Discover Kalispell concerned about bed tax proposals

The Kalispell Convention and Visitors Bureau is raising concerns about two pieces of legislation that would change how Montana distributes revenue from its lodging facility tax, also known as the bed tax.

Visitors to the state pay the 8% tax when they stay in hotels, motels, campgrounds, short-term rentals such as Airbnbs, and other lodgings. Half of that revenue goes into the state's general fund and is spent at the Legislature's discretion, while half is statutorily earmarked for a wide array of tourism marketing and historical preservation purposes.

The latter portion includes funding for the Montana Department of Commerce, six state tourism regions and 18 convention and visitors bureaus, like the ones in Kalispell and Whitefish. Through a variety of marketing techniques, they aim to attract visitors to support the local economy.

"We promote our communities as a travel destination," said Diane Medler, executive director of the Kalispell Convention and Visitors Bureau, also known as Discover Kalispell. "Our focus … is to increase those visitations outside of that peak summer season, so that our hotels and our restaurants and retail and activities and outfitters and guides, they're able to have a more well-rounded year, versus a feast or famine of six weeks in the summer."

According to the University of Montana's Institute for Tourism and Recreation Research, visitors from out of state spent an estimated $613.5 million in Flathead County in 2019.

And according to the Department of Commerce's Office of Tourism and Business Development, revenue from the 4% bed tax used for promotional purposes climbed every year since 2010 before reaching a peak of nearly $35.2 million in 2019. That revenue dropped to about $30.8 million in 2020 due to pandemic-related travel impacts.

Medler said bed tax revenue accounts for $118,000 — about a third — of Discover Kalispell's budget, while the remaining $560,000 comes from the city's Tourism Business Improvement District, which charges visitors fees of $2 per night in local lodgings. The two funding sources support the same marketing plan.

MEDLER SAID she is concerned about an amendment to a House budget bill introduced last week by Rep. Dan Bartel, R-Lewistown. The amendment and a companion bill would give lawmakers discretion over more of the state's bed tax revenue, removing the statutory requirement that a portion goes to the Department of Commerce.

Medler said that could strip visitors bureaus like Discover Kalispell of financial stability.

"If it's moved out of statutory appropriation, there's not that predictability and guarantee of what our funding will be," she said. "If it's moved into the general budget, essentially it allows the Legislature to determine how much money we get and how we can spend it."

Medler said some lawmakers have expressed concerns about a lack of oversight of the state's tourism promotion activities, but added that such concerns are unfounded.

"We have layers and layers and layers of oversight," she said. In addition to local boards composed largely of local tourism industry representatives, visitors bureaus are overseen by the governor-appointed Tourism Advisory Council. Their meetings are public, and breakdowns of their finances are publicly available online.

"They approve our marketing plan. They approve quarterly financial reports and financial compliance reports. They approve our end-of-the-year project completion reports. We go through annual audits," Medler said. "So there is a lot of oversight both at the local level and the state level."

It wasn't immediately clear if Bartel's amendment would be in the budget bill when it reaches the House floor. Bartel didn't respond to messages seeking comment Tuesday.

MEDLER ALSO raised concerns about Senate Bill 355, sponsored by Sen. Mike Lang, R-Malta, which would divert a portion of bed tax revenue to counties with large amounts of state land.

"This is a fairness bill," Lang said last month during a hearing in the Senate Finance and Claims Committee, explaining that Montana counties can't collect property taxes on state land that attracts hunters, anglers and tourists. The bill would distribute $482,000 of bed tax revenue — a small slice of the total collected — across 16 rural counties.

"In counties where more than 6% of the land area is owned by the state, the state exemption for property taxes places an undue burden on schools and local governments," the bill states. "Tourists use these public lands, which justifies distributing a portion of the lodging facility use tax to those counties most affected by large state land ownership."

Officials from Daniels County, which would receive the bulk of the new revenue, testified in support of the bill, as did Jason Rittal, deputy director of the Montana Association of Counties.

"We advertise to get people to come here, to stay in our beds and go recreate our public lands, and then we take a portion of the money they spend on staying in those rooms, and we circulate it again to do the same thing. At no point in that process is there any accounting for the impacts at the local level on the infrastructure," Rittal said. "Folks are going hunting, and they're tearing up the roads. There's no revenue to offset that."

Stuart Doggett, executive director of the Montana Lodging and Hospitality Association, testified against the bill, saying lawmakers should instead divert bed tax revenue from the portion in the state's general fund.

"We don't dismiss the need, but we think there's a better, fairer solution," Doggett said. "We would suggest that this bill could be amended to divert from that fund, and not from the fund that's needed for promotion."

The bill is awaiting a hearing in the House Taxation Committee.

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