HAILEY — Hailey may be a resort city, but it was one of the latecomers to charging a local option sales tax.

The city’s voters first passed one in 2006. Currently, Hailey taxes lodging and car rentals at 3 percent, alcohol-by-the-drink sales at 2 percent and restaurant food sales at 1 percent.

“It’s limited to the type of (purchases) that would largely be paid by tourists,” City Administrator Heather Dawson said.

The city of Ketchum is part of the reason Idaho even has a local option sales tax. Ketchum’s and Sun Valley’s mayors pushed the Legislature in the late 1970s, to help pay for a bus system that would serve primarily the area’s tourists.

In 1984, Ketchum’s and Sun Valley’s mayors returned to the Legislature to lobby for the ability to tax all sales — the original law allowed for a local option tax on just hotel beds and booze, and “Ketchum did not have enough hotels and motels to raise sufficient funds from the ‘bed’ tax,” former state Rep. Wendy Jaquet wrote in an article summarizing the tax’s history. Currently, Ketchum taxes room stays and liquor by the drink at 3 percent and all other sales, except groceries and motor vehicles, at 2 percent.

Thirteen resort cities in Idaho — legally defined as cities with fewer than 10,000 people where a major portion of economic activity is generated by tourism and recreation — levy local option sales taxes, including Sun Valley, Hailey and Ketchum.

In Hailey, the tax brings in an average of $360,000 a year, and it has been increasing, Dawson said.

“Ours has very steadily kept at about 10 percent of our general budget,” she said.

The money can be spent on transportation, economic development and public safety services such as the police and fire departments. Much of it, Dawson said, goes toward street maintenance. Some of it is used to pay the city’s contracts with Mountain Rides Transportation Authority and the Hailey Chamber of Commerce. Some, she said, has been used for police and fire vehicles and to help hire police staff.

Ketchum puts the money it collects into a designated fund and this year has budgeted $440,000 for the Sun Valley Marketing Alliance and $590,000 for Mountain Rides, Assistant City Administrator Lisa Enourato said. The city is also putting some of the money toward Wagon Days and for emergency services.

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Has the local option tax affected people’s shopping habits?

“Like many cities, Ketchum strongly promotes buying locally,” Enourato said. “It’s fairly obvious that buying locally supports our local businesses, which are vital to the sustainability of our town. What is sometimes forgotten is that without the LOT, Ketchum may not have bus service or its excellent emergency services.”

Dawson said there was some concern, when Hailey first adopted the tax, that it would affect how people spend their money; that’s why the city put a four-year sunset on it the first time. She said the feedback at the time of the second vote was that the tax was not driving down sales.

“Taxing the tourist element doesn’t seem to have as big an impact on the taxpayer locally,” she said.

Dawson said revenue fell during the recession, but even then it still covered about 10 percent of Hailey’s budget. She said both the relatively stable share of overall revenue and the lack of economy impact may be because Hailey’s tax is only on a few largely tourism-related items.

“Areas that tax retail sales more see a bigger fluctuation in their tax,” she said.

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