Polson Mulls Implementing a Resort Tax

By Beacon Staff

POLSON – There were as many questions as answers at a city council workshop here last week on whether to ask voters in November to institute a local luxury surcharge, and, if so, what the measure should look like.

The majority of about 20 members of the public who joined the city commission and City Manager Todd Crossett in the brainstorming agreed, while such a proposition has its challenges, such a taxing mechanism is the only way for this tourist berg of fewer than 5,000 people to repair infrastructure and fund both necessary and desired future projects, especially those that promote economic development.

Such a tax in tourist areas is not a new concept. Tourist-oriented cities like West Yellowstone, Red Lodge, Big Sky and Whitefish have used similar taxes.

Whitefish first instituted a resort tax in 1996 and just extended the measure for another term. And Missoula County commissioners voted last week to place a resort tax measure before voters in Seeley Lake.

Crossett, just two months into a two-year city manager contract, said his job is to present ideas and alternatives to the city commissioners, who make the ultimate decision.

“I’m not here with a specific agenda,” said Crossett, who facilitated the 2 1/2-hour session by presenting a variety of key points to be considered before the drafting of a resolution, which after a required public hearing held Monday was considered by the city commission.

The commission voted to approve a resolution Monday night and place the measure on the ballot.

The state Department of Commerce recently designated Polson a resort community, which allows the city to institute such a measure as long as the population does not exceed 5,500 residents. The latest census data placed Polson’s city population at about 4,800 people, but concern has been raised that the city could soon exceed the population level, eliminating any such taxing authority.

Crossett agrees that there is a small window to move forward on a resort tax, but Mayor Lou Marchello and Commissioner Jules Clavadetscher noted that city commissioners have examined and considered the possibility for several years, but until being designated a resort community were unable to move forward.

“We’re short on time. There’s no question about that,” Crossett said.

But Commissioner Elsa Duford was concerned about the short time frame.

“I think it’s too soon,” she said about the 17 days the current measure has thus far been examined. “That’s too fast. You can’t inform the public this quickly.”

If the city commission does move forward, there is about two months to tweak the proposal before the resolution is made available to voters in advance of the November election.

Much of last week’s workshop discussion centered on what percentage to charge – state law allows up to 3 percent; who if anyone would be exempt; how much property tax relief would be appropriated to city residents; and what the length of the tax would be.

All tribal members are exempt from paying any tax under provision of the Treaty of 1855. After a long discussion, it was decided not to exempt anyone else from the resort tax, but to instead earmark 20 percent of the collected revenue – far greater than the 5 percent the state requires – to decrease in city property taxes.

“I think everybody should pay except those who are legally exempt,” said Commissioner Mike Lies.

“If you start exempting people, you open up a can of worms,” said business owner Greg Hertz, pointing out the difficulty of deciding at the point of purchase who is exempt adds greater burden to retailers.

If approved by voters in November, the 3 percent tax decided upon would become effective Jan 1, 2010. It would apply to what is described as luxury items sold by hotels, motels, lodging and camping facilities; restaurants, fast food stores and other food service establishment; taverns, bars, nightclubs and other public establishments that serve any alcoholic beverage by the drink; destination ski resorts and other destination recreational facilities and establishments that sell luxuries.

It would not include items purchased for resale or food purchased unprepared or unserved, medical supplies and other services.

Although several members of the public and Commissioner Duford expressed concern, it was determined the measure would be effective for a term of 10 years with a public vote.

If voters approve the measure in November strict criteria will decide how proceeds of the tax will be used and a committee probably will be established to examine the dispersal process.

Whether or not Kwa Tuq Nuk Resort will collect the tax and participate in the program is a key element in the resort tax going forward, according to Crossett, adding that a meeting with the Salish and Kootenai Tribal Council is scheduled.