Whitefish hearing weighs proposed changes to resort tax

Whitefish residents can weigh in on a proposal to reallocate the city's resort tax revenue during a virtual City Council meeting Tuesday evening.

The resort tax, a sort of limited sales tax, is a 3% levy on food, drinks, hotel stays and other lodging, ski resorts and certain luxury items defined by city code. While the tax applies to all consumers, it's a main way the city capitalizes on its tourist base. Resort tax funds have been used to reconstruct city streets, provide property tax relief to landowners, maintain parks, improve bike and pedestrian paths, and fund a conservation easement that protects the city's water supply.

The City Council is considering a proposal to extend the resort tax at 3% and adjust how that money is spent. After a public comment period, the council is expected to introduce a ballot measure sometime this summer. Voters would make the final call in November 2021. If approved, the changes would take effect in early 2025 and last for 20 years.

The city's Resort Tax Monitoring Committee, which is made up of six Whitefish businesspeople and City Council member Andy Feury, unanimously recommended the plan to the council last fall.

"The renewal language will allow for continued street reconstruction but will also allow for improved community safety by adding the ability to complete projects like constructing new sidewalks in school neighborhoods and will allow for improvements to our vehicle transportation grid," the committee wrote in a letter to the council last Tuesday. "The renewal will also provide much-needed funds for the improvement and maintenance of our pedestrian and bike path system and maintenance of our city's parks."

The city collected nearly $4.3 million in resort taxes during the 2020 fiscal year, which ended June 30.

The city currently remits 25% of resort tax revenue to landowners in the form of property tax credits, and businesses keep 5% to cover the costs of administering the tax, such as credit card fees. Of the remaining 70%, the city uses one-third to pay off debt on a conservation easement for the Haskill Basin, which provides the city's drinking water, and two-thirds on various street and park projects.

PREVIOUS RESORT tax ballot measures have passed by large margins.

Whitefish voters first approved a 2% resort tax in 1995, with 56% voting in favor. In 2004, 76% voted to extend the tax through January 2025. And in 2015, nearly 84% voted to increase the tax to 3%, with most of that 1% increase going to the Haskill Basin easement. As of last year, a 3% resort tax is the maximum Whitefish can levy under state law.

The city expects to finish paying for the easement in early 2025, just as the resort tax is set to expire. Rather than return to a 2% levy, city staffers have proposed reallocating the 3% tax to increase funding for streets, parks, and bike and pedestrian paths.

DRAFT LANGUAGE before the council would earmark 58% of all collected resort taxes for existing streets, sidewalks, storm sewers and underground utilities. Based on allocations from fiscal 2020, that's projected to increase annual funding for street and utility work by $650,000, for a total of nearly $2.6 million.

The proposal also would add the word "maintenance" to the city code, which currently provides only for "repair" and "improvement" of streets and utilities. City Manager Dana Smith has said that would provide more flexibility, allowing the city to use resort tax funds for street patching or overlay work rather than complete demolition and reconstruction.

The proposal would make parkland acquisitions, park maintenance and equipment eligible for resort tax spending, in addition to capital improvements and bike and pedestrian paths. And it would earmark 10% of resort tax revenue for parks and recreation. That would be a projected $450,000 per year, triple the fiscal 2020 allocation.

According to Smith, the city should be spending about $130,000 per year on "proactive maintenance" of paved paths, which it hasn't been able to afford.

Finally, the proposal would set aside 2% of resort tax revenue for maintenance and improvements to the Whitefish Trail, which currently aren't permitted under the city code. Under the proposed language, that money could not be spent to add miles to the trail, and it could be reallocated for other bike and pedestrian paths if it isn't spent within five years.

Under a state law enacted since Whitefish began levying its resort tax, the city wouldn't qualify to reimpose the tax if it is allowed to expire. In other words, if voters don't renew the tax before 2025, it likely would be gone forever.

IN OTHER business, the council is scheduled to consider an agreement with Montana Fish, Wildlife and Parks to maintain fishing access on Beaver Lake, as well as a request for contractor bids to provide recycling services at a new collection site on Monegan Road between Voerman and JP roads.

The meeting will begin at 7:10 p.m. Tuesday, a day later than normal due to the Martin Luther King Jr. Day holiday on Monday, and be held remotely via Webex video conferencing. Instructions for tuning in and participating can be found on the city's website.

Reporter Chad Sokol can be reached at 758-4434 or csokol@dailyinterlake.com