Local Option for Local Services
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City residents and property owners have enjoyed lower property tax for the past 6 decades with the investments made from the electric, water and sewer utilities. However, with a recent Idaho Supreme court case and under the advice of the city attorney, the city can no longer make transfers of gross sales from our utilities to cover general fund expenditures. This means, the difference must be made up by funding these services in other ways, or by cutting community services to align with the property tax being paid.
In January of this year, 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. This means that 1% of all sales subject to sales tax (exempting sales in excess of $1,000) will impose an additional 1% over the state sales tax of 6%. Based on sales data from the Idaho State Tax Commission, early estimates predict the 1% sales tax could generate around $450,000 to $500,00.00 in revenue.
If approved by voters, the money raised will cover cost associated with operating the city Fire Department, Police Department, Street Department, building and grounds as well as contribute to property tax relief (click here for adopted language).
Many have asked if they can review the city’s budget. Attached below is the entire budget for the city. The utility funds, which include water, sewer and electric are not allowed to share funds between the general fund. That said, when reviewing the budget, it can be difficult to understand where one ends and the other begins. Staff is ready to assist all those who wish to or are willing to seek help in understanding how to read the numbers. Please don’t hesitate to ask. Emails can be forwarded to City Administrator, Lisa Ailport at firstname.lastname@example.org.
Make your voice heard, VOTE ON MAY 16, 2023
Funding for Community Services
As a property owner, taxpayer, or a utility customer, the availability of police officers, fire fighters, or adequate streets will likely be impacted or cut to make up the financial short fall. Planning services may be adjusted or altered and those benefits the community has enjoyed, such as a community pool and other parks, may have to be closed or even sold to make up the loss. Property taxes alone will not cover these essential services any longer and the city residents must decide how they’d like their government to proceed.
Local Option Tax on Taxable Goods
A preferred option is the local option tax on all or part of sales subject to sales tax within city limits. Residents could approve a 1% sales tax on all sales subject to sales tax under Idaho Code. This option allows for the residents to consider exemptions of certain sales from the tax, such as single purchases over a certain cost. Ponderay, Cascade and other cities use single purchased items over $1,000.00 as exempt from the local option tax.
The greatest advantage of this method is everyone who makes purchases within city limits will help pay for the essential services for which they benefit from.
Early calculations suggest that with overall gross sales within the city (extrapolated from state tax commission data) could generate between $400,000 and $500,000 that would go towards general fund services. In addition, any funds generated in addition to those needed, could help to cover capital expenses related to those services and may even be able to support property tax relief.
A local option tax must be supported by a minimum of 60% of city voters.
Parameters of Location Option
City Council met at their regular February 21, 2023 meeting approved a resolution for a May 16, 2023 ballot election. The ballot language includes the following:
Shall the City of Bonners Ferry, Boundary County, Idaho, adopt an ordinance providing for a local option tax of 1%, effective on July 1, 2023, and extending the period of the tax until December 31, 2033.
This local option tax would apply to all sales subject to Idaho sales tax pursuant to Title 36, Chapter 63, Idaho Code, exempting those sales in excess of $1,000.00, in one individual transaction. The non-property tax revenue derived from and collected under the Ordinance shall be used for the following purposes:
- Fire Protection, including capital and operating expenses.
- Law Enforcement, including capital and operating expenses.
- Streets, Sidewalks, Buildings and Grounds, including capital and operating expenses, such as road construction and maintenance and snow removal.
- Property Tax Relief (Per Idaho Code, any excess revenue received will be placed in a designated property tax relief fund.)
- Direct costs to the city to collect and enforce the tax.
The city will meet with individuals, groups, and businesses to help educate them on the ballot language and to seek input from business and voters on the future ordinance, if supported by the voters.
If you have any questions, thoughts or wish to communicate with the city on this issue, please feel free to email, or call Lisa Ailport, City Administrator. She can be reached at 208-267-3105 or by emailing at email@example.com.
Questions and Answers about the City Budget
The Idaho Supreme Court case has provided direction that using utility funds to support tax-based services is no longer acceptable. Therefore, we will not continue this method of funding our general fund. We have no other option other than to bring this question to the voters of Bonners Ferry.
The city has only a few options for generating general fund revenue. Idaho law requires that our adopted budget is balanced each year. We know that next fiscal year’s budget will not include the general fund transfer, so to balance our budget we must have either a new source of income (Local Option Tax or Base Rate Increase) or we must cut services to balance the budget.
General Fund services include police, fire, streets, and parks (including swimming pool, splash pad and the golf course), building and planning services, administrative services such as the clerk’s office, city engineer, city administrator, and the visitor center facility. There are some services which are partially covered by fees, but also use taxes to fully support the service. These include Planning and Zoning administration and building services. The golf course is chartered to cover its expenses, however, on occasion there may be single one-time capital purchases that use taxes to help cover the cost of items such as mowers and buildings.
Grants often do help cover the costs of project expenses, such as buildings, roads, and equipment expenses. Generally, grant money does not cover ongoing operations and maintenance costs that otherwise are supported by tax dollars.
The city has been very successful in the past receiving grants to pay for project related expenses. Local Highway Technical Assistance Council (LHTAC), Blue Cross Foundation, Community Transformation, Innovia, and Community Block Grants are just a few that have helped in the last five years. While grants are certainly an opportunity for funding projects, they are not a reliable funding source, as many grants are very competitive.
The Council finalizes its budget each year in September, and the fiscal year runs from October 1-September 30. The city uses Tyler Technologies software for accounting and billing. Any member of the community can request detailed budget information.
The State of Idaho limits what cities can do to raise revenue to offset property tax. The city cannot charge a fee for a service that goes to support another service. For example, city building permit fees cannot raise revenue to support the police department, or the city pool expenses. The fees charged must be representative of the service or product received.
A breakdown of revenue received from taxes and expenses for tax supported services since 2021 are provided on the city’s website. When considering income and expenses, our local property tax dollars do not even cover the amount that is needed to run the 7-member police department, let alone the other services the public receives.
Many communities have established development impact fees to offset the costs of new development. However, just like with other funding sources, there are limitations on where the funds can be spent. Generally, impact fees pay a proportionate share of the cost of new public facilities needed to serve new growth and development, not pay ongoing operating expenses.
Bonners Ferry has an Urban Renewal agency. Urban renewal funds must be used as specified in the urban renewal plan and within the urban renewal district. The urban renewal district does currently reimburse the city for some of the police and street maintenance costs within the district.
Can the city “live within our means?” Absolutely! However, the question is whether the citizens will like the way the city looks after cuts are made. The city’s services are a direct reflection of what the citizens want and expect from its local government. To do away with any of these services, such as police, fire, roads and parks, means the quality of live in the area will change. If reducing general fund services is what the voters tell us they want, the city will adhere to that decision.
The council, mayor and administrative staff stand ready to sit down with citizens and businesses to discuss the implications of losing these funds from our budget and the impact it will have on the quality of life for everyone in the county. We care about what the voters say, and we most certainly will abide by what the majority of voters tells us to.
Idaho code dictates that to be eligible to register to vote in city elections, a person shall be at least eighteen (18) years of age, a citizen of the United States and a resident of the city for at least thirty (30) days next preceding the election at which he desires to vote, or a resident of an area annexed by a city.
Staff and the Council understand that there will be more questions as we navigate the steps towards a vote in May. As you have questions or any additional thoughts, please send them to Lisa Ailport, the City Administrator at firstname.lastname@example.org