Commission takes comments on resort tax

The Polson City Commission last week took a first look at a resort tax proposal for the city that could go to voters in early 2021.

Polson’s Economic Development Council sent the commission preliminary terms that would set a year-round resort tax at 3% for 20 years. Most of the revenue — 80 percent — would go toward city street maintenance and improvements, while 17 percent would be returned to city residents through a property tax rebate. The remaining 3% would cover administrative fees associated with the tax.

A resort tax must be voter approved. The Economic Development Council is seeking to place a referendum ballot measure on a special election ballot in January or February 2021. The City Commission decides whether to hold the election.

A resort tax is generally considered a way for small municipalities with a high rate of visitors to manage wear and tear on local infrastructure. A resort town is defined as an incorporated city with a population of less than 5,500. A significant portion of the town’s economic base must be tourism-related.

At the Aug. 24 public hearing, City Finance Director Cindy Dooley told the commission that street maintenance is listed as a top priority for city residents in annual surveys. However, funding for such projects generally runs short, she said.

Dooley noted that currently the city street department budget includes about $200,000 from the general fund. Some gas tax funding is also available for street projects, along with various grants.

With the funding, Dooley said the city can do small projects “here and there.”

“But the big projects, like to build one block, costs about $335,000. There’s never any way at this point that we could complete even a rebuild during one summer season. We just don’t have the money to do that. And of course costs are going up every year, so we need to look at ways to get the street fixed.”

She presented the various options for street repair, including raising city taxes via a levy or creating a special improvement district.

A resort tax, she noted, “allows communities like ours that have high numbers of visitors but relatively few residents to manage the wear and tear on our local infrastructure without overburdening the local residents.”

And tourist spending is on the rise in Lake County. According to a 2018 report from the University of Montana Institute for Tourism and Recreation Research, nonresident traveler spending was $30,302,000 for Lake County in 2018. Lake County bed tax collections in 2019 were $355,002, up 18% over the previous fiscal year.

Based on lodging alone, Dooley estimated that Polson could raise $213,000 annually through a 3% tax.

A few City Commissioners who spoke at the hearing seemed to back the proposal.

Carolyn Pardini said that one way or another, it’s critical the city address street repair.

“Do we burden [city residents] with the entire responsibility to pay for these streets that so many of us drive on?” she questioned. “That helps the city residents tremendously, to share the burden .. and making [the roads] good for all of us to drive on.”

Lou Marchello pointed to the success of the tax in other Montana cities, like Whitefish.

“The first time they had it, it barely passed,” he said. “The next time it passed by about 80 percent because they could see the benefit. That’s the same thing with West Yellowstone and Red Lodge.”

A few members of the public questioned whether the tax was equitable and fair.

Larry Ashcraft said the he wasn’t against the tax idea, but the structure could be tweaked. He suggested the tax be put in place four months of the year, for a 10 year period.

““But 12 months for 20 years is crazy,” he said.

Lee Manicke said the tax structure should have more going back to property owners. He suggested a 25% rebate, as opposed to 17%.

“That very well could be the difference between having some and having none,” he said.

There was also discussion about which items would be taxed, which the commission admitted needed to be refined.

As presented, lodging, restaurants and bars, recreational facilities, and retail “luxury” items would be taxed.

Tribal members would be exempt from the tax.

Ashcraft told the commission that if the tribes were on board “we could pass this thing.”

Polson has considered enacting a resort tax previously. In 2009, a measure placed on the ballot was overwhelmingly rejected by voters. In 2016, the City Commission denied a plan to bring the issue to a vote.