City considering LOT to fund general budget

BONNERS FERRY — City officials are pondering putting a local option tax before voters to cover a general fund shortfall caused by a Idaho Supreme Court ruling on how such budgets can be funded.

The LOT was the top idea discussed at a recent city meeting, rather than cutting services or raising property taxes.

A proposed local option tax of 1 percent to fund the city’s general fund budget was the leading community solution from a Jan. 10 special council meeting. A LOT is a termed tax and will expire after a set date.

Since the 1950s, the city has transferred 5 percent of its gross sales in enterprise funds to the city general fund, excluding garbage.

However, due to a 2017 Idaho Supreme Court case ruling, the general fund can no longer be funded in this way. Bonners Ferry officials said the city now has a general budget shortfall of approximately $450,000. It was only after approving the 2023 budget that the city was only made aware of the ruling.

Bonners Ferry officials said the shortfall will be an ongoing one where the city will have to find ways to cover the general budget each year or make cuts equaling that amount.

The general fund is paid for by the city taxpayers and grants. City departments that fall under the general budget include, Bonners Ferry Police, volunteer fire department, streets department, contracted planning and zoning, city pool, golf course and city administration.

The general fund consists of approximately 25 percent of the city’s budget.

At the Tuesday council meeting, many residents spoke out against raising property taxes.

“The city made a mess of things to the tune of almost a half million dollar deficit and we all have to pay to fix,” Boundary County resident Jeanine Betsher said.

Betsher said residents don’t want to pay more in taxes and that a LOT affecting grocery taxes and other goods is not a good solution.

“Governments, whether at the federal, state or local level, always think the solution is a local tax increase. The same with the schools. Why can’t the government learn to budget, live within that budget and do without? That’s what the rest of us do,” she said.

She said a LOT would hurt local business as more people will travel to Montana and Ponderay or online to shop. She told the council she was concerned the tax would never expire.

Gregory Lamberty said he was concerned that a LOT would negatively affect city businesses, such as gas stations and that customers would go elsewhere or into the county to make purchases.

Many patrons suggested looking deeper at the budget to see what services are essential. They said they, too, are being hit with inflation and “on all sides” financially, from the county to the school district.

Councilman Ron Smith said that after hearing comments many people don’t understand how the shortfall came about. Since the 1950s, the city of Bonners Ferry hasn’t had the money to operate the general fund and so they took 5% from electric, water and sewer to cover the general fund.

“It is nothing this council or mayor had anything to do with,” he said. “When I hear ‘live within your budget,’ I agree wholeheartedly to live within your budget, but when they throw this at us, to come up with $450,000 for this current budget […]”

For budget planning next fiscal year, the general fund will not be receiving $300,000 to $400,000 for budget, he said. They will not have a budget.

“How do we gain the income?” he said.

At the Jan. 10 meeting, residents suggested that if a 1 percent LOT was passed and if the funds raised exceeded what was budgeted then the city property owners should receive a tax rebate. Many present agreed, but others were concerned how city departments could grow, such as first responders, if their budget didn’t grow.

At this time BFPD is still operating 20 hours a day seven days a week and is down an officer. Councilman Rick Alonzo, a former BFPD police chief, said the BFPD has operated with the same amount of officers for 50 years, yet crime is rising.

In order to cover the deficit from property taxes alone, city property owners would pay 63 percent more on the line item for the city.

City Administrator Lisa Ailport said in simple math terms, if a home in Bonners Ferry is at a value of $300,000 after expectations, the property owner already pays $700 to the city. With the 63% increase, the property owner would pay $1,141. A supermajority of 66% would be needed to pass this tax.

Alonzo quoted his projected tax increase and said the increase was “ridiculous.”

If the city is to put a vote before the people in the May election, ballot language is due to the county in March. The council directed staff to schedule more time for community meetings for input, a time has not yet been announced.

A local option tax is a tax on taxable goods within a jurisdiction used for funding. The city could run a 1% local option tax on taxable goods to cover the shortfall. The tax is local due to being controlled by a local jurisdiction and anyone shopping in Bonners Ferry would be paying toward the city’s general fund instead of exclusively city property owners.

The city’s fiscal year 2024 budget is due for publishing in August. If the city runs an election in November, it would be the next fiscal year and the 2023 budget would have to balance with the $450,000 shortfall included.

The city of Ponderay has a 1 percent LOT, set to run for five years in order to fund a park project.

Ailport said that she has an open door policy and is willing to meet with concerned residents regarding the city shortfall.

The city’s budget and slide show from the special council meeting are available on the city’s website under the Jan. 10 meeting.

Also at the meeting, the city council approved the repair, estimated at more than $7,000, of police vehicles damaged in connection to a slow speed chase earlier this month.

Bonners Ferry Police Chief Brian Zimmerman said the department hopes to receive restitution once the case receives judgment.