Kalispell looks at fee to pay for streets

The city of Kalispell is considering a 5-cent retail transaction fee to help pay for street maintenance.

City staffers discussed the idea with the City Council during a work session on Monday.

City Manager Jane Howington proposed the idea because the city's infrastructure "is crumbling in some places."

"We don't have a real strong capital program," she said. "We can chip-seal, but reconstructing [a street] is a different story." She cited the example of Stillwater Road, a north-south route west of U.S. 93.

"Portions of it won't be able to be chip-sealed. It can't handle it," she said.

Howington said the current budget includes $1.75 million for street maintenance but $4 million to $4.5 million is needed to adequately fund improvements.

That's where the transaction fee would help.

The idea has been tried in Hampton, Va., which used it to fund the Hampton Coliseum, and several places in Colorado.

The initial discussion was about a 5-cent flat charge per transaction at Kalispell retail businesses.

Howington said she talked to a couple of businesses about a 3-cent charge, and they balked, equating it to harassment and implying that amount wasn't worth collecting.

"I'm staking my claim at between 3 and 5 cents," Howington said.

The transaction fee is not a sales tax, she noted, but instead is a user fee.

Howington said city officials started looking into the transaction fee last fall. At that time, they thought state law would have to be changed to allow it. But they found out that's not the case.

The Montana League of Cities and Towns looked into it and a number of large cities in the state are interested, Howington said. Numerous efforts in Helena to give cities the power to levy local-option sales taxes have been turned down by the state Legislature.

If approved, the transaction fee would lower by two-thirds property owners' street assessments, which are levied in their property taxes.

It would place the burden for the use of city streets on those who use them, including tourists and those who don't live in the city.

For example, residential property owners in the city currently pay 50 percent of the street maintenance assessments, but only produce 22 percent of the vehicle trips.

Retail businesses pay 18 percent of the street assessments, but those who frequent those businesses account for 63 percent of vehicle trips.

The other entity is non-retail business, which don't generate many vehicle trips.

City Attorney Charlie Harball said the transaction fee would raise more revenue. "It's not a perfect way," he said, but it's a reasonably close way to factor how the streets are being used.

Howington gave the example of how much less she would pay if the 5-cent fee is enacted.

She currently pays $184 a year in street maintenance property tax. She figures she would pay $60 less per year based on a lower property tax and 5-cent transaction fees.

Someone who bought something at a Kalispell store once every day would only pay $18.25 a year in transaction fees, council member Tim Kluesner said.

Kalispell could be the first city in Montana to enact such a fee on a citywide basis.

Mayor Tammi Fisher said she likes the idea. "I would see this as a progressive move, and I'm all for progress," Fisher said.

Council member Jeff Zauner said some people may be concerned about the transaction fee later going up to a dime or a quarter.

"This is a really good time to talk about it because there's chuckholes everywhere," council member Jim Atkinson said.

Howington said shoppers' activity likely would not be affected significantly by the transaction fee due to the price of gasoline.

She cited the example of Sportsman and Ski Haus in Whitefish, where customers pay the Whitefish resort tax, while people shopping at the Kalispell Sportsman store do not. Howington said the owners of the business said people are not refusing to shop at Whitefish because of that city's 2-percent tax on lodging, restaurants and luxury items.

The Kalispell street maintenance fund also pays for such things as rights-of-way and curbs and gutters. Howington said the city also could use the fee to pay for street light assessments.

It would also be a way for the city to collect data for a business registration program, another idea the council discussed implementing last year.

Business registrations were talked about as a way to improve public safety because they would require the business to provide information to the city that is may not have, such as whom to contact in case of emergency and how to enter the building.

Howington said city staff will study the transaction-fee issue some more and bring a proposal to council.

Street assessments have to be complete by August.

Reporter Caleb Soptelean may be reached at 758-4483 or by email at csoptelean@dailyinterlake.com.