Revisiting the resort tax: City hopeful, public divided

The city of Polson is re-examining the option to install a local resort tax as an effort to rebuild streets in town. 

City Commissioner Jill Southerland and the Polson Economic Development Council spent most of 2015 compiling reports, data and examples on how other cities have implemented the resort tax.

In the past weeks, Southerland and the seven-member economic task force have been reaching out to organizations in the city to better grasp where the community stands.

“We’re one of the very few cities that has this opportunity. It doesn’t have to be a huge burden on the citizens,” Southerland said. “Everything is aging around town and we have to do something about it.

“We swell to 10,000 people in the summer. Wouldn’t it be great it we can capitalize on that?”

Southerland said the primary reason for pursuing a resort tax is to raise money to repair cracked and battered streets in downtown Polson. Those streets are used not only by Polson’s 4,800 residents, but the additional 5,000 seasonal homeowners that return to the city during the summer months. The resort tax would only be in place from April to September.

Southerland said the city only receives about $100,000 a year from the state gasoline tax. Much of that is spent on snow plowing before summer arrives when road repairs can get underway.

State law limits the resort tax designation to cities with a population of 5,500 or less. Whitefish and Big Sky are the case studies for the resort tax, but their tourist base is much larger. Tourists spent $688 million in Flathead County and $662 million in Gallatin County in 2014, according to the Institute of Tourism and Recreation Research at the University of Montana.

That same year, tourists spent just $32 million in Lake County.

The 3-percent tax would be implemented on “luxury items” such as art, clothing, alcohol and prepared food. This could potentially complicate tax computation for grocery stores, which would have to tax precooked and processed foods but not ingredients that would be prepared by someone at home.

So far, groups such as the Chamber of Commerce, Rotary Club and a handful of churches have been receptive to the idea, Southerland said, although the Chamber of Commerce denied a request to comment on the resort tax. The city can’t held an official public hearing until there is a formal resolution to put the tax to a public vote.

This isn’t the first time the resort tax idea has been floated in Polson.

THE INITIAL VOTE

The Montana Department of Commerce officially designated Polson a resort town in 2009. That year, the Polson City Commission put the resort tax to a public vote, and the people spoke loudly and clearly.

“It was soundly defeated,” Southerland said. She estimated over 75 percent of voters disapproved of the measure.

Southerland said that tax request might have been taken to a public vote too quickly before the city had enough time to communicate how the resort tax would affect the community.

This time around, the commission is taking a more in-depth approach.

“I think this committee really wanted to put a lot of effort into getting all the facts and listening to the community about what their issues are,” Southerland said.

Southerland and the Economic Development Council drafted a report on how the city would disburse the resort tax revenue if it were approved: Eighty percent would be directed at road repairs, 15 percent would be spent to relieve property taxes and 3 percent would be returned to city merchants to help covers accounting costs.

Still, Southerland said there are several reasons why some Polson merchants oppose the resort tax. Some say it would push commerce out of the city and weaken the existing tax base. Others say it would complicate their accounting systems.

BUSINESS COMMUNITY WEIGHS IN

Mary Frances Caselli, owner of Mrs. Wonderful’s Marmalade Cafe, said she’s adamantly against the tax proposal. Polson merchants already are overtaxed, she said.

“I think it would shut down downtown Polson,” Caselli said. “If they want to kill downtown Polson, that’s one way to do it.”

Caselli said between property and unemployment taxes, profit margins are too small. With tourist spending coming in a just a fraction of what is spent in counties such as Flathead and Gallatin, she said she doesn’t believe the tax would be enough to save the Polson streets.

“Three percent can break you, definitely,” Caselli said. “The paperwork alone would kill me.

“Polson is not a resort.”

Caselli and Southerland both pointed to another factor that separates Polson from other resort tax communities.

“We know we’re unique because we’re on an Indian reservation,” Southerland said. “That in itself makes it more complicated.”

Confederated Salish and Kootenai Tribal members would be exempt from the resort tax.

Dennis Duty, a partner in the Ridgewater real estate development in South Polson, said that fact might be the line residents have drawn over the resort tax.

“I think that’s the biggest rub for people that live here. Some of the business people think it would be an accounting nightmare,” Duty said. “So I can see it from both sides. But as a property taxpayer, I would like to see some outside help being provided by the outside people that come here.”

Duty is said he’s on the fence about the resort tax and he doesn’t think the tribal tax exemption is worth arguing. He doesn’t want to see anyone creating more divisions between tribal members and nontribal members. He said if the gas tax doesn’t provide enough capital to make the road improvements the city needs, then merchants and residents have to be willing to explore other avenues.

Wilma Mixon-Hall, a broker at Savoir Faire Properties, said she doesn’t think resort tax concerns outweigh the road repairs needed around town.

“I think probably all of us could benefit from better streets,” she said. “The image of your community changes when your streets aren’t full of potholes. Three percent isn’t going to hurt anyone.”

Mixon-Hall said the real estate market wouldn’t likely take a hit after installing a resort tax. As long as the tax remains at a six-month basis, she thinks year-round homeowners wouldn’t be required to budget more than they can afford to live in Polson, she said.

Southerland said the resort tax might actually assist the housing market rather than damage it. The committee chose to disburse 15 percent of the resort tax revenue back toward property tax relief on all city properties.

“What I like about this tax is there is some benefit to the citizens [aside from road repairs],” Southerland said. If it does start reducing our property tax, that’s huge.”

In the coming weeks, Southerland and the Economic Development Council will continue to share their report on the resort tax option. The measure could go before the city commission as soon as a June or as late as November, which would be followed with a public hearing before the vote. If approved by voters, the tax would be imposed next year.

“As soon as we get this to the committee, then we’ll really be hitting the streets,” Southerland said.