New fee gets chilly reception
Shelley Ridenour/Daily Inter Lake | Hagadone News Network | UPDATED 13 years, 8 months AGO
Not many of the 20 or so people who attended a Monday meeting chose to speak about a possible transaction fee to be assessed on retail purchases in Kalispell, but those who did talk were united in their opposition to the tax.
They were joined by council member Bob Hafferman, who said until he gets additional, convincing data, he couldn’t support the proposed fee.
“There are too many unknowns,” Hafferman said. “What businesses will be taxed ... that hasn’t been made clear yet.” He wants city staffers to provide a list of specific items and transactions that would be subject to the fee.
“We don’t even know what’s going to be taxed yet. This doesn’t have much to even begin to debate,” Hafferman said. “I haven’t seen a good method in order to support this, yet.”
But City Manager Jane Howington said it’s the job of the council, not the staff, to identify what to tax.
Audience members Linda Johnson and Doug Hamilton both said business owners will incur costs to have their computer systems and cash registers overhauled to track a transaction fee.
Hamilton, who owns the Midas store in Kalispell, said it will cost $1,000 to program his computers. Across the city, hundreds of thousands of dollars will have to be spent by small business owners to do the same, he said.
They both supported the idea of increasing the gas tax, saying it is more equitable and shifts some burden to tourists. And, they both said, city leaders need to talk to the county commissioners about the gas tax increase.
“What I don’t need is one more burden,” Hamilton said. He already has cut his staff from five to two to survive the economic downturn. “Think seriously about what you’re doing to small business.”
Sharon DeMeester, a retired business owner, said she didn’t maintain a cash register at her copy shop, but used a cash drawer. Other small businesses do the same, she said.
“How are you going to monitor that?” DeMeester asked.
“This is a bad idea,” she said of the fee.
Gary McHenry agreed that the tax is a “bad idea. You need to figure out some other way,” he said.
Business owners in Evergreen and Columbia Falls should write thank-you letters to the Kalispell council, McHenry said, because “people will go there to shop.”
A tax on purchases especially hurts low-income people, Patrick Moulton said. Moulton lost his job about a year ago and said he barely gets by now.
He frequently makes small purchases and at 9 cents per purchase, he’s worried about how much he’ll spend with the new tax. And, Moulton said, he doesn’t even own or drive a car, so he doesn’t contribute to wear and tear on streets.
“Think about it,” he said. “A lot of us are struggling.”
The audience broke out in applause after he spoke.
Council member Duane Larson wants the city to consider some sort of minimum purchase before the fee would be added to a purchase. Using convenience stores as an example, he said those businesses rely on small-ticket items and having to increase the cost of every item by 9 cents “will kill them.
“It’s not fair to make a $1 or a $2 purchase and pay 9 cents and to make a $3,000 purchase and pay 9 cents,” Larson said.
“I can’t support that. We need to consider a minimum purchase,” he said.
Prior to hearing public comment, Howington laid out the city’s case for the fee.
The city wants to implement the fee to raise $4.5 million a year for street maintenance.
City employees do a “great job with our limited resources,” Howington said. But the city has a “failing infrastructure” in its streets that needs to be addressed.
Currently, the city assesses its street maintenance fee based on property size. To generate the $4.5 million a year the city says it needs, the assessment on the approximate 9,000 pieces of property in the city would have to double or perhaps triple, Howington said. The city now collects about $1.5 million with the street assessment.
Plus, city officials say the 80,000 to 100,000 people a day who are driving on city streets should share in street maintenance costs.
Hafferman’s question about how the city staff came up with the 80,000 to 100,000 trip generations a day went unanswered by Howington.
“How was that arrived at?” Hafferman asked. “The implication is there is a huge number of nonresidents wearing out our streets, but a lot of those streets where businesses are at are maintained by the state and federal government, not the city. For the life of me, I can’t understand this idea that tourists are wearing out our streets. To me, our assessments have always been a fair way.”
Hafferman was referring to business located on either U.S. 93, Montana 35 or U.S. 2. The city doesn’t maintain state or U.S. highways.
Under the current assessment plan, Kalispell residents pay 47 percent of the street assessment fees but generate 22 percent of trips in the city, Howington said. Non-retail commercial ventures pay 18 percent of the assessment and generate 16 percent of the trips. And retail businesses pay 18 percent of the assessment and generate 62 percent of the trips.
“You can see the inequities,” Howington said. “We’re not having retail commercial pay what covers them.”
There are options for a city to generate more money for streets, she said. But those options are outside the control of the city.
Howington said the county commissioners could increase the gas tax from 2 cents to 4 cents. But she said the commission has “said it’s not in the best interest of the county.”
However, the commissioners haven’t discussed raising the gas tax since before 2005, according to Flathead County Administrator Mike Pence.
In response to a question, Howington said the city now gets $320,000 a year from its share of the 2 cent tax on gas, so if the tax was increased to 4 cents, the city would get $640,000 a year.
Kalispell’s population is too large for the city to implement a resort tax, in accord with the state law, she said. And Montana legislators have rejected proposals to allow local-option sales taxes to be implemented.
Additional reductions in the number of employees in the street department aren’t feasible, she said. Equipment purchases already have been put off and the city patches and repairs roads rather than constructing new streets.
Several speakers took exception to Howington’s explanation that only one full-time new employee would be hired to handle data entry related to the fee collection. In addition to that new clerk, two existing employees would spend half of their work day on fee collection issues, she said.
The city would need to spend about $500,000 on start-up costs to implement the new plan, she said, but that work would be done by private contractors.
Hafferman urged people at the meeting to track their transactions for a week to figure out how the new fee might affect them.
He said he already has done that and it appears he and his wife will spend more paying a 9 cent fee than they would through their property tax assessment.
“God help people with two kids,” he said.
Hafferman also wants a public vote on the proposal, as several members of the audience suggested.
Larson told the audience three times that the council won’t make a decision for a long time and public comment will be accepted throughout the review process.
As public input is received, “a completely different solution” could be identified, Howington said.
While Howington said the Monday meeting was “the very beginning,” she also said she had been mentioning the idea of a transaction fee to the council for the last six months or a year.
Reporter Shelley Ridenour may be reached at 758-4439 or sridenour@dailyinterlake.com.
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