Polson City Commission to look at resort tax proposal

Polson is once again considering a resort tax as a funding mechanism for city street improvements.

The Polson Economic Development Council on Thursday voted to present the City Commission with its plan for a tax on so-called luxury items. The council discussed preliminary terms that would set a year-round tax at 3% for 20 years. Most of the revenue — 80 percent — would go toward city street maintenance and improvements, while 17 percent would be returned to city residents through a property tax rebate, and the remaining 3% would cover administrative fees associated with the tax.

The tax would start sometime next summer if approved by voters.

The City Commission is expected to take a first look at the council’s proposal and hear public comment at a meeting set for July 27 at 6:30 p.m.

This isn’t the first time Polson has considered a resort tax. In 2009, a measure placed on the ballot was overwhelmingly rejected by voters. In 2016, the City Commission denied a plan to bring the issue to a vote.

A resort tax is generally considered a way for small municipalities with a high rate of visitors to manage wear and tear on local infrastructure. A resort town is defined as an incorporated city with a population of less than 5,500. A significant portion of the town’s economic base must be tourism-related.

Columbia Falls voters in June OK’d a 3% resort tax that goes into effect next year, while Whitefish has had one in place for more than 20 years. The Whitefish tax — collected on retail sales, lodging, at restaurants and for prepared food and alcoholic beverages — generated $4.2 million in revenue in Fiscal Year 2019.

Polson Economic Development Council member Rich Forbis noted it took Whitefish many years to reach that revenue level, but added that Polson’s “infrastructure is so bad right now, can we afford to wait?”

Council member Gerry Browning said the tax would be a positive for Polson residents and the business community alike.

“We can spread [the burden] out among everybody who comes into our community, and you can also save some money on your property tax,” she noted during a June 30 discussion about the plan. “That’s kind of a win-win.

“Having good streets and a nice downtown — that’s a real positive for businesses that want to come in.”

The council considered proposing the tax for only six months a year, but ultimately decided that a year-round version would be easier for businesses to keep track of.

“If you have any business owners that are going to purchase software to do this, turning it on and off is going to be more of a problem than just having it run all the time,” Polson Finance Officer Cindy Dooley noted at Thursday’s meeting.

Browning added that Polson is pushing to attract visitors during the shoulder seasons as well through sports tournaments and other events like the Flathead Lake International Cinemafest.

“We’re trying to make ourselves more than a summer tourist town,” she said.

The council has not developed a list of items that would be taxed, but Dooley noted previous proposals looked at Whitefish’s list as a frame of reference.

“We have a big choice on the taxable items,” said Forbis. “We can work on what the luxuries are after this is given to the commission.”

There was some discussion among the council about Tribal exemptions and whether Tribal members would be required to pay the tax.

According to Polson’s 2016 resort tax proposal, Tribal enterprises on the reservation are not required to collect state or local taxes such as a bed tax or resort tax, and enrolled tribal members would be required to show identification to be exempt from the resort tax.