Resort tax saved by House bill, AG opinion

Whitefish Pilot

A bill that could help Whitefish keep its resort tax was signed by Gov. Brian Schweitzer in April and is now on the books. And at about the same time, Montana Attorney General Steve Bullock issued an opinion that supports the city's authority to have the resort tax.

In both cases, the problem facing the city is that only towns and resort areas with a population under 5,500 are allowed to create a resort tax by election. The state law establishes the population by federal census, which is done once every 10 years, or by "federal estimate," which is done annually.

The population of Whitefish in 2000, when the last federal census was taken, was 5,032. But the estimated population in 2007 was 8,032.

Sponsored by Whitefish Republicans Rep. Bill Beck and Sen. Ryan Zinke, House Bill 312 amends the current resort tax law by deleting any reference to "federal estimate." It passed in the House by 59-40 and in the Senate by 34-16.

The city's population, however, could be around 9,000 by the time the federal census is taken next year. And when Whitefish residents voted 3-1 in November 2004 to extend the life of the resort tax from 2016 to 2025, the city's population likely exceeded 5,500 residents, by federal estimate.

The questions facing the city are whether the 2004 vote is valid, and whether Whitefish can continue to have a resort tax after the 2010 census results are reported. City attorney John Phelps, however, is encouraged by the state attorney general's opinion that came out in April.

"The attorney general seems to be saying that once a community validly adopts a resort tax, it's good to go forever," Phelps said. "But it's not 100 percent clear, and we may either send a formal request to the attorney general or just request a clarification."

Bullock's opinion had to do with the Big Sky Resort Area District, which voters created in 1992. Residents were considering incorporating a portion of the district into the Town of Big Sky and wanted to know if they would lose their resort taxing authority as a result.

The attorney general's office took a close look at the statutes and found that "they are silent on the question of whether an existing resort entity is affected by any subsequent change within its boundaries, such as a change of population or incorporated status."

Bullock went on to say that the statutes "are also silent as to whether a resort community or resort area, once created, may be dissolved."

"The legislature's silence is revealing," he said, "as it suggests that a resort-taxing entity continues its existence until dissolved."

However, even if a resort area district is dissolved under one section of state law, Bullock noted, "the resort area as originally established continues to exist, and there is no process for its dissolution."

In that case, the voters could amend or repeal the tax itself, if not the district.

"In short, the resort tax statutes contemplate a one-time drawing of resort area boundaries based on population and status of incorporation, subject to voter approval, which, once established, remains a resort area with resort tax authority that is unaffected by subsequent changes within the area," Bullock said.

Two other resort tax-related bills did not survive the legislature. House Bill 329, sponsored by Rep. Dee Brown, R-Coram, would have included the population of Whitefish's two-mile planning area — the so-called "doughnut" area — in the population limit. That bill died in the standing committee.

Senate Bill 506, sponsored by Sen. Jeff Essmann, R-Billings, would have created a uniform resort sales tax available to communities across the state that voted for it. The bill, which was supported by the Montana League of Towns and Cities, died in process likely because of the economic recession and general attitudes toward sales taxes.

With voter approval, Whitefish enacted its 2 percent resort tax in February 1996. Since 2003, annual revenues have ranged from $1.2 million to $1.7 million. The revenue goes to street reconstruction, property tax rebates, and parks and trail projects.

Sixty-five percent of Whitefish's resort tax money goes into streets, and the property tax rebate has reduced city property taxes by 21 percent.