Whitefish council gets positive feedback on resort-tax proposal

The Whitefish City Council heard positive feedback Tuesday on a proposal to extend the city's resort tax and adjust how the city uses that money.

While some members embraced the idea of using resort taxes to fund public transportation, the council unanimously decided to keep the proposal unchanged for now.

The council will hold another public hearing before it votes on a resolution. The tax proposal then would become a ballot measure, and voters would make the final call in November 2021.

Whitefish voters first approved a resort tax in 1995; the tax has been extended and adjusted through two subsequent ballot measures. It's 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.

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.

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 staff and the city's Resort Tax Monitoring Committee have proposed reallocating the 3% tax to increase funding for streets, parks, and bike and pedestrian paths.

The ballot language currently being considered would earmark 58% of all collected resort taxes for existing streets, sidewalks, storm sewers and underground utilities; 10% for parks and recreation; and 2% for maintenance and improvements to the Whitefish Trail, which aren't currently permitted. The city would continue giving 25% back to landowners, and businesses still would keep 5%.

If approved by voters, the changes would take effect in early 2025 and last for 20 years.

SEVERAL PEOPLE spoke in support of the resort tax proposal during Tuesday's meeting and no one spoke in opposition. Among those testifying was Chuck Stearns, who served as Whitefish's city manager from 2008 to 2016.

Stearns urged the council to consider investing in public transit programs and said resort tax revenue would be a good way to fund those programs, in part because that revenue comes from the same tourists who cause traffic congestion in the warmer months.

"I think that if you ever want to decrease traffic congestion, especially in the summer, I think transit is a big way to do it," Stearns said.

He suggested the council add language to the resort tax proposal that would allow the city to channel some of that money to existing transportation providers, such as Eagle Transit, to add stops and routes in Whitefish.

Several council members said they agree that Whitefish may need to contract with a bus service or launch its own system in the not-so-distant future.

"If we had such a system, this would be an ideal means to fund it," council member Ben Davis said. "It very well may be that, in the lifespan of this ballot initiative, that we never do that. But it would be interesting to have the flexibility."

Council member Steve Qunell also voiced general support for Stearns' idea, noting that parking on Big Mountain is "already at a crisis point" and many skiers and snowboarders are beginning to use the S.N.O.W. shuttle bus service.

"I wish we could build in some flexibility for public transit," Qunell said.

Mayor John Muhlfeld, meanwhile, said the proposal should remain intact and hew closely to the original intent of the resort tax that voters approved in 1995. He also cautioned against treating resort tax revenue as a "grab bag."

"Everyone wants a piece of it, and we know that's the case. And while we'd like to give a piece to everyone, that's just not practical," Muhlfeld said.

"I agree with Chuck that transit is something that is needed in this community," he said. "I just don't think this is the mechanism upon which to do it – especially when we don't even have a transit plan crafted or conceptualized to present back to the voters when they ask the question, 'Where is this money going to go to?' We don't have a plan, but I agree that one is needed."

Council member Andy Feury, who sits on the Resort Tax Monitoring Committee, concurred, saying resort tax revenue isn't a good way to fund a transit program because it can plummet during economic downturns.

"I'd hate to hire a bunch of bus drivers and buy a bunch of buses, and then find out that we can't pay to run them," Feury said.

City Manager Dana Smith noted the council can revisit the transit question if Whitefish's traffic problems become urgent any time in the future.

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