Until state laws are changed, a resort tax in Bigfork isn’t feasible, community members tasked with investigating the fees say.
“The bottom line is we’re dealing with laws that were enacted in the early 1980s – they may have worked 30 years ago, but they don’t apply now,” Cheryl Richmond, head of the Resort Tax Committee and owner of the Sleeping Bear Lodge in Bigfork, said.
Earlier this month, Richmond told the Bigfork Steering Committee that state statutes governing the creation of a tax district in unincorporated areas make it nearly impossible to institute a resort tax in Bigfork. Another, smaller tax, however, may prove possible for the town.
Under state law, Montana towns that are eligible for resort taxes – also known as local-option taxes – are divided into two categories: communities and areas. Resort communities are incorporated cities with a population of less than 5,500 and resort areas are unincorporated entities with fewer than 2,500 people. Places that exceed those population limits aren’t allowed to put resort tax proposals on any ballots.
Eligible towns must also prove that their economy relies heavily on tourism dollars.
But the laws governing incorporated resort communities and unincorporated resort areas like Bigfork are somewhat different.
For Bigfork, and other towns like it, there’s a regulation called an income-matching requirement, which means that tourism must be the largest income provider for the residents within the resort tax boundaries.
For example, if the people in the resort tax area earn a total of $5 million from tourism, but wages and salaries from pensions or social security total $5 million and one dollar, the area isn’t eligible. In Bigfork, where there’s a large population of retirees and well-to-do residents, an income match is nearly impossible, Richmond said.
Over the past few years, the local resort tax committee submitted several different maps of potential resort tax boundaries to the Montana Department of Commerce. None met the requirements.
“(The acceptable boundary) would look like a snake, going along just the commercial corridors of Bigfork,” Richmond said, noting that only the people who live within the proposed district can vote on the tax.
“To me, that’s not fair, because very few people would get to say yes or no to a tax everyone is going to pay,” she added.
A similar income-matching regulation existed for incorporated towns, Richmond said, until a bill pushed by Whitefish passed a few years ago. The city successfully petitioned for a law change allowing them to use the city’s limits as the tax district boundaries.
Now, Richmond and other committee members hope that Bigfork could push for a similar change for unincorporated towns. But with the current legislative session already halfway through, those efforts will likely have to wait until 2011.
“We haven’t given up on the idea,” Richmond said, “but it’s a ways off.”
The fundamental idea behind resort taxes is to allow places that get a lot of tourism to pay for the wear-and-tear on local infrastructure and do city improvements. Montana currently has less than 10 resort communities or areas. All of them have 3 percent taxes – the maximum – except for Whitefish, which has a 2 percent tax.
In fact, Whitefish’s downtown improvement project which would use more than $4 million of resort tax dollars is perhaps the most stunning single example in the state of how much influence tourism money can have on a town’s infrastructure.
In addition to its resort tax, Whitefish city coffers have also benefited from a Tourism Promotion Assessment, a voluntary 1 percent assessment. In Whitefish, Richmond said money has been spent on advertising and the hiring of a professional public relations firm, which has helped get the town publicity in national outlets.
Since it is voluntary, customers can decline paying the 1 percent assessment. It’s also much easier to institute than a resort tax. Estimates show that Bigfork could raise about $100,000 a year if all retailers participated.
“If residents wanted the TPA taken off their bill all they’d have to do is ask,” Richmond said, “but I doubt tourists, who are usually used to paying a lot more in sales tax where they live, will even notice. It could go a long way toward helping Bigfork.”
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