The 2007 Legislature is more than six months away, but local officials are already drafting legislation that would allow Billings or Yellowstone County to enact the kind of voter-approved resort tax that has benefited West Yellowstone, Red Lodge and other tourism-dependent communities.
It's no secret that any legislation involving a sales tax has been political poison in Helena. More than a dozen sales tax bills were introduced during the 2005 Legislature, and all were defeated.
Joe McClure, executive director of the Big Sky Economic Development Authority, said draft legislation now being discussed would amend the existing resort tax law so that larger communities could enact a sales tax on goods typically purchased by tourists.
McClure said a bill to expand the resort tax has a chance in the Legislature, but only if lawmakers from Billings and other large communities cooperate to assure its passage.
Existing resort tax legislation exempts unprepared food, medicine, medical supplies, appliances and other "necessities of life" from the tax. McClure hopes the Legislature will allow local communities to decide what items to tax and what to exempt.
Amending the resort tax, which has a history and broad support from throughout the state, would be easier to get through the Legislature than legislation for a local-option sales tax, McClure said.
"The thinking is to amend an existing law that people have embraced and feel is doing good things," McClure said.
Officials with the Big Sky EDA and the Billings Area Chamber of Commerce have been studying the proposed expansion of the resort tax for several weeks. Officials from other communities are also taking a look at it. McClure said the proposal will soon be presented to Yellowstone County legislators and candidates.
The Chamber of Commerce has endorsed such a change in the state resort tax law.
The concept received widespread support among council members during the City Council's work session Monday night.
But council members Don Jones and Vince Ruegamer said they wouldn't support a bill if it includes a requirement that Billings or Yellowstone County would have to share sales tax revenue with outlying communities.
Ruegamer warned that Billings could actually end up with less money if revenue sharing is part of the bill. "You don't want to cut off your nose to spite your face," he said.
The revenue-sharing provision has been suggested as a way to make the legislation more palatable to rural legislators, whose constituents are likely to oppose paying a sales tax in Billings.
Under state law, only communities in which a "major portion" of economic activity is from tourism-related industries can enact a resort tax. The law also applies only to a municipality whose population is less than 5,000 or an unincorporated area with a population of less than 2,500.
The draft legislation would expand the definition of resort communities to those that receive "a portion" of their business revenue from tourism, with no limit to population.
McClure said a local resort tax would help pay for community amenities and infrastructure improvements that are typically used by out-of-town visitors. Those amenities could include MetraPark, Cobb Field, even streets and roads, he said.
"The thinking is that if we continue to grow, we don't want to look like Missoula and Bozeman," which are struggling to keep up with demand for new infrastructure, McClure said.
The state law governing the resort tax requires that at least 5 percent of proceeds from sales must be set aside for property tax relief. Other communities, such as Whitefish, have chosen to commit a larger portion of resort taxes to property tax relief, said John Brewer, president of the Billings Area Chamber of Commerce.
The amount of money collected with a local resort tax would depend on several factors, such as how much tax is levied and what goods would be taxed. Preliminary estimates indicate that taxing just two items — lodging and food and beverage tabs — would net the city about $11 million a year, Brewer said.
Red Lodge has collected a resort tax since voters approved it in 1998.
"People have had time to see some of what it can do," said Debbie Tomicich, Red Lodge town clerk. "It has helped us do a rather large project for water and sewer without raising rates, and it has done a lot of street paving and park improvements,"
Tomicich said the Red Lodge resort tax revenues can be used only for infrastructure.
"It has been a very good thing," she said. "It has been good for our community."