Tourism brings millions of people to Missoula each year, and with them, lots of money for local businesses. But all of those visitors also make use of local infrastructure, which locals pay for mainly through property taxes. By one estimate, tourists could be costing the county more than $20 million in public infrastructure and services each year.
The wear and tear, increased traffic and emergency services needs of tourists has some local residents and government officials searching for a way to make visitors pay their share of the infrastructure they use, while providing property tax relief for locals.
Missoula County’s treasurer, Tyler Gernant, decided to investigate how much tourists should pay to keep pace with the amount of county services they use, directly or indirectly, when visiting. While he characterized his calculation as unscientific, quick and dirty, “back of the napkin” math, the number he came up with is startling.
According to his math, the more than 1.5 million tourists that visit Missoula County could account for as much as $23.4 million of county spending each year, or about a quarter of the infrastructure budgets they are benefiting from, which residents pay for.
“Tourists take advantage of government services we provide to make tourism not only attractive, but like you can come here and not get accosted by a burglar because we have police, and you’re not going to get burned because we have a fire department, and you’ll get to drink clean water because of the water quality districts,” Gernant said. “I took out things like the cemetery districts because I didn’t really feel those were things that were tourism enhancing.”
To find the number, he added up the cost of all services tourists use, including things like roads, sewers and fire protection. Then he calculated how much time out-of-state tourists were spending in Missoula County, added that to the amount of time residents spend here, and divided out what percentage of county services were therefore being used by tourists.
The city and county’s ability to fund the majority of their budgets on the backs of homeowners has reached a breaking point, Commissioner Josh Slotnick said. Mayor John Engen has noted his desire to create a local option sales tax to shift the burden away from property taxes. But options for moving away from a property-tax-based system are few and far between, due to state law governing how cities and counties can tax.
Bills that would have created more local sales tax options failed in the 2009, 2017 and 2019 legislatures. One option that does exist for a select number of towns is a resort tax.
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Currently, the only Montana towns that can impose resort taxes are those with fewer than 5,500 residents, or unincorporated areas with fewer than 2,500 residents. Currently there are 10 towns that have voted to dub themselves resort towns and impose a 3% tax on luxury goods and services.
One of those is Whitefish, home to state Rep. David Fern, who made an attempt to create an expanded local option sales tax in the most recent legislature after seeing the remarkable success of Whitefish’s resort tax.
“Whitefish created the resort tax in ‘95, so we’ve had time to see the impact it has had,” Fern said. “You see major rebuilding of roads, sidewalks, addition of bike and pedestrian paths, new street lamps, things that cost a million a mile… all while local taxpayers are getting a 20 to 25% rebate on their property taxes.”
Cities must vote on whether to become a resort, and then define what goods and services will be taxed, up to a 3% cap. Whitefish passed the initial resort designation in 1995, with 56% support. When it came time to renew the designation 20 years later, it passed with 76% of the vote, which Fern saw as residents realizing the benefits of the program.
“The popularity of these programs increases as they become more entrenched in how a city operates, and people see the positive effects it has,” Fern said.
In Whitefish, the money generated by the tax not only subsidizes government services and infrastructure, but also gives a direct tax break to local property owners. Road and sidewalk improvements and repairs get 65% of the revenue, while 25% goes directly to paying off a portion of residents’ tax bills. Between 1996 and 2013, it provided more than $20 million in road maintenance and property tax relief.
For now, the resort option is off the table for Missoula. While county treasurer Gernant said there were some possibilities for creating special taxing districts targeting tourist-heavy industries, he said that option hadn’t been fully explored and had serious complexities to investigate.
“What you’d have to do is target businesses that benefit from tourism like hotels, motels, public accommodations, and I would assume things like restaurants, but that's a difficult thing to attribute to those businesses because we can’t base it off sales,” Gernant said. “You’d basically have to put a property tax on those businesses, which would in theory be passed on to the tourists in costs. It’s never been done, so of course it’s questionable.”