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Council gets input on resort tax proposal

by HEIDI DESCH
Editor | January 27, 2021 1:00 AM

Funds generated from Whitefish’s resort tax in the future will likely be directed at much the same areas it is now — property tax relief, streets and the bicycle path — but if voters approve a ballot item in the next election the tax could be extended, but also have some of the funds go toward maintenance of the Whitefish Trail.

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 the fall to seek a 20-year extension of the tax and make adjustments to how the funds are spent.

City Council last week approved a set of proposed uses for the resort tax money in future, if OK’d by voters. Some suggested that money also be allocated to funding transit, historic preservation, and open space, but those ideas didn’t seem to gain traction.

Mayor John Muhlfeld worried adding too many areas of spending for the resort tax would complicate the tax making it less palatable for voters.

“The resort tax can often become like Santa’s grab bag,” he said. “Everyone wants a piece of it and we know that’s the case. While we’d like to give a piece to everyone we can’t.”

City Manager Dana Smith said the plan is to go before voters to ask for another extension in November.

“We will still have to go through a resolution approved going for a vote, and we will want to just some education about how beneficial the resort tax has been to the community,” she said.

The property tax reduction would stay the same at 25%, funds for streets, storm sewers and sidewalks would drop from 65% to 58%, funds for bicycle paths and other park improvements would increase from 5% to 10%, and a new addition to the allocation of funds would set aside 2% of collections for maintenance of the Whitefish Trail. The administration fee of 5% that remains with businesses that collect the tax would also stay the same.

Currently, a portion of the resort tax is also used to fund the purchase of the Haskill Basin Conservation Easement to protect the city’s drinking water source. That is expected to be paid off in 2025.

A total of about $4.2 million was collected in resort tax funds in fiscal year 2020. Of that, $1.2 million went to tax relief, $1.9 million to streets, $150,000 to parks and just over $1 million went toward paying for Haskill Basin.

Based upon the FY2020 collections, under the new structure the same amount would go toward property tax relief, streets would see about $2.5 million, parks would get about $450,000 and roughly $100,000 would go to the Whitefish Trail.

“Over time we see on average an increase of about 5 % to 6 % annually in collections from the resort tax,” Smith said. “There have been some dips, but on average it’s increased.”

While the Whitefish Legacy Partners maintains the Whitefish Trail, the city owns the trail itself. Funds could 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.

Smith said adding the Whitefish Trail to the list of areas that receives funds makes sense.

“The trail is a significant city asset that tourists enjoy in the summer months,” Smith said. “What better way to support the trails then through resort tax and we have people visiting those trails.”

If the funds aren’t spent on the Whitefish Trail, Council could also direct them to be used for maintenance of the city’s other bicycle and pedestrian paths.

In addition, changes would also allow for funds in the future to be spent on maintenance and equipment creating more flexibility in how the funds can be spent.

The original tax language limited the use of resort tax money for only improvements of existing streets and sidewalks, but the new version would allow the city to add a sidewalk or extend streets in the city. In terms of bike paths and parks, the new language would allow funds to be used for acquisition of parks, maintenance and equipment.

“One of the key changes is that it just doesn’t provide for current infrastructure, but it also provides for new infrastructure,” she said. “That’s a big change because before we could only do repairs to current streets and now could put in a new section of sidewalk that’s needed or a street connection.”

Council still has to approve how the resort tax money is spent during its annual budget process.

During last week’s meeting, members of the public and Councilors also made suggestions for other areas where they would like to see resort tax funds spent.

Chuck Stearns, former Whitefish City Manager who now serves on the city’s resort tax monitoring committee, suggested a portion of funds be used to improve transit here by assisting Eagle Transit with improving and increasing bus routes. Improving alternative transportation would assist in decreasing traffic congestion, he noted.

“I’m a strong supporter of the tax and extending it,” he said. “It’s essential to our community.”

Councilors Steve Qunell and Ben Davis said they both liked the idea of adding funding for transit.

“Looking 20 years down the road,” Qunell said. “We’re already at a crisis point in terms of parking on the mountain [at Whitefish Mountain Resort.]”

Rhonda Fitzgerald suggested keeping some of the funds as designated for conservation easements.

“People are always bringing up the fact that we need the ability to expand lands we can put into conservation or open space, and we don’t have a mechanism for that,” she said.

Councilor Rebecca Norton said though it won’t make the final list she’d like to see historic preservation as one of the areas where resort tax is spent.

“I felt like it would be another way to access funding for historic preservation,” she said. “It’s very upsetting to a lot of people to see the old town character being replaced.”

Council will still have to vote on a resolution calling for a vote and the final ballot language before it’s submitted to the Flathead County Election Department.

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.

Columbia Falls in November approved a 3% resort tax that goes into effect in October. Polson voters in February will consider whether to implement a 3% resort tax there.