Resort tax hike favored for Haskill deal

Whitefish voters will likely be asked this spring to approve an increase in the city’s resort tax to help fund the purchase of a conservation easement in Haskill Basin.

City council last week asked to have a ballot measure drafted that seeks to increase the resort tax by 1 percent. They will consider a resolution calling for the special election at the Feb. 17 meeting.

Mayor John Muhlfeld encouraged council to consider the measure.

“This is a one shot opportunity to permanently secure the city’s municipal water supply and that option expires in December 2015,” Muhlfeld said. “We don’t need to look far in the past or far down the road to understand why it’s critical to get this project done.”

The project would permanently protect 3,000 acres of working forestland in Haskill Basin through a proposed deal between The Trust for Public Land and F.H. Stoltze Land & Lumber Company. Nearly $8 million is still needed by the end of the year to complete the deal.

Haskill Basin serves as the source for most of Whitefish’s water supply. The city has spent the last few months determining how it might contribute to fundraising efforts to purchase the conservation easement. Besides raising the resort tax, other options include a general obligation bond or raising water rates.

Councilor Frank Sweeney said he agrees with protecting the city’s water supply, but the discussion will ultimately come down to the funding source.

Councilor Andy Feury said he is committed to finding a way to raise the money.

“We’re going to fund this come hell or high water,” Fuery said. “This [resort tax vote] is the first option for people to take a look at.”

The Trust for Public Land has secured an option to purchase the development rights for the 3,000 acres from Stoltze through the end of this year. The overall purchase was expected to cost $20.6 million, but Stoltze agreed to contribute $4 million to the project, while the Forest Service is expected to provide a $7 million grant, and a $2 million grant from the U.S. Fish and Wildlife Service also is expected.

Proponents of the deal say that if the property were to be developed it could damage the Haskill watershed, which provides about 75 percent of the city’s water supply. The other portion comes from Whitefish Lake.

Muhlfeld notes that in 1975 the city lost a portion of its water supply in First Creek due to E. coli contamination from development. He said the city could face double the cost for domestic water if it’s taken only from Whitefish Lake.

“This is 100 percent about protecting our water supply, and I strongly encourage the council to take the appropriate steps to permanently secure our water supply for our citizens and visitors,” he said.

Resort tax

If approved, the measure would increase the resort tax to 3 percent, or the maximum permitted under state law, beginning July 1 and ending in 2025, when the resort tax sunsets, unless voters approve an extension. The special election would likely be held on April 28 by mail-in ballot.

The increase in revenue would likely be used with at least 25 percent for property tax relief, which is in addition to existing relief already in place. No more than 70 percent would be used for repayment of a loan or a bond to finance the conservation easement. Five percent would go to merchants for administering the tax.

The resort tax is currently set at 2 percent and collected at restaurants and bars, retail and lodging in Whitefish.

Money collected from the resort tax is already split into four categories. Currently, 65 percent goes to roads, 25 percent to property tax relief, 5 percent to parks and 5 percent remains with the merchants as an administration fee.

The city collected $2.09 million in resort taxes in fiscal year 2014. If approved, the 1 percent increase is estimated to generate about $1 million in additional funds annually.

The city is projecting about a 5 percent increase in resort tax collections per year. For the last four years collections have increased by at least that much.

The resort tax has been in place since 1996, and year-to-date about $25.78 million has been collected. During that period, retail shops have contributed 45 percent of the money collected. Motels have brought in about 18 percent and bars and restaurants add 37 percent to the total.

Other funding

The city could either hold an election asking voters to approve a general obligation bond or increase water rates as a way to fund the conservation easement.

Under the 20-year bond, the cost for an average house would be about $100 per year for the life of the bond. Under a 10-year bond, the cost for an average house would be about $180 per year for the life of the bond.

A second option is for the city to increase water rates to pay for a water revenue bond.

Under a 30-year bond, the average residential water bill would increase by about $80 per year. For a 10-year bond, the average residential water bill would increase by about $220 per year.

Polling

The Trust for Public Land provided a finance feasibility study that outlines possible ways to raise funds for the easement.

The city asked TPL to conduct a public opinion survey in January to determine the proper funding mechanism, and if voters would be likely to pass a ballot measure.

Representatives from TPL presented its findings that came as the result of phone surveys with 175 registered Whitefish voters.

The poll found that the majority of voters — 57 percent — offered initial support for a proposed ballot measure to increase the resort tax to pay for the conservation easement. When the measure was explained further, the number who said they would vote “yes” increased to 67 percent.

Voters rejected other potential alternative funding, like increasing property taxes or water rates. Between 74 and 85 percent of those surveyed said they would not support raising either property taxes or water rates.

Of those who said they would vote to approve the ballot measure, 58 percent said they would do so to protect the watershed and clean water. The second highest reason to vote yes — at 18 percent — was because the resort tax is paid for by tourists.

Based upon the survey, TPL said that an increase in the resort tax “appears both feasible and the most viable prospect for securing funding for conservation of Haskill Basin.”

Comments

Several people took the opportunity at a Feb. 2 work session to weigh in on a possible increase in the resort tax. Some business owners said the resort tax is already detrimental to their business and the increase would only be worse.

Sam McGough, owner of McGough & Co. jewelry, said he often pays the resort tax himself to make a sale.

“The resort tax hurts us,” he said. “A lot of people don’t shop in Whitefish because of the resort tax.”

Stephen Isley, owner of Stephen Isley Jewelry, echoed the same comments. He said most of his customers are first time buyers and don’t want to pay the tax.

“A ring for marriage is not a luxury,” he said. “That’s a necessity.”

Dan Graves, Whitefish Mountain Resort president, said visitors come to the ski resort because of the value in visiting Whitefish.

“Be careful about raising taxes,” he said. “Water is important, but it’s also easy to say ‘let other people pay for it.’”

Marilyn Nelson, owner of Nelson Hardware, said a healthy tourist economy can’t be taken for granted. She would favor an increase is the water rates because the main reason for the easement is protecting the city’s water source.

“Discussion about the resort tax makes me queasy,” she said. “It’s fair to charge the people who use the water.”

A few voiced their support for an increase.

Kelly Marchetti, owner of Sprouts children’s clothing, said the resort tax increase would not effect her business.

Karen Reeves said she supports the protection of Haskill Basin and the increase in resort tax wouldn’t cause her to shop elsewhere.