City Council OK’s wording for ballot measure increasing Sandpoint bed tax

By Zach Hagadone
Reader Staff

The Sandpoint City Council unanimously approved language Aug. 3 for a proposed increase to the tax on short-term lodging, which is slated to appear on the Nov. 8 ballot for consideration by residents.

Councilors voted July 20 to table the proposed ballot measure, asking city staff to refine the wording to emphasize that the tax increase would not fall on property owners, nor would it reduce the current amount of bed tax allocation to public safety, parks, infrastructure improvements and property tax relief.

Staff returned Aug. 3 with that new verbiage, which first of all altered the title to read: “City Local Option Non-Property Tax for Tourist Lodging.”

The question put to voters at the polls will read:

“Shall the City of Sandpoint, Bonner County, Idaho, adopt an ordinance providing for an increase of its hotel/motel occupancy tax from its current 7% to 14% and extend the period of years for its collection to end December 31, 2035. This tourist lodging tax applies to all short-term rentals of 30 days or less, including hotels and motels, condos and vacation homes.

“50% of the revenues received will continue to fund purposes approved by voters in 2014, including public safety services, public parks and other infrastructure and capital projects. The remaining 50%, anticipated to be $6,000,000 over 12 years, will be dedicated to the following purposes:”

Those purposes include street pavement, sealing, widening, reconstruction and associated stormwater infrastructure; improvements to the Pedestrian Priority Network, including maintenance of sidewalks and pathways, as well as reconstruction and extensions to provide connectivity and increase ADA accessibility and safety; property tax relief; and to cover costs related to enforcement and collection of the tax.

“I think you did a great job clarifying that we’re not losing any money for public safety,” Councilor Jason Welker said.

The current tax of 7% is due to expire on Dec. 31, 2025, and has collected an average $500,000 per year over the past three years, including annual increases to receipts. Meanwhile, as City Council members heard on July 20, revenues from the tax have decreased related to motel and hotel occupancy, while short-term rentals — and vacation homes, in particular — have increased to make up just more than 50% of the total.

That trend is not expected to reverse any time soon. Doubling the current 7% to 14%, and putting the new revenues toward street work, is intended to meet an ongoing and critical need to improve the city’s infrastructure. 

According to data shared in July, Sandpoint has a backlog of streets in “poor” or “very poor” condition, amounting to about 21% — twice the national average. In its Multimodal Transportation Plan, the city identified the need to increase spending on streets to $1.3 million a year as a baseline to keep the backlog from growing and forestall more failing road conditions. At the same time, annual paving maintenance and reconstruction budgets have doubled to $500,000 in recent years, as has sidewalk funding, rising from $25,000 to $50,000.

Increasing Sandpoint’s short-term lodging tax to 14% would fall closer to the national average, identified in an industry analysis from 2019 at about 13.5%. Meanwhile, many resort cities, which experience a disproportionate amount of short-term rental traffic, have a bed tax rate of more than 20%.

City Hall officials underscored several times that the proposed tax increase is meant to capture revenue from short-term visitors — not local property owners — and would not result in reduced allocations to public safety and parks, as voters had already approved in 2014.