Whitefish officials are planning for the future of the city’s resort tax.

The 3% tax is collected on “luxury” retail sales, lodging, at restaurants and for prepared food and alcoholic beverages. The tax runs through January 2025.

The Whitefish City Council held a work session recently to discuss plans to go before voters in fall of 2021 to seek a 20-year extension of the tax.

Since the city’s resort tax began in 1996 it has collected more than $40 million, providing a total of $10 million of that in tax rebates to property owners and $20 million for infrastructure improvements.

Whitefish City Manager Dana Smith said the city has about a year to prepare ballot language that would appear on the ballot in November 2021 for an extension of the tax.

“We need to go before voters, asking them for an extension,” she said. “If it would fail then that would still allow us to go before the voters again in November of 2023 before the tax ends.”

Though the resort tax, under state law, is capped at 3%, the city can also ask voters to approve a change in how the funds are distributed.

Funds from the resort tax now go to three main areas — property tax reduction for taxpayers in the city, repair for streets, storm sewers and sidewalks, and bicycle paths and other park capital improvements. Revenue from the tax is also currently used to pay for the purchase of the Haskill Basin Conservation Easement to protect the city’s drinking water source.

Smith said the city would continue to provide the property tax rebate, and the other general areas that are funded wouldn’t likely change. But the council could consider increasing the amount diverted, for example, to parks and recreation while decreasing the amount that goes to street repairs.

“As long as we stay with the same uses we’d probably have buy-in from voters,” she said.

In fiscal year 2019 alone, the city collected $4.2 million in resort taxes. Of that, $1.1 million went to property tax relief, $1.9 million went to streets, $149,000 went to parks and recreation and $1 million went toward paying for the Haskill Basin conservation easement.

Council member Andy Feury said the tax has been very successful so far, noting he believes the general areas where the funds are spent makes sense, but a higher percentage of funds should be diverted to the parks department.

“The parks need to get more money,” he said. “Parks are a big driver for resort tax collections and they are the hardest to fund.”

Council member Frank Sweeney agreed that the parks deserve more funds.

Of the resort tax, 25% goes to property tax relive, 65% goes to streets, 5% goes to parks and 5% goes to administration.

Other suggestions for areas that could receive funding includes funding to purchase open space and funds for preserving historic buildings.

Council member Steve Quenell pointed out that losing two historic buildings downtown in recent years should be a sign that a solution is needed for ways to preserve those types of buildings.

Columbia Falls voters in June approved a 3% resort tax for their city. The tax is not set to take effect until October 2021 and the funds will be used to pay for emergency services, such as fire and police. Property tax payers there also will receive rebate of the new tax revenue.

The city of Polson is considering a resort tax to help pay for city street improvements.

Whitefish’s resort tax was approved by city voters in 1995 and was implemented in February 1996. In November 2004, voters approved an extension of the tax for an additional 20 years.

In April 2015 voters approved increasing the resort tax rate from 2% to 3% to cover the cost of acquiring the Haskill Basin Conservation Easement. The 1% only provides funds for property tax relief and payment for the easement.

Other cities in the state that have a resort tax, include Red Lodge, Virginia City, West Yellowstone, Big Sky, Cooke City, Craig, Gardiner, St. Regis and Wolf Creek.