City voters OK 'tourist tax'

SANDPOINT — City voters gave a thumbs up to the city's proposed "tourist tax," setting the stage for a 7% increase of a local option tax on visitor lodging.

A total of 2,098 residents, or 64.77%, voting in support of the measure with another 6,525, or 32.15% voting. A supermajority of 60% was needed for the local option tax to pass.

“Thank you to our voters who overwhelmingly passed the increase in our tourist lodging tax to support much needed improvements to our streets and sidewalks and extension of the existing tax an additional ten years to providing ongoing financial support to our police, fire and parks services impacted by tourism,” Mayor Shelby Rognstad said.

Sandpoint officials said the higher tax was needed so the city could finally accomplish a number of long-sought street projects. With the approval, the city's existing tourist tax would be extended to Dec. 31, 2035, and would increase from 7% to 14%.

The increase will go into effect on Jan. 1, 2023.

The proposed "tourist tax" is applicable only for lodging stays of 30 days or fewer at hotels, motels and vacation rentals within the city limits.

The additional 7% sought by the city would only fund street and pedestrian projects. The existing 7% tax will continue to fund public safety, parks and other infrastructure improvements, Sandpoint City Administrator Jennifer Stapleton said.

The increase puts the city roughly in line with the national average. According to a 2019 study published by the American Hotel and Lodging Association, the average tax on lodging is 13.5%, with several cities now charging over 20%, particularly in cities that are a significant tourist destination.

The need to address the declining condition of city streets and sidewalks has been apparent for some time, city officials said at an October council meeting. The long-standing question has been how to pay for those improvements.

"Even with this increase, more funding sources are needed to increase the investment in street pavement and sidewalk projects to recommended levels and prevent more streets from reaching poor/very poor or failing condition," officials said on the website.

Like the rest of Idaho, growth in Sandpoint has skyrocketed in the past several years. Sandpoint officials said the city's growth rate has, and is projected to continue at 2 1/2 times its historic growth rate.

All remaining tax revenues collected – including personal and business income taxes, capital gains taxes, gas taxes and sales taxes – flow to the state and are controlled by the governor and Legislature. Only a small percentage of sales tax revenue (11.5%) gets sent back to local jurisdictions, city officials said.

In 2014, Sandpoint voters approved a resort city local option tax of 7% on lodging on any short-term room occupancy for each hotel-motel room rented or leased within the city.

City officials said current lodging taxes received average nearly $600,000 per year. A majority — about 60% — used to come from hotels/motels with the remainder from permitted short-term rental properties. In the past two years, short-term rental properties have accounted for over 50% of the revenues and the taxes generated by hotels/motels decreasing to less than half.

Revenues raised by existing 7% tax are used primarily to benefit public safety services, public parks operations such as the City Beach Lifeguard Program and the SPOT Bus service.

The city's transportation system includes approximately 102 lane miles of streets, with a replacement value of more than $86 million.

The additional 7% will allow the city to tackle a backlog of paving projects and other street repairs.

Projects that will be completed with this funding include sidewalk connectivity and improvements on Larch and Oak Streets, and Ella and Fourth avenues, Stapleton said. In addition, sidewalk connectivity will be improved to Washington Elementary and the Senior Center.

Stapleton said accessibility improvements will be completed in the downtown core and reconstruction of Cedar and Fir Streets will occur in the first five years of the tax. Future projects will be prioritized for the 2027 through 2035 tax years based upon an updated Pavement Condition Report and an updated gaps analysis of the Priority Pedestrian Network, she added.

Projects were identified as part of the city's Multimodal Transportation Master Plan. While the plan found that the pavement conditions of city streets are within the national average, Sandpoint has a backlog of pavement projects for streets in very poor or poor condition of 21% — double the national average.

The report recommended the city’s annual investment in street pavement projects needs to increase to over $1 million per year to avoid further increasing that backlog, officials said. The MTMP also includes a pedestrian priority network improvement program which identifies accessible improvements needed to existing sidewalks and paved pathways and extension needs to complete the network, officials said.