Voters to decide extension of resort tax

Whitefish’s resort tax first took effect 25 years ago with the idea that visitors putting pressure on the city’s infrastructure should assist in paying for those costs.

Since its inception, more than $46 million has been generated to pay for streets, parks, and a conservation easement while also providing about $15 million in property tax relief back to homeowners.

Now voters will decide whether to extend the resort tax along with approving a slight shift in how the funds are spent. The tax currently runs through January 2025, but voters are being asked to approve pushing the expiration date out to 2045.

City Manager Dana Smith said the resort tax has been very successful in the past more than two decades in providing funding for the areas where the funds are allocated.

“If we didn’t have those funds some of those projects would not have been completed or we would have to look at alternative funding sources,” she said. “In parks that could be property taxes or maintenance assessments to pay for those projects. We might have to wait for projects to have grants. Without the resort tax what you would see is a slowed improvement schedule. In streets, you’d see more overlays rather than reconstruction.”

Mayor John Muhlfeld said the resort tax has rebuilt miles of roads, replaced aging water and sewer infrastructure, projects that would otherwise have been funded by property tax increases. “We have improved parklands for our children and families, expanded opportunities for recreation throughout town, while rebating millions of dollars in property tax relief to help keep taxes down for our hard-working families in Whitefish,” he said.

A total of about $5 million was collected in resort tax in fiscal year 2021.

THE RESORT tax is collected on “luxury” retail sales, lodging, at restaurants and for prepared food and alcoholic beverages. Funds generated from the 3% tax go to property tax relief, streets, parks, and if the request is approved by voters funds would also go to the Whitefish Trail maintenance.

Since its inception in 1996 through June 2021, the resort tax has generated $28.5 million for street improvements, $1 million for parks improvements and $5.6 million has been generated to pay for the Haskill Basin Conservation easement.

On average since the tax went into effect in 1996, homeowners have seen about a 23% reduction in the city portion of their tax bill as a result of the resort tax. For a home valued at $500,000, the property tax relief for 2021 is about $240.

Muhlfeld said voters should support the reauthorization of the resort tax because without the tax, property taxes and other assessments will increase to offset the loss of revenue that would occur.

“If not, it’s inevitable that other taxes and assessments will increase to compensate for the decrease in revenue received from our visitors,” he said. “This council and city staff have worked diligently to keep taxes down, and we are committed to doing so. Reauthorizing the resort tax is a commitment to keeping taxes down for those that continue to struggle with escalating costs of living.”

Currently, 1% of the tax goes to the Haskill Basin Conservation Easement and property tax relief. Once the easement is paid off in 2025 funds raised by that portion of the tax will be diverted to the rest of the areas where the funds are allocated.

As part of the vote, the city is seeking to shift how the funds are allocated. 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.

However, 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%.

Smith said there’s still a long list of streets in the city that need to be reconstructed.

“While we’re seeing the percentage drop we will actually see $600,000 more allocated to streets than we have in prior years,” she said. “Parks are also an area we struggle to fund simply because the only means of funding parks is through property taxes and maintenance assessments. So by increasing the percentage allocated there, parks will have a significant amount more in funding that can go toward items like new playgrounds and new bathroom facilities, which are often funded through resort tax funds.”

Funds would also now be allowed to be used for maintenance and equipment purchases, as well as for parkland acquisition, areas where funds aren’t currently allowed to be spent.

A NEW ADDITION to the allocation of funds would set aside 2% of total collections from the tax for the maintenance of the Whitefish Trail. While Whitefish Legacy Partners maintains the trail, the city owns the trail itself. Funds could not be used to expand the trails, and all projects using the funds would be approved by City Council and no funds would go directly to Legacy Partners.

The city estimates that the resort tax would generate about $100,000 annually for the Whitefish Trail. However, if funds designated for the Whitefish Trail aren’t used within five fiscal years then they would be diverted to maintenance of the city’s bicycle and pedestrian paths.

Currently, the total cost to maintain the Whitefish Trail including in-kind contributions is $156,000 per year, which equals roughly $1,400 per mile and $5,800 per trailhead, according to Legacy Partners.

Muhlfeld says he supports the addition of directing resort tax funds to the maintenance of the Whitefish Trail.

“The Whitefish Trail is a major economic generator to the Whitefish economy,” he said. “Whitefish is a premier nationwide recreational destination and as a city, we need to figure out a stable, predictable revenue stream to ensure this amenity is successful in perpetuity.”

Smith said City Council wanted to add the trail as part of where funds are spent to plan for the future.

“The trail brings in a significant amount of visitors while also being used by locals,” she said. “We want to be prepared for funding that might be necessary in the future because the philanthropy that supports the trail might not always be there, but we need to think about how we’re going to fund the maintenance of the trail.”

Heidi Van Everen, executive director of Whitefish Legacy Partners, said the nonprofit is glad that City Council included the trail in its renewal of the resort tax because the trail is a city asset in the same way its parks and bike paths are, and the trail is similar to other city-owned properties maintained by a nonprofit like the WAG dog park.

“The trail is a well-loved and growing asset and it’s important to plan for the long term of that,” she said. “It’s smart of the city to be paying attention to the maintenance of the trail. So few communities look forward to plan for that.”

A study in 2017 by Headwaters Economics found that the Whitefish Trail generates roughly $6 million annually in spending in Whitefish.

Margosia Jadkowski, director of lands and partnerships for Legacy Partners, points out that the trail users contribute to the funds raised as part of the resort tax.

“The Whitefish Trail is a revenue generator as people come here to use the trail, rent bikes and stay in hotels,” she said. “Visitors who come here to use the trail have an economic benefit and by using resort tax funds to help maintain the trail that closes the circle.”

Beyond using a portion of the funds for the trail, which Legacy Partners leaders say obviously benefits the trail, renewing the resort tax is beneficial to the entire community through a reduction in property taxes that results from the tax and the funds it provides for necessary infrastructure. They noted the shift in allowing for funds to be used for maintenance of roads and trails is important.

“The vast majority of the funds are being allocated to the same things as before,” Jadkowski said. “But looking at the maintenance of our parks and paths is an important shift in mindset. Even since the beginning, the resort tax has been about funding for the future.”

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 to protect the city’s drinking water source. That 1% only provides funds for property tax relief and payment for the easement.

If the measure fails, the city could go to the voters again in 2023 without holding a special election. In Montana, cities must meet certain population criteria to levy a resort tax.

If the resort tax is allowed to expire, Whitefish would permanently lose it because its population now exceeds the requirements for a resort tax.

The city election is being conducted by mail with ballots due on Election Day, Nov. 2 to City Hall or the Flathead County Election office.