ISSUE #8b: City Hall's Corporate Welfare Program (Part II): SVSB/VSV/FSVA

I Have No Problem with Visit Sun Valley or Fly Sun Valley Alliance...except for one little thing...

Want that bumper sticker in the picture? Sign up three subscribers, send me an email with your PO Box #, and it's yours!

What did we vote for?

Who here voted “for” in the last LOT referendum in Ketchum? What did you think you were voting for? Taxing tourists to subsidize air service and affordable housing for locals, right? Those things sound good! Get the tourists to pay the airlines to fly her and chip into the affordable housing crisis they have helped create. Genius!

But that’s not what you voted for. Ok, you did vote for some of that. But wrapped up in that “for” vote, you also voted to tax locals to subsidize not just affordable housing but also the Fly Sun Valley Alliance (FSVA) and Visit Sun Valley (VSV) via an entity called the Sun Valley Air Service Board (SVASB). FSVA is supposed to pay airlines to fly here, and VSV promotes increased tourism to the Wood River Valley.

Did you know you were voting to tax locals as well as tourists to pay for these things? Given the wording of the ballot and how the City presented it, you can be excused for not fully understanding what you were voting for. You were voting to hand over not just tourist taxes but also local taxpayer money to unelected people (including employees of Sun Valley Co) who spend it for private profit, e.g., taxpayer-funded corporate welfare.

The LOT Is Supposed to Benefit Us, Not Hurt Us

The 0.5% for Air Local Option Tax (LOT) is collected on tourists and locals as a sales tax on lodging, construction materials, retail (not groceries), restaurants, and bars. The purpose of a LOT is to enable Idaho resort cities of under 10,000 people to tax tourists to offset the detrimental impacts of tourism on their communities.

“Often referred to as a “penny tax” or a “tourist tax,” a local option tax is a temporary sales tax allocated exclusively toward funding local projects — including infrastructure, street maintenance, water and fire services, and other community needs. Funds accrued through local option don’t fund state projects, but local ones, shifting reliance away from raising property taxes.” ¹

Readers of the Mountain Express can be excused for believing that is what Ketchum’s (and Sun Valley’s and Hailey’s) LOT does. The paper almost always calls the LOT a tourist tax, ignoring the fact about 25% of it is paid by locals—even more than that if you consider part-time residents locals.

Our “regular” LOT is a good and even necessary thing. It is the primary source of funding for our police and fire departments, and we need that money to run the City.

But that’s not what LOT for Air does. It doesn’t do any of that. It promotes increased tourism—not just tourism, but increased tourism. More. Because we don’t have enough. Is that what you wanted to vote “for” last May? Let’s examine how this works.

Sun Valley Air Service Board—Our Elected Officials Are In On The Game

The LOT for Air tax money goes directly to the Sun Valley Air Service Board (SVASB). Who are they? SVASB is the government. It was created by a joint powers agreement and consists of the mayors of Hailey, Sun Valley, Ketchum and a non-voting rep from Blaine County. They decide how to allocate this tax money. Since voting rights are determined by how much each city puts into the kitty, the Mayor of Ketchum controls how this money is allocated.

Does anyone else find it curious that the Mayors work well together when promoting tourism but not so well on any other regional issue like housing, fire consolidation, or other things that would benefit the locals? Hmmm.

SVASB collectivizes the main WRV towns in a community greater than 10,000 people. The municipalities align their LOT referenda and contribute the LOT for Air to a collective pool. SVASB is a clever workaround for legislative intent that limits LOT powers.

It’s a lot of money at stake (pun intended). For the last reported fiscal year of FY2022, SVASB took in $4.35mm. But SVASB doesn’t spend any of this money itself. It gives it away. $1.6mm to VSV and $1.2mm to FSVA. If you are doing the math, you are asking, where did the other $535k go?

Nowhere. It sat in a bank account. SVASB was sitting on $3mm in cash at the end of FY22. This is questionable legality—in Idaho, all taxes must go to a specific purpose. Going to sit in a bank account beyond a reasonable reserve is not kosher. But who’s checking up on something as vague-sounding as SVASB? Elected officials run it, and they would always act in their constituents' interests, no?

SVASB really just acts as a pass-through entity for VSV and FSVA. In my opinion, it is terrible governance, designed with the express intent to obfuscate how taxes are spent. How is this corporate welfare from the locals? Read on…

Visit Sun Valley: Making Life Less Sunny For Locals

Tangent: Like most people, I cringe at the “Stay Sunny” campaign. What does it even mean? Why are they trying to sell my cheerful nature to the tourists as part of the “ambiance” of Sun Valley? Good luck with that.

Also, what’s with the photo? Aren’t we supposed to be a Dark Sky Reserve?

The money from SVASB to VSV gets commingled with other VSV revenues, and it goes toward tourism promotion and banners and silly little stickers. And overhead. A lot of overhead.

There is nothing wrong with tourism promotion. It’s a free country, and tourism businesses can advertise to their heart’s desire—with their own money. Visit Sun Valley is promoting tourism not just with their money but with ours, and they are not transparent about it. We get a double whammy from them—bad governance and corporate welfare.

What is VSV? “Visit Sun Valley is a 501c6 nonprofit destination management and marketing organization (DMMO) for the greater Sun Valley area including Ketchum, Sun Valley, Hailey, Bellevue and beyond.”²

What is their mission? They exist to promote tourism, but they say they are all about “sustainable”³ tourism and community and blah blah blah.

Who are they? They are nice people; some are retired, and some have run local businesses. There is usually a City of SV rep and a City of Ketchum rep. There is ALWAYS a Sun Valley Co rep (that’s how we know it’s corporate welfare). None of these people are elected. Other than the Sun Valley Co rep, it is unclear to me how they get on the VSV board.

Where do they get their money? In FY22 (the last available report), their revenue of $3mm included $1.6mm from the LOT and a lot of other taxpayer money. In addition to the LOT, they got $380k from the state tourism bureau, $250k directly from the City of Ketchum⁴, and $220k from the City of SV taxpayers. Local businesses chipped in, too! $12k. Yup, $12k. Less than 1% of the VSV budget. It’s sounding a lot more like corporate welfare now, isn’t it?

Where does the money go? Over 20% of it, $610k, went to “overhead and administration.” This is for an organization that doesn’t do any fundraising. I help run a non-profit, and our overhead is about 20%, but that includes a large fundraising staff. Then, $780k went to “research and creative.” I have no idea what that is, but I am guessing that is code for “consultants.” And then $1.2mm went for “promotional expenses.” Like “Keep it Sunny” stickers.

What are their key performance indicators? How do they know they are effective? Dang if I can tell. They don’t seem accountable for achieving any measurable taxpayer goal with their taxpayer funding and do not report directly to any city government. This is not just corporate welfare; it is corporate welfare with poor governance.

In summary, VSV lives off taxpayer money to promote tourism and is unaccountable to the taxpayers.

It would be bad enough if this situation were limited to just VSV, but there is more to this story…

Fly Sun Valley Alliance—Sitting on a Pot of Gold

The last component of the get-the-tax-money-out-of-public-supervision trio is Fly Sun Valley Alliance. What is FSVA? Like VSV, it is a 501c(6) non-profit. Its mission is to “determine strategic priorities for SUN air service.” That is code for bringing in more tourists and hopefully getting that American flight to Dallas they have been working on for years. In their strategic plan, they are working to accelerate the growth in visitors who come to Sun Valley by air by two-thirds more than its historical growth rate.

Who are these people who are working to accelerate tourism growth in the WRV? They are a mix of business leaders and government officials. It's no surprise that those business leaders include a Sun Valley Co. rep. It's ironic that a real estate broker is listed as a government and ex-officio board member. However, given that Aspenization and corporate welfare seem to permeate our government and its quasi-governmental agencies, none of this is particularly surprising.

Each City and the County has a representative. Ms. Breen represents Ketchum. I have never heard her report to the Council on what FSVA is doing with Ketchum's taxpayer money. This is not good governance.

Where does FSVA money come from?

“The air service development work of Fly Sun Valley Alliance (FSVA) is funded through investment partnerships with both public and private sector entities. Public sector investment is provided through annual contracts with Sun Valley Air Service Board through .5% Local Option sales tax revenues (known as LOT for AIR).  Significant private sector investment is provided by Sun Valley Resort with additional support provided by other local businesses through FSVA and Sun Valley Resort partner programs such as Air Support Business Ski Passes, Ski for Air Service Day, and Realtors for Air.”

Looking at their financials, I see only LOT for Air money. I don’t see them transparently reporting the money from any other source, including the “[s]ignificant private sector investment” they get from Sun Valley Co or from selling Sun Valley ski passes to businesses or the “Ski for Air Day.” I wonder what their definition of “significant” is.

Where does the money go? For the past couple of years, most of it has gone into a bank account. In the latest reported year, FY22, they received $1.2mm in tax money (plus an undisclosed amount of private funding) and spent less than $500k on air service. They did not disclose which airlines got how much. They are sitting on $3mm of unspent tax money. Again, taxes are supposed to be spent on a specific purpose, so is banking it even legal in Idaho?

There is nothing wrong with the WRV tourism industry getting together and using their money to pay the airlines to bring in more tourists. FSVA has been effective at its goal of bringing in tourists—over 75% of SUN traffic is tourism traffic. Air service for the WRV benefits the entire community by linking us to the rest of the world. It seems worthy of some public subsidy if that subsidy is actually required to have air service at SUN.

But is it required? Have you checked out SUN fares? I do a fair bit of travel. Fares to/from SUN are often double the routes from BOI. They are ALWAYS higher—for the same plane flown by the same airlines. I did a little research on the interweb, and BOI doesn’t pay airlines to fly there.⁵ If you need a lift to BOI, let me know. I’ll drive; you pay for gas and coffee.

So why are the taxpayers of the Wood River Valley paying airlines to fly what appear to be profitable routes? In my previous life, I was a transportation analyst. My analysis: The airlines are jacking up their fares to SUN because their load factors are so high. Maybe operating costs at SUN are higher? I don’t think so. They don’t have to pay the same gate fees that BOI charges. Instead of paying airlines to fly to SUN, maybe we should charge them.

But the City and IME Say the LOT is a Tourist Tax. Kinda.

In the back of your mind, are you now thinking that Sun Valley Co. is run by geniuses.⁶ They get the tourists and the State of Idaho to pay VSV to promote their resort! (And every other local business, too, to be fair.). They get the tourists to pay FSVA to subsidize the airlines for the flights that bring them in, even above and beyond their airfare. That seems smart.

But it’s not just the tourists. We pay the LOT, too—a lot of the LOT. We pay more of the LOT than we need to because we tax much of everything we buy locally when the LOT could have been limited to hotel and Airbnb beds. And so we pay for the corporate welfare machine.

It’s not transparent who pays all this tax money, how it flows through the system, or who gets it. I did the best I could to dissect it from publicly available information, and it took me a lot of time. This is not good governance. This is not the transparency touted by the Mayor.

Meanwhile, SUN is building more capacity for private jets. At the same time, it is running out of parking for locals (the parking lot was full this weekend, according to their Instagram post). SUN's whole purpose was to enhance the quality of life for the locals. They have become another cog in the Aspenization of the Wood River Valley.

1. https://www.liftlocalidaho.org/

2. https://visitsunvalley.com/about-visit-sun-valley/. I wonder how Carey, Fairfield, Picabo and Shoshone feel about being in the “beyond?” Are they getting any benefit from VSV?

3. Calling tourism “sustainable” is like calling a retired person part of the workforce (Ketchum does this in its Housing Action Plan). Tourism is one of the dirtiest of industries from a carbon perspective. This is greenwashing by VSV.

4. Ketchum did not directly transfer local taxes to VSV in 2023.

5. https://www.iflyboise.com/media/1834/boi-competition-plan-final-2-10-22.pdf. Maybe instead of wooing American, we should be wooing Southwest. They seem to keep the pressure on to lower airfares.

6. Think about this. SVC brings in foreign workers on the J1 program. They pay them a low wage, and get a kickback of that wage for the rent they charge the kids to live in the dorm. Many SVC workers work a second job in Ketchum to make up for that kickback and save money for when they go home.

In a way, SVC is providing employee housing for other businesses. And they charge their employees for that. But when City of Ketchum does the exact same thing with a Bluebird, it charges the local taxpayers, and some of that profit leaves the community via a for-profit developer like GMD. Who is smarter about employee housing—SVC or Ketchum City Hall?