Bozeman will again lobby for a local option sales tax in the upcoming state legislature session, billing it as a potential tool for property tax relief.

Representatives from Bozeman have lobbied for the measure during previous legislative sessions to no avail. But growing “property tax fatigue,” in the words of city commissioner Terry Cunningham, has pushed the issue to the forefront for Bozeman officials ahead of the 2021 legislative session.

“For us to lean so heavily on property tax … that really puts perhaps an undue burden on people who own property relative to other folks in our community who enjoy the benefit but don’t pay into it,” city manager Jeff Mihelich said during a recent city commission meeting.

Though the form a local option sales tax could take is not yet clear, Bozeman officials said they would want to tailor it to provide relief from existing taxes. One path could target a big part of the economy: tourism.

Because Bozeman is not able to levy a sales tax, tourists come into town using taxpayer-funded roads, stay at hotels or motels whose water and sewer systems rely on city infrastructure, and sometimes even use police or fire services, without a portion of their spending directed back to the city.

“It’s like we throw a party twice a year and people come from all over the planet and enjoy our city, and we enjoy them being here, but we end up paying the bill,” said Rep. Chris Pope, D-Bozeman, who is running for state Senate and introduced a local option tax bill during the 2019 Legislature. The bill was tabled in committee.

Mihelich said one option is to tax hotel bookings, rental car services or even airline tickets.

Several smaller towns in Montana have used a similarly focused local sales tax for decades. Under Montana law, a resort tax on luxury items is an option for towns under 5,500 people whose economies rely on tourism. The sales taxes are used by West Yellowstone, Whitefish and Big Sky, among other places, but aren’t available to larger cities.

Pope said pushing for expanding that statute to include larger cities is one option they could pursue, but past conversations on it haven’t garnered much traction. Tim Burton, executive director of the Montana League of Cities and Towns, said they could still look to the resort tax as an example of how local option taxes could work.

“It seems to me that it has worked for decades in the resort community, and why don’t we take lessons learned from that?” Burton said.

Any proposal that could get to a vote isn’t hammered out yet, but Pope — who said he plans to introduce a bill on the matter if elected — said he would want to make sure a tax didn’t burden low-income Bozeman residents by having it focus on luxury items, steering clear of any essentials like groceries.

Bids for a local option sales tax have found little favor in past legislative sessions. Burton said this year, he thinks an emphasis on the state’s infrastructure deficiencies could help supporters of the tax make their case.

After Mihelich said state legislators recently told city officials they might need to get more creative with their proposals this session, the city is hoping they can reframe the issue to try to get more lawmakers on board. They could be more specific about where the sales tax revenue could go, Mihelich said, potentially earmarking portions for affordable housing or infrastructure projects.

Mihelich said in general, he would recommend sales tax revenue be used for one-time expenses, like an infrastructure project, rather than ongoing expenses in order to insulate their budget from tax revenue fluctuations that could result from economic downturns.

Cunningham proposed advocating for a portion of the local sales taxes to go towards a rural revenue fund, which would be available to rural towns statewide to apply for funds to help with infrastructure.

The idea, Cunningham said, is that since residents of rural areas have to travel into larger towns or cities for shopping, they might be “considered tourists in that city.” A rural revenue fund could make the sales tax more equitable, Cunningham said.

If a local sales tax proposal made its way through the legislature, it would likely just give cities the option to have residents vote on whether to install a tax. Commissioner I-Ho Pomeroy, who owns a restaurant in Bozeman, said she would support it as a business owner, and hopes people would recognize they need to have another taxing tool.

“We cannot (continue to) just raise, raise, raise property taxes,” Pomeroy said.

Mayor Cyndy Andrus said it would be essential to make sure a local sales tax proposal would help offset other existing taxes.

“Our main focus is trying to find some relief for the residents who live here,” Andrus said. “It would help offset other taxes that we pay … there would need to be some type of offset so we’re not just piling on additional taxes.”

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