attempts were made to increase the 'tourist' tax. In 2007, somebody got the inspiration to propose a half-percent increase in the sales tax to fund MCPAWS. The electorate crushed that idea like a runaway grand piano into a pallet of eggs. Poor MCPAWS, who didn't propose the measure but got accused of it, nearly folded under the weight of the blowback. We wrote an editorial in their defense. It was one of those classic cases of critical mass. It was just the wrong time to ask that electorate that particular question. For MCPAWS, it came out OK in the end. It became a leading beneficiary of the tourism tax.
The tourism LOT has been renewed for 7 and 10 years respectively and will sunset again in December 2028. There have been some more exotic notions for expanding it, including adding back the booze tax and extending it to meeting spaces and rented vehicles, but those, thankfully, never got traction.
The local option tax dedicated to street improvements (the Streets Tax) took a couple tries but passed in 2015 with 65% of the vote and high voter turnout. It was passed in an era of changing attitudes in McCity about taxation, and its single, dedicated purpose attracts far less controversy in general. In a post closer to the election, we will look more closely at what is proposed for this tax.
The Streets Tax is uncomplicated and dedicated to a specific purpose, therefore it’s easily traceable if it jumps the banks. Now that I think of it, the Little Salmon River analogy I started with more resembles the Tourist Tax. It's all over the place. Mother Nature can make disorganization and ditziness charming and picturesque. Municipalities definitely do not have that knack. They need to be channeled and meticulously managed. Otherwise they leak money all over the place.
Would you like to a)tell me how wonderful I am b)tell me to crawl back where I came from c)tell me about your vacation? (no pictures please, especially of beaches and tropical drinks with little umbrellas in them). Write me a private email! Send your bribe observations to: tomigrote@substack.com. I promise I won't out your trash talk to your church congregation.
Scroll down for the Afterthoughts after this commercial break:
Know somebody who would be interested in this Substack? If you got this as an email, forward it. Tell the recipient to look for links within the post to subscribe for free. Or say something about it on social media and include the web address tomigrote.substack.com. Thanks so much for helping spread the word about this completely volunteer effort.
Afterthoughts, Observations and Authentications
• Oddly, the option taxes for Cascade and Donnelly represent one of each of the flavors of McCall's taxes. Donnelly's is like McCall's Tourist Tax. It has, so far, primarily distributed funds to various civic organizations. It collects 3% on lodging and 1% on retail sales. Cascade's is similar to McCall's Street Tax. The funds are tightly targeted, meaning that they are used exclusively for city infrastructure projects such as stormwater mitigation, park improvements, sidewalks and street paving. The city has spent roughly $1,076,000 on such projects since the LOTs adoption in 2021. Cascade collects a 1% tax on all retail sales within the city limits, including lodging. I thank Cascade Mayor Judith Nissula and City Clerk Janice Van Winkle for their prompt and thorough response to my inquiry. The information for Donnelly comes from The Star-News.
• Thanks to a particularly virulent strain of cabin fever, or a fit of civic patriotism or motivations yet to be revealed that will make sensational gossip, more people are running for taxing district boards than for quite a while. The North Lake Recreational Sewer and Water District has a contested seat. The Payette Lakes Recreational Water and Sewer District has two contested seats, one of them has four people in the race. Cascade Medical Center has a contested seat. This is a thrilling development because, as my regular readers know, taxing districts are prone to ideological stagnation. Fresh ideas are ALWAYS beneficial. I hope this is the start of a trend and not a blip.
Infrequently Asked Questions
• There goes that lying on the public dime again. McCity's web page on the Streets Tax contains the usual condescending head-patting I lost my temper with months ago in a post about this same type of behavior. In an attempt to "explain" what a vote yes or no means (because they don't think we have the brains to figure it out ourselves), we are told the following:
McCity: A Yes vote allows for the completion of street maintenance and improvements projects the city would not be able to fund through property tax dollars.
That is absurdly false. The city can shift its spending priorities to cover a loss of revenue. It may be that the loss of revenue would mean less money will be spent elsewhere, but to say they can't cut their budget and shift funds to finish street projects is a lie.
McCity: A No vote: Will result in lost...revenue...placing the burden on property tax payers
Also absurdly false. The first part is true, but the second one is not automatic unless you want to threaten your electorate. There are a whole bunch of options. For starters, the Tourist Tax (non property tax) could be applied to streets instead of the slush fund it currently is for civic fund-raising and pet non-essential city projects. That is at the council’s discretion. Street projects are included in the list the Tourist Tax can be dedicated to. The budget could be cut so that property taxes are reduced. I won't go on and on about all the ways they can actually save property tax payers money...but I could.
This is not explaining the street tax, it is selling it. The city is using the tax payer dollars they say they are so concerned about protecting, to espouse highly selective and misleading points of view. Watch for this fibbing to appear in a social media post or newspaper ad near you. Scroll a little down this past post from months ago to see this identical transgression. It is a violation of the spirit of Idaho law, which says public funding must not be used by governments to advocate for government-driven initiatives. Period. Why am I having such a hard time getting this concept through to these people? I don’t want to call them liars, but I tried being more measured…
Reading your thoughtful (and entertaining!) work has become the best part of my Sunday mornings. Love learning history and policy from you, Tomi!
Death and taxes ya know! One can't be avoided while the other live forever? LOT's the only one that interest me is for infrastructure needs in my mind, while others can easily get lost in the mud.. These small communities greatly benefit from the generation of funds and seeing's how tourism is essential to these towns, guess what, Tourists generate the most of it. I hope that Cascade stays the course on infrastructure, generally so far main St. and so called well traveled Roads get most the funds. Once the powers to be realize how much mud is left in town and how a limited sewer limits growth, things may greatly improve. Personally I'd like to see everything in this country work off sales taxes. Ya, I know, it supposedly would hurt the poor? There can be ways around that. We have so much to fix in this country and so little resources now that we've borrowed the printed money to the hilt. Good luck everyone!