Despite protests from business owners, the Whitefish City Council approved a resolution Tuesday to ask voters to approve a 1 percent increase in the city resort tax. 

The city is looking to raise $8 million by the end of the year to fund a 3,000-acre conservation easement in Haskill Basin. The project is aimed at protecting the watershed, the primary source of Whitefish drinking water. 

Voters will be asked in a special election April 28 to raise the resort tax from 2 to 3 percent. 

The council’s vote was 5-1 with Jen Frandsen in opposition. 

“This is a vote to ask the people of Whitefish how they want to pay for this,” council member John Anderson said. “If this doesn’t pass, water rates are going up.”

Frandsen said she would support a water rate increase over an increase in the resort tax as the funding method. 

“No matter how we fund this, it is the right thing to do,” Frandsen said. “I support protecting that water source.”

If approved, the increase is expected to generate about $1 million annually to pay back revenue bonds. 

Several business owners asked the council not to increase the resort tax and some said water rates should be increased instead.

Mike Gwiazdon, chief executive officer of Sportsman & Ski Haus, said the resort tax already hurts business in Whitefish. 

“The reason for the tax won’t be understood — what they’ll understand is there is a tax,” he said. “I’m not against water, but the increase in resort tax is going to be detrimental to our businesses.”

Ron Brunk, owner of Glacier Cyclery, said he supports the easement knowing it will also protect a popular recreation area that will be a positive for his business. 

“I would prefer another direction rather than the resort tax,” he said. “It took a while for business to come back after the resort tax was based and I do believe it will come back again after this.”

The city also could ask voters to approve general obligation bonds or raise water rates to generate money for the easement. 

Council member Frank Sweeney said the viable option was to raise the resort tax. 

“I would love to have another way to do this, but I don’t think there is another way,” he said. “We’re talking about placing this on the ballot for the community to decide.”

Pointing to the large number of comments that called for protecting Haskill Basin, council member Andy Feury said he couldn’t recall any other single project that had this much buy-in. 

“I’m sympathetic to retailers and losing business to Kalispell,” Feury said. “With the general obligation bond or the water rate increase, that’s also money that people would no longer spend with retailers either.”

Steve Lull said a promotion to shop local could be the counter to business concerns.

“If someone is driving to Kalispell for 1 percent, there is a psychological problem,” he said. “Lower property taxes are part of this and it’s a conservation easement to preserve 3,000 acres — what could be better than this?”

The Trust for Public Land has secured an option to purchase the development rights for the property from the F.H. Stoltze Land and Lumber Co. The overall purchase was expected to cost $20.6 million, but Stoltze agreed to contribute $4 million to the project while the U.S. Forest Service is expected to provide a $7 million grant plus a $2 million grant from the U.S. Fish and Wildlife Service also is expected.

Proponents of the deal say that if the property were to be developed, it could damage the Haskill watershed, which provides about 75 percent of the city’s water supply. The other portion comes from Whitefish Lake.

If approved, the increase in the resort tax to 3 percent — the maximum permitted under state law — would begin July 1 and end in 2025, when the resort tax sunsets unless voters approve an extension. 

At least 25 percent of the proceeds from the higher resort tax would go toward property tax relief (in addition to existing relief already in place). No more than 70 percent would be used for repayment of a loan or a bond to finance a portion of the conservation easement. Five percent of the amount collected would go to merchants for administering the tax. 

The resort tax is collected at restaurants and bars, retail and lodging businesses in Whitefish. 

Money collected from the resort tax is currently split four ways 65 percent goes to roads, 25 percent to property tax relief, 5 percent to parks and 5 percent remains with the merchants as an administration fee.