The Whitefish City Council will decide Tuesday whether to move forward with a plan to ask voters to approve a 1 percent increase in the city’s resort tax.

The city is looking for a way to raise the remaining $8 million needed for a $17 million conservation easement to preserve 3,024 acres in Haskill Basin. The project is aimed at environmentally guarding the city’s drinking water supply.

About 100 people attended a town hall meeting Thursday to talk about funding options for the easement.

Mayor John Muhlfeld told the crowd the deal is a one-shot opportunity to permanently protect Whitefish’s water.

“The issue is with the land and the potential for development,” he said. “There could be up to 200 lots there — that’s significant development.”

While most people attending Thursday’s meeting seemed to favor the easement, opinions were mixed on how to fund the project.

The proposed resort tax increase would be decided by voters in a special election on April 28 if the council passes a proposed resolution calling for such an election.

Whitefish already has a 2 percent resort tax that has raised $25.8 million since collections began in 1996. Tax revenue has been increasing by an average of more than 6 percent per year.

About two-thirds of the resort tax revenue is used for street projects, with 25 percent of the revenue rebated to property owners. Five percent goes to park improvements and 5 percent is used to administer the tax.

The extra 1 percent would be split roughly in the same manner, with the lion’s share — 70 percent — used for the conservation easement, either to repay a loan or a bond. Twenty-five percent of the tax increase would be earmarked for property tax relief and 5 percent would go to administration.

Whitefish City Manager Chuck Stearns said city officials have had discussions about the Haskill Basin watershed over the past six years. The acreage is owned by F.H. Stoltze Land and Lumber Co.

“Some of their timberlands were sold and developed into subdivisions in the past,” Stearns said in his council report. “Development could increase sedimentation for our municipal water supply, and if such development was not on a public sewer system our water supply could be threatened.”

The Trust for Public Land became interested in the conservation project in 2013 and began negotiating with Stoltze for an option to buy the easement for $17 million.

The land is appraised at $22 million but Stoltze has agreed to donate the $5 million difference.

A $7 million Forest Legacy grant and $2 million Cooperative Endangered Species Conservation Fund grant already have been secured by the trust, leaving Whitefish to ante up the remaining $8 million.

Not everyone is on board with the proposed tax increase. The Resort Tax Monitoring Committee, which advises the city on street reconstruction priorities, voted against the 1 percent increase. Some business owners fear the increase could cause a backlash to the city’s retail sector.

Sam McGough, owner of the McGough & Co. jewelry store in downtown Whitefish, said he often pays the resort tax himself to make a sale. 

“The resort tax hurts us,” he said at the town hall meeting. “I’m for this project, but the water users should pay for it.”

Whitefish Mountain Resort President Dan Graves said visitors come to Whitefish because of the value. He, too, cautioned against raising the resort tax. 

“Tourists have choices where they spend their money,” Graves said. “We need the water, but we need to be careful about putting that on the back of tourists.”

Retail “luxury” goods have produced the biggest share of tax revenue, bringing in $11.6 million as of Dec. 31, 2014.

Whitefish also could consider asking voters to approve a general obligation bond to raise the $8 million. Such a bond would cost the average homeowner about $100 annually over a 20-year period or about $180 a year over 10 years.

Another option is for the City Council to approve an increase in water rates to pay for a water revenue bond. Under a 30-year bond, the average residential water bill would increase by about $80 per year. For a 10-year bond, the average residential water bill would increase by about $220 per year.

Stearns said he believes a resort tax increase is the least regressive of the funding options because the tax is spread to a broader number of people.

A public hearing will be held prior to the council’s vote on the resort-tax resolution.

In other business at Tuesday’s meeting the council has two other public hearings on the agenda.

The Iron Horse Homeowners Association is asking for approval to remove an existing guard house at the subdivision entrance and replace it with a welcome center in a landscape median on Iron Horse Drive. The work would consolidate two roads on the south side of Iron Horse Drive into one road uphill.

The proposed reconfiguration is meant to minimize traffic through the subdivision. Both the planning staff and Planning Board have recommended denial of the Iron Horse request.

A third hearing deals with a resolution of intent to adopt amendments to the Whitefish downtown master plan as an amendment to the city’s 2007 growth policy.

The council also will discuss and provide direction for a possible extension of the season at Stumptown Ice Den. A work session at 5:45 p.m. will focus on ice rink issues. If the council chooses to move forward with a possible budget amendment for an extended season the vote would be taken during the formal council meeting.

The council meeting begins at 7:10 p.m.; both the work session and general meeting are at Whitefish City Hall. The meetings are on Tuesday due to the holiday on Monday.

Features editor Lynnette Hintze may be reached at 758-4421 or by email at lhintze@dailyinterlake.com.

Whitefish Pilot reporter Heidi Desch contributed to this report.