Whitefish ponders resort-tax increase

By LYNNETTE HINTZE

The Daily Inter Lake

Should the Whitefish resort tax be raised to 3 percent?

Voters may get a chance to decide.

The Whitefish City Council has until Aug. 23 to decide whether or not to put a tax-increase proposal on the November election ballot. Most council members favor boosting the tax from 2 to 3 percent, but after a workshop last week there was no clear indication of what the council will do.

The council has long felt that an increase in the resort tax is a viable option to pay for the infrastructure needs that accompany the city's rapid growth.

"It's smart for us to explore any revenue source," Mayor Andy Feury said. "We have ongoing needs."

Convincing the public a tax increase is necessary may be a challenge.

Many Whitefish merchants don't favor a tax increase and maintain any discussion about the tax opens old wounds. The council got an earful from business owners during the workshop July 16 that included members of the resort-tax monitoring committee and Heart of Whitefish downtown business association.

"Perception is the big thing," Don K Chevrolet owner Don Kaltschmidt said.

"People say, 'They got that tax in Whitefish,'" which makes it a disadvantage for Whitefish businesses, Kaltschmidt said. "Let's let it lie."

Marilyn Nelson of Nelson Hardware said businesses suffer any time the resort tax is discussed.

"It opens old sores," she said.

Whitefish's resort tax was controversial when it was first approved by voters in 1995. Collections began in February 1996, and since then the 2 percent tax on lodging, restaurants/bars and retail goods has raised roughly $13 million.

Two-thirds of the revenue goes toward street reconstruction, 25 percent is rebated to city property owners and 5 percent pays for park improvements. The remaining 5 percent is retained by merchants to offset costs they incur in collecting the tax.

Retail business owners bore the brunt of controversy during the first few years of tax collections, but eventually shoppers accepted the tax for the most part and it has been quietly collected through the years.

Retailers have collected the most resort tax in Whitefish every year since it began. At the end of 2006, retail collections totaled $5.3 million, compared to $4.4 million collected by bars and restaurants and $2.1 million from hotels and motels.

Collections have increased each year. Tax revenue totaled $1.48 million for the 2005-06 fiscal years. This year, $1.64 million was collected for the year ending June 30, a 10 percent increase from the previous year.

LAST FALL the resort-tax committee and Heart of Whitefish agreed to hold joint meetings to discuss ways to broaden the tax and consider additional non-exempt items that could be placed on a ballot initiative. But recently the committee recommended it discontinue working with the Heart of Whitefish when no consensus could be reached.

Although the resort-tax committee's recommendation is to leave the tax as is, committee spokesman Jack Fletcher said the majority of the committee would like to see changes made in the list of tax-exempt items. Among the items the committee has recommended for removal of tax-exempt status are craft items and supplies, lottery tickets, health-club membership fees, photo developing, taxidermy fees, travel-agent fees, public recreation fees and boat-launch fees.

Council member Shirley Jacobson, also a longtime resort-tax committee member, stressed that the committee is neutral on the tax increase.

"The committee suggested to the council that if they [the city] wanted more money for roads, this is the only way to get it," she said.

Discussion about a tiered tax system - 3 percent for lodging, 2 percent and 1 percent for retail goods - surfaced again. Voters also would need to approve a tiered-tax proposal, but there was once again no consensus on the issue.

IT'S NOT the first time Whitefish has considered raising its resort tax. Three years ago the 3 percent proposal was tossed around. The city decided instead to ask voters to extend the 2 percent tax until 2025 to avoid legislative action that could have prevented the resort town from renewing the 2 percent tax.

That ballot issue passed.

The nine-year extension will bring in an estimated $25 million.

Council member Nancy Woodruff said she believes the current 2 percent tax is popular with citizens because "they perceive we are getting visitors to pay for part of it.

"I have a hard time thinking that 1 percent will be make or break," she said.

Feury, too, said he believes a ballot measure for the 1 percent increase is the way to go.

Added council member Velvet Phillips-Sullivan: "It's the people's tax.

"This is more about giving voters the option to raise it."

Features editor Lynnette Hintze may be reached at 758-4421 or by e-mail at lhintze@dailyinterlake.com