Whitefish Considers Asking Voters to Divert Portion of Resort Tax to Meet Housing Needs

The Whitefish City Council could decide later this summer if it will submit a ballot question to voters asking them to decide if they approve reallocating a portion of the city’s resort tax toward funding affordable community housing development and programs.

During a Thursday meeting of the Whitefish Community Housing Committee, City Manager Dana Smith said she intends to bring the financial plan before the Whitefish City Council on July 17, at which point she said she would seek direction about moving forward with a public hearing on the matter for the council’s Aug. 7 meeting. Any change to resort tax allocations would require voter approval, with the council having the final say on whether to ask voters to weigh in at the ballot box during this fall’s elections.

The committee was established with the purpose of making recommendations to the city council to implement housing strategies and create more affordable housing options.

A 2022 housing needs assessment report for the city determined that the city needed 1,310 new units of housing by 2030, with 75% of those units needing to be priced below market rate. From 2016 through 2021, the city added 1,069 units of housing, but just 7% of those units were below market rate.

Operating under the purview of the city, the committee has been meeting recently to discuss the potential ballot question and subsequent change in resort tax allocation, which the Whitefish Community Housing Roadmap calls for, and which the city council also previously directed city staff to explore. The city council approved the roadmap in November 2022, and the document is intended to guide city staff, elected officials, and community partners to effectively address the community’s housing crisis.

The proposed re-allocation wouldn’t alter the 25% portion of resort tax revenues earmarked for property tax relief, nor would it affect the 5% reserved to offset the costs incurred by merchants for administering the fee. The only changes to the reallocation voters approved in 2021 would be reducing the increase to street repair and utilities projects from 15% to 5% to free up funding for community housing needs. Voters had approved allocating 58% of the resort tax for street repair and utilities, but the proposed ballot question would bring that amount to 48%. Currently, 43.34% of resort tax revenue is set aside for street repairs and utilities.

If approved, 10% of the city’s resort tax revenue would be dedicated to community housing development projects and programs beginning in February 2025. Over a 20-year-period, the change could generate around $27 million in funding for community housing projects and programs, with an estimated $832,856 coming in the first year. A draft of the financial plan that could come before the city council this summer states that the amount contributed towards a development project would be determined on a case-by-case basis by the city council, and that the proposed funding would be used to fill the financial gap between market rate housing and needed community housing.

“It is currently estimated that to produce a community housing rental unit priced at 70% AMI requires $169,000 of funding, and an ownership unit priced at 100% AMI requires $350,000 funding,” the draft report states, with the notation that those numbers are expected to continue to change based on market conditions, interest rates, grant funding, and other factors.

Some of the funds made available through the resort tax allocation for community housing could go towards the Whitefish Workforce Assistance Fund, which is intended to provide rental assistance to help workforce members retain housing and get into new rental units. Additionally, funding could go towards a Homebuyer Assistance Program, which attempts to help residents get into deed-restricted homes through down payment assistance.

The committee voted to move forward with approving the draft financial plan presented at the July 6 meeting, with the only vote against approval coming from committee member Leanette Galaz. During discussion at the meeting, Galaz explained that she believes that, given the state of housing in Whitefish and the needs that exist in the community, the 10% allocation for community housing is insufficient. Galaz was also critical of the property tax relief allocation and made the case that it is not directly helping community members who rent; instead, Galaz said it is assisting property owners who in many cases do not reside full time in Whitefish but own vacation homes there. She proposed additionally taking 10% out of property tax relief and reallocating that for community housing projects and programs, for a total of 20%.

While multiple members of the committee agreed with Galaz in principle on the need to do more for community housing, they also raised concerns about how such a change would potentially impact voter support of the ballot question, especially considering recent increases in assessed value of properties, the anticipated increased property taxes this year in Whitefish, and the longstanding inclusion of property tax relief in the resort tax revenue allocation.

“It is really why people went for it because they said, ‘This is supposed to be taxing visitors but you’re taxing me too because I go to restaurants and bars and I shop and I’m paying it,’ and the argument was, ‘But you’re getting a property tax rebate that equals more than what you spend, 3%, on your purchase,’” said committee member Rhonda Fitzgerald. “So that was the whole sort of math that sold it. It’s 27 years ago, but there are a whole lot of people that still remember that.”

“The original premise is fatally flawed,” Galaz said. “Residents doesn’t mean property owners. Full-time residents can be property owners, or renters, or, you know, people living in whatever circumstances, but it doesn’t mean property owners. And residents of all forms are spending money in town.”

Galaz ultimately acknowledged the critical feedback she was hearing on her idea for reallocating property tax relief but expressed her belief that the committee should be working to craft creative solutions that would offer more benefit to residents.

Smith, the city manager, said that to make a change that would benefit residents versus non-residents, it would require change at the state legislature because of how state tax law is written in regard to resort tax.

The resort tax revenue that voters in 2021 had approved to reallocate is expected to come online after the anticipated completion of paying off the city’s Haskill Basin Conservation Easement Bond in January 2025, something for which about 23.33% of the resort tax is currently allocated.

The city has been collecting its resort tax since the 90s, when voters in 1995 approved a 20-year term for the tax starting in 1996, with an extension through 2025 approved in 2004, and most recently, a 20-year extension approved by 89% of voters in November 2021. The tax is a 3% fee collected from transactions related to lodging, retail, bars and restaurants.