Whitefish faces a taxing dilemma

The same day the Whitefish City Council approved an ordinance imposing $5,560 in impact fees per new dwelling, it reactivated discussions about raising the city's 2 percent resort tax to 3 percent.

Simultaneously, eyebrows and questions have been raised about a capital improvement program the council adopted in May that calls for $73.2 million in capital improvements over the next five years.

There have been enough inquiries and negative feedback to prompt both City Manager Gary Marks and City Finance Director Mike Eve to write letters defending the city budget.

Is the city of Whitefish in a money grab to pay for an excessive wish list? Or is it merely trying to keep its head above water during an unprecedented growth spurt for the resort town?

Maybe a little of both.

During one recent discussion a citizen asked the council if it needed a "Taj Mahal" for a new City Hall planned downtown. Council members countered that in the upscale resort town that Whitefish has become, residents expect a certain level of services, whether it's paved trails or attractive-looking city buildings.

The conundrum for Whitefish is how to find revenue sources to pay for the infrastructure needed to sustain a 53 percent population increase since 2000.

The 2 percent resort tax has been Whitefish's ace in the hole for more than a decade, bringing in roughly $13 million that's been used for street reconstruction, property-tax rebates and park improvements.

Three years ago voters approved a nine-year extension of the 2 percent tax that will bring in an estimated $25 million. Now the issue before the council is whether to put a 1 percent tax increase on the November ballot and let the public decide if the tax should be raised.

While the City Council is solidly in favor of the 1 percent increase, Whitefish's business community worries the increase will keep shoppers away. Many merchants contend that merely talking about the tax and a proposed increase is enough to open old wounds with tax opponents.

It's certainly a challenge for Whitefish businesses to lure people in the door in the face of growing retail competition in Kalispell. But it's also a challenge for the city to keep up the level of service the public has come to expect.

Whitefish is one of the few Montana communities able to impose a resort tax and is the envy of other cities strapped by growth but with no way to pay for it.

The council has until Aug. 23 to decide whether or not to put the 1 percent tax increase proposal on the ballot. It also could choose to ask voters to expand the list of non-exempt items while keeping it at 2 percent. Any change to the tax is subject to voter approval.

The resort-tax committee pointed out during a recent workshop that many inequities still exist on the list of what's taxed and what's not. Among the items recommended for removal of tax-exempt status are craft items and supplies, lottery tickets, health-club membership fees and public recreation fees.

Perhaps it's time for the city to look first at making the resort tax more broad-based and equitable before considering a flat increase.