In response to booming residential and commercial growth on the north side of town, Kalispell needs to build a $14 million sewer pipeline before the current line reaches capacity, which is expected to occur in the coming years.
To pay for this urgent project alongside the gamut of standard services and infrastructure needs, city officials have a few options. They could increase property taxes to the maximum allowable levy amount for the roughly 8,000 taxpayers in city limits. They could increase impact fees, heightening the costs for developers. Or they could cut funding for services and other projects in the budget.
Grappling with persistent growth, city officials have turned their attention to another funding source that is controversial but could remedy the current funding dilemma.
With a 4 percent sales tax, the city of Kalispell would accrue roughly $26.64 million this year, nearly half of its general budget, according to an analysis by the state Department of Revenue.
With a 3 percent local option sales tax, similar to Whitefish’s, Kalispell would similarly reap the significant benefits of collecting revenue from the sales of goods and services while dropping property taxes for residents, city officials say.
Yet, unlike Whitefish 10 miles up the road, Kalispell is unable to venture a guess as to whether residents would even consider enacting a local option sales tax, or resort tax, if they could. 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.
“Why is Whitefish different than Kalispell?” City Manager Doug Russell asked, pointing to Kalispell’s role in the greater valley’s expanding tourism sector.
“We fit the definition of a resort community.”
As the retail, professional and medical center of Northwest Montana, Kalispell does serve a greater population than simply within its city boundaries. It also stands out as the largest city in Flathead County, which is the state leader in nonresident tourist spending at more than $668 million annually.
Kalispell officials say residents inside 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. 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.
Mayor Mark Johnson and the Kalispell City Council have been persistently pleading their case to state lawmakers and governor candidates, alongside other cities such as Billings and Bozeman, which recently hired a lobbyist to try to sway lawmakers during the upcoming legislative session.
Last week the Kalispell City Council held a forum with current and prospective legislators, as well as Greg Gianforte, the Republican candidate for governor, and at both events councilors repeatedly brought up the contentious topic and the desire for local governments and their residents to decide their own fates.
“It shouldn’t be up to Helena to keep us from deciding which funding mechanism we want,” Councilor Phil Guiffrida told Gianforte. “Let (Kalispell residents) make the informed decision to govern themselves.”
City officials say the addition of a sales tax could provide relief for property taxes, which are a key source of funding for public schools while also being divvied out to city, county and state governments. In Whitefish, homeowners receive a 25 percent reduction in annual property taxes to help offset the resort tax.
In 2015, Kalispell residents paid $30.46 million in property taxes, and of that amount, $7.11 million was levied, or distributed, to the city of Kalispell, according to the state Department of Revenue.
“I don’t mind paying my fair share,” Kalispell Councilor Rod Kuntz said. “We’re just paying a lot of other people’s shares also.”
Gianforte told the Kalispell councilors that he did not favor any new taxes for residents, but he understands their predicament.
“I hear you loud and clear that (the current funding structure) is not working now,” he said. “I don’t know that (a bill changing the law) can get through the Legislature, but I think this education that you’re doing, you have to convince people … I’ll listen to the constituents.”
When asked his opinion, Gianforte’s opponent, incumbent Democratic Gov. Steve Bullock, responded to the Beacon in a statement, “I’m firmly against any statewide sales tax. As with any other bill, I will sure take a look at the local option if it gets to my desk, but it didn’t even make it out of committee last session.”
In Montana, a flourishing tourist destination that is one of five states without a general sales tax, the topic is both thorny and enticing. 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.
The topic was recently thrust into the forefront of the gubernatorial race with Democrats accusing GOP candidate Gianforte of previously supporting a sales tax that “would hurt hard-working middle-class families,” Jason Pitt, a spokesperson for the Montana Democratic Party, said.
Gianforte responded by saying he is opposed to a statewide sales tax. Bullock used the opportunity to propose an amendment to the state constitution that would prohibit any future sales tax. Gianforte called Bullock’s proposal a stunt “to cover his failed record on tax relief for Montanans.”
In previous legislative sessions, any attempt at changing the law to allow cities such as Kalispell the chance to ask voters has also fizzled out early and often. In the 2009 session, Sen. Jeff Essmann, R-Billings, proposed a bill allowing larger cities such as Bozeman to enact resort taxes, but the Legislature killed it. Last session, a similar bill failed to make it out of committee.
Essmann, chairman of the Montana Republican Party, said the challenge remains convincing rural areas — and their legislators — that enacting the sales tax would be beneficial to them instead of simply a new cost that they would be incurring.
“It’s got to be perceived as a win-win,” Essmann said.
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