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Col. Falls considers resort tax on June 2 ballot

by Jeremy Weber
Daily Inter Lake | May 24, 2020 1:00 AM

Columbia Falls voters will have the final say on the city’s proposed resort tax June 2 as part of the state’s mail-in primary election.

After two years of study, debate and planning, the City Council unanimously voted in February to put the measure on the ballot. The issue will appear only on the ballots of Columbia Falls residents, those who live outside city limits will have no say on the proposed 3 percent tax of what the state and city define as “luxury” items for the next 20 years.

The city is proposing the tax as a way to pay for emergency services and infrastructure, which it says are in desperate need of expansion and upgrade with an ever-growing population and increase in visitor traffic.

“This is not intended to grow the city government, it’s intended as a funding mechanism to help pay for public safety and public infrastructure,” City Manager Susan Nicosia said. “This way, it’s not just the community but also the visitors that help drive up the demand for services that will help pay for it.”

It is that demand for services that led the city to look into the resort tax in the first place. A resort tax would be a way to capture tourist and visitor revenue without placing the tax burden on property owners. Increasing visitation in the late spring and summer months continues to lead to increased calls for emergency services. Since the 2000 Census, the Columbia Falls population has grown from 3,873 to 4,688 in 2010 and an estimated 5,525 today while expanding from 1 square mile in area to just over 2 miles.

In a letter sent to voters, the city stated that the number of police calls for service in 2019 was 10,670, up from 6,133 in 2010.

Since 2010, the number of police officers employed by the city has only increased from eight to nine while the department’s annual budget has gone from $345,453 in 2000 to $1.3 million last year.

The strain on the city’s fire department, which consists of a full-time chief and 26 volunteers, has also seen a significant increase. The department’s budget had increased from just under $54,000 in 2000 (before the department had a paid chief) to just over $223,000 in 2019, a number that includes an agreement with the Columbia Falls Rural Fire District that pays half the cost of the chief’s salary and all direct operational costs, but firefighters responded to a department-record 315 calls for service in 2019. That number is up from 178 in 2010, with many calls pulling the volunteer force away from their regular jobs.

“It’s evident that we have difficulty sometimes having the volunteers available to roll out on daytime fire calls,” Nicosia said. “We have a fantastic volunteer fire department, but they are not always available during the day because they have jobs. Ideally, we need two paid firemen available during the day to complement the chief and what he does.”

The city intends to use funding from the resort tax to hire two full-time firefighters to help lighten the load not only on the fire chief, but also on the police chief, who serves as fire marshal and inspector as well.

“It is hard for one person to be able to do all of the required inspections in the city and keep up with routine inspections as well. It’s basically impossible,” Nicosia said. “If we could bring on additional paid personnel that could help with that, it would be great.”

The city estimates that, in the first year of implementation, the resort tax would, conservatively, raise around $450,000. Fifty-five percent of that, or $247,500 would go to public safety, as the city plans to add two full-time firemen to its staff. Twenty-five percent, or an estimated $112,500 would go toward a property tax rebate for city property owners. The remainder would go toward infrastructure, like city streets and parks, 5 percent back to businesses for administration costs associated with tax and 1 percent to the city for administration as well.

If the measure passes, Columbia Falls would join 10 other Montana communities and areas that collect a resort tax, including Whitefish, Big Sky, Cooke City, Red Lodge, St. Regis, Craig, Gardiner, Virginia City and Wolf Creek, though the last four communities apply the sales tax only during the summer-fall tourist season. Resort tax has been used to great effect by all 10 communities as St. Regis installed sidewalks and streetlights along Highway 135, Whitefish repaired 18 streets and replaced the sidewalks on 84 blocks, Virginia City built a new fire hall and Gardiner is in the process of upgrading its water and sewer systems.

Columbia Falls has been most closely compared with Red Lodge among Montana’s resort tax communities. In 2015, Red Lodge collected approximately $700,000 in resort tax revenue, by far not the highest in the state as Big Sky collected $4.1 million, Whitefish got $2.2 million and West Yellowstone saw $1.7 million collected.

For the average Columbia Falls resident, the proposed tax would affect them most when they eat out or buy preprepared food at the grocery store, but some of that would be offset by the reduction in property taxes. Based on an estimated $450,000 in resort tax collections, a property tax reduction of $51 would be applied to the property taxes on a $250,000 home - a 7 percent reduction from the current tax rate of $718.35. In comparison, if the city were to pass a $450,000 levy to pay for infrastructure improvements, a property tax increase of $203 would be added to the property taxes on a $250,000 home.

When it comes to what is to be taxed, Nicosia said a resort tax advisory committee consisting of council members and area residents and well as the City Council as a whole worked for more than six months to make sure the proposed tax would best suit those living in the area.

While state statute states that resort communities can only tax items defined as luxuries, it is up to the individual resort communities to define what a luxury item is.

According to the University of Montana’s Institute for Tourism and Recreation Research, Flathead County saw approximately 2.3 million visitors with 95 percent of those travelers visiting Glacier National Park in 2019 alone. In order to get to Glacier, nearly all of them drive through Columbia Falls, and many of them stop to eat and drink. With that in mind, the proposed resort tax for Columbia Falls was written to tax goods and services that would have a much larger impact on travelers than locals, taxing items such as hotels, motels and other lodging; restaurants, fast food stores and other food service establishments; and Taverns, bars, nightclubs, lounges and other public establishments that serve beer, wine, liquor or other alcoholic beverages by the drink. The tax would also cover other tourist related items and activities such as golf courses, vehicle rentals, cameras, craft items, guide services and clothing imprinted with designs depicting or containing words such as Montana, Columbia Falls, Flathead County/Valley, Glacier Park.

The resort tax is also notable in what it does and doesn’t tax. The tax does not apply to groceries, with the exception of candy and soda. It does not tax medicine, hardware supplies, auto parts, cars and trucks, motor oil, gasoline, furniture, dishes or many other household items.

If the resort tax passes, the City Council has elected not to start collecting the tax until October 2021, giving local businesses a chance to rebound from any losses suffered during the current COVID-19 shutdown.

“It’s a year later than we originally intended, but the delay is for a good reason. The council was very concerned about the economic climate with the shutdowns and thought this would be a good way to mitigate that,” Nicosia said.