The sales tax debate is far from over.
As part of its list of priorities for the upcoming legislative session, a nonpartisan statewide collective of business leaders, trade associations and local governments called the Montana Infrastructure Coalition would like to give larger cities, such as Kalispell, the ability to seek voter approval of a local-option sales tax to address deteriorating infrastructure.
The coalition, a group of over 70 members, including the Montana Chamber of Commerce, was chartered earlier this year to research ways to address the state’s declining roads, schools, water and sewer systems, and other infrastructure, which are collectively “approaching a critical state of disrepair,” according to a 2014 report by the American Society of Civil Engineers.
At its November meeting, the coalition approved a short list of funding options that it plans to recommend at the 2017 session, including an increase of 10 cents per gallon to the fuel tax and using revenues from the coal tax trust fund to back bonds for community infrastructure projects.
Front and center on the group’s agenda is the advocacy for cities to be able to ask voters for a local-option sales tax. Darryl James, executive director of the coalition, said the exact details of any proposed legislation are still being ironed out. The initial idea is that voters in specific cities could choose whether to enact a local-option sales tax for a certain period of time before it sunsets, or expires. The revenues would have to be committed to infrastructure investment, and at least 5 percent of the funds would have to be returned to taxpayers through property tax relief, according to the coalition.
“Montana hasn’t adjusted our revenue tools and infrastructure funding formulas in decades, and we are unable to keep pace with growing physical and regulatory demands,” James said. “Our goal as a coalition is to identify sustainable funding for the essential infrastructure required to build and maintain healthy communities and a robust economy.”
James cited the state’s growing tourism industry as a factor in the proposal. The state tourism office estimates that more than 11 million nonresident visitors spend nearly $4 billion during their travels across Montana each year.
Tourism spending represents a significant part of the statewide economy, but the economic benefits are not widely spread out, James said, and the large amount of tourists who visit the state also impact locally funded infrastructure.
City leaders in Kalispell, Billings and Bozeman have increasingly raised the idea of a sales tax to help tackle mounting infrastructure needs amid residential and tourism growth. Kalispell Mayor Mark Johnson and much of the city council have said residents in city limits are bearing the brunt of paying for road maintenance, city services and other projects that people in the surrounding area, as well as tourists, also benefit from but do not help fund.
Opponents of a sales tax say it could hamper consumer spending and place an added burden on seniors with fixed incomes, low-income residents and young people.
Daniel Brooks of the Billings Chamber of Commerce visited Kalispell two weeks ago to meet with civic and business leaders to discuss a statewide initiative for a local-option sales tax authority bill in the 2017 Legislature. Billings is supporting the ability to enact a temporary sales tax to fund individual economic development initiatives. Under the initial proposal, cities could enact a 3 percent maximum tax for a maximum of 10 years at a time.
“We’re visiting with communities across the state to find out exactly what they need and how we can help them fund their specific economic development projects,” Brooks said. “We’re trying to identify the needs across Montana and see if this (sales tax proposal) is a workable solution.”
Currently under state law, only cities with a population under 5,500 that are deemed “resort communities” — meaning they draw a high number of visitors compared to local residents — have the ability to enact a resort tax with voter approval. Whitefish, for example, has a 3 percent resort tax on retail sales of lodging, restaurants, prepared food, alcoholic beverages, goods, services and luxury items. To help offset the burden on taxpayers, the city devotes 25 percent of the revenues to reducing property taxes.
The sales tax debate recently flared up during the gubernatorial campaign when incumbent Democrat Steve Bullock accused GOP challenger Greg Gianforte of supporting a statewide sales tax. Gianforte vehemently denied the accusation, but the contentious back-and-forth claims reflected the thorny nature of an age-old debate in Montana, which is one of five states without a general sales tax.
The last time Montana residents were pitched a statewide sales tax — in 1993 — they resoundingly rejected it by a 3-to-1 margin. It was the second time in 22 years that the effort fell flat. Any attempt at adding a sales tax has historically received pushback from the retail and dining sectors, as well as county and rural residents who say the tax would unfairly shift the burden onto them.
Recent legislative sessions have also seen local-option sales tax efforts die quickly. The latest attempt will play out when the 65th Legislature convenes Jan. 2 in Helena.
“The Infrastructure Coalition looks forward to collaborating with the new legislative leadership and the Bullock Administration to develop this new approach,” James said. “But what we know now is that the status quo isn’t working, and we simply must start taking incremental steps towards addressing a problem that isn’t going away and isn’t getting any smaller.”