Extension of resort tax to 2045 to go before voters

Come November, Whitefish voters will be asked to reauthorize the city’s resort tax and also approve a slight shift for how the funds generated from the tax are spent.

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 the city is asking voters to approve an extension pushing the expiration date of the tax out to 2045.

Funds generated from the tax go to property tax relief, streets, parks, and if the request is approved funds would also go to the Whitefish Trail maintenance. A total of about $4.2 million was collected in resort tax funds in fiscal year 2020.

City Council last week unanimously approved placing the request before the voters on the ballot.

Prior to the vote, Councilor Steve Qunell questioned whether some percentage of the tax should be directed toward affordable workforce housing, but after listening to other Councilors was swayed to support the ballot item as presented.

“The conditions on the ground have changed,” Qunell said prior to hearing from his fellow Councilors. “I can’t support this with nothing included for affordable housing — that’s the No. 1 issue people are talking about. We have a crisis situation.”

Councilor Andy Feury agreed that a lack of affordable housing is an issue, but asked Qunell to support the request anyway. Feury said it would be better to have a fully developed plan for how resort tax funds would be spent on housing before asking voters to approve that change.

“Visitors to this community have been part of the problem when it comes to housing so it makes sense that affordable housing would be included,” Feury said. “But if this vote fails it will place a bigger burden on this community. I think it’s best to keep this with little change from the original intent of the tax so it will pass.”

Feury said the city could return to voters later to ask for a change in how the money is distributed including to be used for affordable housing such as it did in 2015 when it asked for funds to be spent on the purchase of the Haskill Basin Conservation Easement.

Councilor Ben Davis agreed.

“The resort tax has done a lot of good things and Whitefish conveys a significant benefit from it,” he said. “We need it for another 20 years. It would be a good source of funding for affordable housing, but we don’t have a plan ready for that yet.”

As part of the vote, a shift in how the funds are allowed to be spent is being proposed. The property tax reduction would stay the same at 25% and the administration fee of 5% that remains with the businesses that collect the tax would stay the same.

Funds for streets, storm sewers and sidewalks would drop from 65% to 58%, and funds for bicycle paths and parks would increase from 5% to 10%.

Funds would also be allowed to be used for maintenance and equipment purchases, as well as for parkland acquisition, items which aren’t currently part of the resolution that sets the parameters for how funds from the tax can be spent.

City Manager Dana Smith says adding areas for how the tax can be spent allows for more flexibility and provides a funding source to maintain existing infrastructure that may not need full reconstruction, such as for a street or path overlay compared to the full rebuild of those.

A new addition to the allocation of funds would set aside 2% of collections for maintenance of the Whitefish Trail.

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 by including the Whitefish Trail in the resort tax it creates a way to generate revenue for maintenance of the trail.

“The trail brings in visitation so it makes sense for the resort tax,” Smith said. “Also if at some point the trail reverted to the city for maintenance this would provide funding for that.”

Under the proposed change, if funds designated for the Whitefish Trail aren’t used within five fiscal years then they could be diverted to maintenance of the city’s bicycle and pedestrian paths.

Heidi Van Everen, executive director of Legacy Partners, thanked the city for thinking about maintaining the Whitefish Trail noting that maintenance is critical to trail projects and planning for the future is important.

Currently, a portion of the resort tax is used to fund the purchase of the Haskill Basin Conservation Easement to protect the city’s drinking water source. Once that is paid off in 2025, the funds raised by that 1% of the tax would be diverted to the rest of the areas where the funds are allocated.

Under the new structure and based upon FY20 numbers, roughly $1.2 million would go to tax relief, streets would see about $2.6 million, parks and bike paths would get about $450,000 and roughly $100,000 would go to the Whitefish Trail.

During public comment, Giuseppe Caltabiano said renewal of the resort tax is important for the future, but questioned whether it actually hurts renters.

“Tourists come and pay the tax and leave,” he said. “But you don’t see much benefit if you live here unless you are a property owner.”

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.

The election is on Nov. 3.