Taxpayers to decide on city option tax

May 10, 2023

After a 2017 Idaho Supreme Court decision that "no city shall operate any (utility) works primarily as a source of revenue to the city, but shall operate all such works for the use and benefit of those served by such works and for the promotion of the welfare and for the improvement of the health, safety, comfort and convenience of the inhabitants of the city," the City of Bonners Ferry will ask voters to pass a one-percent local option sales tax with which to fund several city services.

For more than 70 years, the general fund transfer typically generated between $350,000 and $450,000 per year, providing funding for police, fire, streets and parks. With the ruling, those funds now remain in the city's utility account, used to stabilize rates as well as contribute to capital planning efforts.

After examining different options, in January, the city council elected to pose to the community a local option tax as a way to make up the funding for the general fund services. City voters will decide the measure on Tuesday, May 16.

Under the option tax, one percent of all sales within city limits subject to sales tax (exempting sales in excess of $1,000) will impose an additional one percent over the state sales tax of six percent. If approved, the tax would start July 1 and be collected until December 31, 2033.

Based on sales data from the Idaho State Tax Commission, early estimates predict the one percent sales tax could generate around $450,000 to $500,00.00 in revenue.

If the measure fails, the city will be forced to cut about $480,000 from its annual general fund budget.

Some contends the city could just tighten its belt and eliminate unnecessary expenses, but the city, like all coping in tough economic times, is has already long operated on a frugal budget.

"The city has curbed expenses for the existing fiscal year; additional services will be cut if the local option tax doesn’t pass," city administrator Lisa Ailport said. "Currently there is a hiring freeze on general fund employees, we have sought one-time grants/funding relief to keep some services funded, pool and streets, to make up the shortfall for this year.

"The city police department has been understaffed for almost a year due to this hiring freeze. Every purchase that affects the general fund has come with great scrutiny by our Mayor and Council. We are watching our expenses and revenues tightly and will continue to do so as we navigate through this fiscal year. However, one-time funding and grants are hard to come by year after year, and after this year we expect that if we can’t find a sustainable funding source for future years, our budget will be significantly cut to account for the long-term shortfall."

Concerns have been raised that the tax will benefit the City of Bonners Ferry, but cost everyone who shops in town. It would be more fair, they argue, to increase city property taxes.

"A better way to understand why the city is seeking this local option tax vs. a property tax increase relates to something I call the “demand scenario model,” Ailport said. "For example, if you’re in town visiting, eating or shopping, the city must have on-demand police, fire, and street services available should you need any assistance. Rather than have only property taxpayers pay for these and everyone benefit from them, your contribution to ensuring these essential services are available comes in the form of your one percent taxes paid. If you’re not in town shopping, visiting, or eating, then you shouldn’t need to have these services and therefore you shouldn’t have to pay for them. Does this mean that property taxpayers are off the hook? No, if you’re a property owner who pays property tax, you’re still paying roughly 40 percent of the cost of these services with your property taxes. The remaining 60-percent is shared with everyone who spends money in town, including city property owners."

"I wish Bonners Ferry City would stop with the 'fear porn' that they will have to cut police and city street maintenance and find other solutions if the sales tax increase fails," Lynda Fioravanti wrote in a letter published in Boundary.News. "Remember, once a city sees they can increase sales tax to bring in more money, it will NEVER end! This not only hurts city residents, but the whole county as we all shop within city limits. How sad they are pushing this sales tax increase when the people are already hurting with everything going up."

"We all collectively know that lots of new people are moving to Idaho and Boundary County isn’t immune to the influx of new and different folks," Ailport replied. "As we grow and change, losing critical services such as police and street maintenance isn’t something we can afford. However, when you ask someone why they love living here, you often hear things such as 'I just love the people here!' or 'I feel so safe here.' People don’t say these things because they know we have a police department. But you can bet, and without a doubt I believe this, that it is because we have a police department, they feel this way. I can only hope the voters come informed and educated on May 16 and they know and understand what is at stake. However, no matter which way the vote goes, the city will persevere and continue. Just know that your council, mayor and staff will respectfully and undoubtedly stand ready to serve our public today, tomorrow and into the future."

City staff stands ready to address questions regarding the proposed tax, call (208) 267-3105.