Proposed Retail Fee’s Rollout Met with Skepticism

By Beacon Staff

A new proposal by Kalispell officials to raise funds for road maintenance received a rocky reception Monday, as both members of the public and city council members expressed skepticism about its fairness.

“I don’t see why this burden gets dumped on people like me and other small retailers,” Doug Hamilton, owner of the Midas shop in Kalispell, said. “You have to find a more equitable way of doing this rather than just load it onto the retailer.”

Hamilton’s comments came in response to a proposal by City Manager Jane Howington to implement a 9-cent retail transaction fee as a way to raise funds for street repair and maintenance around Kalispell. This fee would be aimed at boosting the street maintenance assessment, which city residents pay as part of their property taxes and which brings in about $1.75 million annually.

Howington estimates $4.5 million is closer to what Kalispell requires for the proper upkeep and maintenance of its roads, and Monday’s work session, where no votes are allowed, was a kind of rollout for the fee proposal, which is likely to see months of debate and changes before any vote by the council.

“This is the very beginning of a community conversation,” Howington said. “We may end up coming out with a completely different solution to this.”

She also emphasized the city’s street maintenance assessment allows crews to perform basic repair and plowing with outdated equipment, but not the increasingly necessary, substantial overhauls on deteriorating streets like Stillwater Road.

“Our staff does a great job with using our limited resources and patching,” Howington said. “That’s very different from keeping our road network safe and secure in a replacement scenario – not maintenance, not patchwork.”

Furthermore, the burden of boosting funds for street maintenance, she continued, cannot be borne by increasing property taxes on city residents, but must be spread to the tourists and other Flathead residents who use Kalispell’s roadways.

Under the proposal retailers would be charged every six months at a rate of 9 cents per transaction, based on the rough correspondence between the traffic a retail establishment generates and the number of transactions the business has. It would be up to businesses whether they wish to embed those costs into the price of the goods they sell or place the 9-cent fee on every transaction receipt. The plan would be accompanied by reductions on property tax bills for the street maintenance assessment.

Unsurprisingly, Kalispell’s business community has been wary, thus far, toward the proposal. A survey of its membership by the Kalispell Chamber of Commerce showed 64 percent of respondents felt that the fee should be “opposed or strongly opposed.”

And though he was the only business owner to speak up at the meeting, Hamilton described the proposed fee as “one more burden to take up my time.” He also questioned the assertion that implementing the fee would only require the hiring by the city of one additional clerk to administer it; rather, some businesses could likely find themselves being audited by a team of city employees.

Councilman Jeff Zauner questioned how the fee system would impact cash-only businesses, using the example of Moose’s Saloon, where the bar operates using an antique register.

In that case, Howington replied, the business could either remit the amount it owes or remit an amount based on the number of transactions.

“If you were to decide to stay with trip generation, that wouldn’t need to be audited because that was calculated by the city,” Howington said. “If you decided you want to do it based on transaction numbers … there would be an auditing process where those businesses that use the transaction model would be audited.”

Zauner also questioned how the city would regulate temporary events where transactions occur, like the farmers’ market or Arts in the Park festival. Howington answered that these were policy decisions where the council would have to make its own determinations. Additionally, businesses that are considered “services,” like banks or insurance agencies, would not be subject to the fee, and it would be up to the council where that distinction between retail and service businesses lays.

Acknowledging the severe spring weather-damaged roads, Councilman Bob Hafferman said he thought Kalispell’s existing level of road maintenance was adequate, and he did not see the need to triple its budget. Nor was he convinced that the added tax would be paid for by out-of-towners. Instead, Hafferman asserted the cost of the fee was, “going to come primarily from the people of Kalispell.”

“Tourists spend a lot,” Hafferman said. “But they’re not the people who will buy the numerous, everyday, small ticket items.”

He added that he hoped to learn more about the proposal, but that he couldn’t see himself supporting it without a popular vote.

“I’m going to urge the council, if the proposal advances, to put this new tax on a ballot and to have assurances that this is not another foot-in-the-door approach with another form of taxation,” Hafferman said.

Part of the reason Howington is promoting the transaction fee stems from that fact that other means of raising revenue have been unsuccessful. The Legislature has not seen fit to allow a city of Kalispell’s size to enact a resort tax or local option sales tax. And Flathead County commissioners will not agree to a 2-cent increase in the gas tax.

But some at the meeting reiterated that the gas tax remains a much more fair option for funding road repair.

Linda Johnson, a leader within the conservative Northwest Montana Patriots group, said the transaction fee would hit small businesses the hardest when they have to reprogram their accounting systems, while big chain businesses could make the adjustment easily.

“I’m for the gas tax – sorry but I am, because it’s very equitable,” Johnson said.

Mayor Tammi Fisher was not present at the meeting, and at the end of it Councilman Duane Larson reiterated to the public that there will be much discussion to come on the transaction fee.

“We hope you have a little better understanding of what the problem is and what the proposed solutions to that problem could be,” Larson said. “We’re going to dig deeper.”

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