Whitefish plans to ask for extension of resort tax

Whitefish voters next year will likely be asked to approve an extension of the city’s resort tax.

The 3% tax is collected on “luxury” retail sales, lodging, at restaurants and for prepared food and alcoholic beverages. The tax currently runs through January 2025, but city officials are expecting to go before the voters in fall of 2021 to seek a 20-year extension of the tax and make adjustments to how the funds are spent.

City Council plans to hold a public hearing on the matter in January before creating a ballot measure that would go before voters in November of 2021. If approved, the changes would begin in 2025 and be in place for 20 years.

Currently, funds from the resort tax go to three main areas — 25% goes to a property tax reduction for taxpayers in the city, 65% goes to the repair and improvement of streets, storm sewers and sidewalks, and 5% goes to funds for bicycle paths and other park capital improvements. In addition, revenue from the resort tax is used to fund the purchase of the Haskill Basin Conservation Easement to protect the city’s drinking water source.

City Manager Dana Smith said the debt for Haskill Basin is expected to be paid in full on Jan. 1, 2025, so a reallocation of the tax revenue needs to be determined and approved by voters.

“We want to find out what people want and follow that to get approval,” Smith told City Council during a work session last week. “We’ve had overall support for it, so we just want to make adjustments and not big changes to where the money goes.”

The city is proposing to increase the amount allocated to bicycle paths and other park improvements from 5% to 10%. Changes also include adding language that would allow funds to pay for the acquisition of parks, maintenance and equipment.

The amount allocated to parks would increase from about $150,000 to $450,000. Based on recommendations to maintain its paved path system, the city should be spending about $130,000 per year for proactive maintenance, but has never had the money to do so.

“We want to allow for more flexibility in how the money is spent,” Smith said. “We have a paved path system now that we can never proactively maintain because of a lack of funds. This would allow the money to be spent on new paths or to maintain paths or park facilities.”

The shift in how the money could be spent would also allow for the development of a list of paths in the bicycle and pedestrian master plan.

Council at a work session in June suggested it would be interested in allocating some of the resort tax funds toward the Whitefish Trail. While the Whitefish Legacy Partners maintains the trail, the city owns the trail itself.

The city is considering allocating 2% of the resort tax revenues to ensure maintenance and operations of the trail. Funds would not be used to expand the trails, and all projects using the money would be approved by Council and no funds would go directly to Legacy Partners.

“The city is not prohibited from contributing to the trail that’s already out there,” Smith said. “We can’t expand the trail, but we could replace what’s already out there.”

Councilor Andy Feury said he supports adding the Whitefish Trail to the list of ways the money is spent, noting that it’s important that the tax pays for things the public “sees and touches.”

“We don’t want to make too many significant changes to the tax because what’s included is the reason that people support the tax,” he said. “We hold licenses and easements on the trail and ultimately we are the ones on the line for that without a funding mechanism to pay for it. The trail is also a huge driver of revenue for the community.”

Margosia Jadknowski, program director for Whitefish Legacy Partners, said long term planning for the trail shows that providing funding from the resort tax could be critical in helping maintain the trail system.

“Our expenses will begin to outgrow our income because of increases in inflation and from growing trail usage,” she said.

An increase in spending of the resort tax for parks and trails, would mean the percent allocated to street reconstruction and maintenance would be reduced to 58%. Even with the reduction, about $650,000 more per year would go to streets because the city would no longer be paying for the Haskill Basin Conservation Easement.

Smith said the allocation to street projects is still reasonable and would allow for improvements to occur. Currently, the resort tax funds can only be spent on existing streets, but Smith noted if Council chose to change that it would open up funds for new streets that are listed in the city’s transportation plan.

Whitefish’s resort tax was first approved by city voters in 1995 and was implemented in February 1996. In November 2004, voters approved an extension of the tax for an additional 20 years through January 2025.

In April 2015 voters approved increasing the resort tax rate from 2% to 3% to cover the cost of acquiring the Haskill Basin Conservation Easement. The 1% only provides funds for property tax relief and payment for the easement.

Since its inception in 1996 through June 2020, the resort tax has allowed for $12.49 million in property tax relief, $23.6 million has been spent on street improvements and $1.6 million has been spent on park improvements.