BONNERS FERRY — On Tuesday, May 16, Bonners Ferry city residents will vote on a proposed local option tax of 1% on all taxable goods under $1,000 to pay for Bonners Ferry police, fire and street departments, as well as property tax relief.

This LOT is to cover the costs of the above general fund departments. Bonners Ferry’s general budget now has a shortfall of approximately $480,000 due to an Idaho Supreme Court ruling that cities can not use utilities or enterprise funds to pay for general fund departments.

For over 70 years Bonners Ferry had used 5% of funds collected through water, sewer and electric utilities to pay for police, fire, street, parks, city pool and the golf course, all of which are general fund departments.

In the 2017, Idaho Supreme Court Case Hill Vu Mobile Home Park Ed Quinn v. City of Pocatello it was found that Pocatello upcharge utilities in order to fund other departments stating this “commonly is done in public utilities and private sector companies.”

Per Idaho Code, utility fund profits can only be used for the corresponding department to cover costs and to improve the department.

It was found that Pocatello “operates as a for-profit corporation in order to raise revenue for the city’s general fund.”

Bonners Ferry has remedied this issue by no longer allowing utilities to fund other departments, resulting in the $480,000 shortfall. In order to cover the shortfall the city had three options, cut services and/or departments, raise city property taxes over 60% or go out for a local option tax.

In January, the city council voted to pose a LOT to the community as a way to make up the funding for general fund services. If the LOT passes 1% of all sales is 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,” city staff wrote. “If approved by voters, the money raised will cover costs associated with operating the city fire department, police department, street department, building and grounds as well as contribute to property tax relief.”

If approved, the tax would be in effect starting July 2023 until December 2033.

This year the city has been able to make cuts. Bonners Ferry entered an agreement with Boundary County to cover the city pool costs for the 2023 season. In addition, the city is in the process of selling property on Eileen Road.

Prior to the city knowing of the 2017 Idaho Supreme Court case, at the end of the fiscal year Bonners Ferry transferred 5% gross sales in each enterprise funds, also known as utilities, and transferred that to the general fund, Lisa Ailport, City Administrator told the Herald.

“Regarding rates, the city rates likely would have seen a double digit increase last year due to rising cost of inflation on parts, materials, etc., but because the transfer was heading back into the funds (the city) took a more modest rate increase of just 5%,” she said. “Ultimately the funds that are staying in the utility accounts will be used to fund capital projects and purchases and may also be used to stabilize rates so we don’t have to encounter a double digit rate increase in future years.”