Cities to try again for local option sales tax

The Montana League of Cities will push again for a local option tax in the 2009 legislative session.

The league's director outlined the pitch for the tax on Wednesday to Kalispell and Columbia Falls elected and administrative officials.

The league - which represents 129 cities - has unsuccessfully pushed this measure since the 1980s.

But today's local governments and property taxpayers are in tightening economic squeezes, which could make the local option tax idea more palatable, said Alec Hansen, the league's executive director.

"People are beginning to realize it's the only idea" to funnel more money to local governments, he said.

City and county governments and some local chambers of commerce usually support this concept. The Montana Farm Bureau, taxpayer associations and the Montana Chamber of Commerce usually oppose it.

Kalispell City Council members - loath to raise property taxes - routinely grumble about wishing a local option tax is legal in Montana beyond the resort tax allowed in only a handful of towns, including Whitefish.

Under the local option concept, a city or county government can levy a local sales tax - with voter approval - on specified items and services within its boundaries.

This concept has been criticized as a stealth sales tax in a state that traditionally opposes sales tax proposals.

But local governments across the state are running out of money, Hansen said.

Right now, the Kalispell City Council is finding that levying a parks maintenance tax might be the only way to keep its 2008-09 budget in the black.

Meanwhile, Montana's $1 billion surplus in 2007 is now $400 million because of increased state 2007 spending on schools, pensions, and paying capital projects as they unfold rather than financing them through debt.

Consequently, cities and counties won't find much extra money from the Legislature, Hansen said.

"If the cities are going to fix their financial problems, they are going to have to figure out how to do it with their own money," he said.

Hansen said that a local option tax would:

. Significantly reach visitors. In a 2003 report, the Montana Department of Revenue calculated that a theoretical statewide resort tax would collect 48 percent of its revenues from nonresidents.

. Be imposed on money spent on discretionary items and services.

. Keep city property tax levies low. Whitefish and West Yellowstone have local option resort taxes, and their property tax levies are among the lowest in the state.

A 2002 Department of Revenue report showed that if Kalispell and the rest of Flathead County had a 1 percent local option tax in 2004, it would raise $492,000 for Kalispell and $1.105 million for the rest of the county.

Hansen said some local option tax money would have to be shared to make the concept more popular in Helena.

That might include earmarking some money to programs currently funded by property taxes, which then would lower those taxes. And each local option taxing jurisdiction would have to share a percentage of its income with the rest of the state, he said.

Reporter John Stang may be reached at 758-4429 or by e-mail at jstang@dailyinterlake.com