Backers of local option tax pin hopes on 2015 Legislature

tax

Ed Kemmick/Last Best News

Shoppers stream out of the Wal-Mart store in the Heights. Billings city officials have long said that a local option tax would allow the city to obtain some tax revenue from the people who come here to shop, among other things.

It’s awfully early in the 2015 Montana legislative session to be optimistic about anything, but Jani McCall thinks this might just be the year lawmakers finally authorize cities and towns to pursue local sales taxes.

“I think it’s going to be a tough haul,” McCall said, “but I think if there was ever an opportunity to do it, this will be the session to do it.”

McCall is a member of the Billings City Council and current president of the Montana League of Cities and Towns. Before she was elected to the City Council for her first term in 2007, she lobbied the Legislature on behalf of the city, among other clients.

The city had supported local option tax bills before she started lobbying in 2001, McCall said, and it kept plugging away every two years, until 2011. That year, Alec Hansen, then-director of the league of cities and towns, said there was so little interest in the idea that it should be shelved temporarily.

“So we put it to bed for a while, just to let it rest,” McCall said.

This year, cities and towns are ready to tackle the issue again. At the annual league conference in October, member cities voted unanimously to have the league sponsor a local option bill and to push for its passage.

The reason for McCall’s optimism this session is that some cities and towns in Eastern Montana are looking at a local option tax as a way of providing much-needed revenue to deal with the impacts of rapid development in the Bakken oil field.

In the past, she said, opponents and supporters of the tax were divided less by party affiliation than by whether they represented rural or urban interests. Most of the major cities wanted local sales tax authority, and most of the rural areas were opposed. Support from Eastern Montana cities and towns could bridge that split, she said.

“I do think it could be a game-changer,” McCall said.

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As in past sessions, the legislation would not give local governments the power to impose a sales tax on certain goods and services. It would only allow governing bodies to put the question of a local sales tax before municipal voters. For that reason, Dave Nielsen, the lobbyist for the league of cities and towns, doesn’t even like to call it a local option tax.

“We’ve been calling it local option authority because it’s not a tax,” he said.

When such taxing authority was first proposed, and for several subsequent legislative sessions, the bills sought merely to expand to all cities the concept of the state’s resort tax, which allows cities of fewer than 5,500 people and which rely heavily on tourism to seek voter approval of sales tax on “luxury” goods and services. The law governing resort taxes also stipulates how the proceeds of such taxes could be spent.

The idea of expanding the resort tax was abandoned years ago, McCall said, and cities began pushing for local option authority that would allow them—and their voters—to decide what to tax and how to spend the revenue.

“It’s kind of neat because a city or town could craft it to fit whatever their needs are,” Nielsen said. Some Western Montana cities would like to use a local sales tax to reduce property taxes, he said, but “eastern cities said, ‘We need services. We don’t need property tax relief.’”

McCall

Jani McCall

The league came up with a six-page bill draft, which was requested by Sen. Cliff Larsen, D-Missoula, and it is now seeking sponsors to introduce it in the House.

“We’re still kind of working on the bill,” McCall said, “but we’re going to have definitive sponsors by the end of the week, which is very good news.”

The bill draft says a local sales tax could not exceed 4 percent and revenues could be spent on anything “approved by the voters … including property tax offset.” Such a tax could be placed on a local ballot by the governing body of the local municipality or by a petition from at least 5 percent of the local registered voters.

The Billings City Council voted to support the bill but to allow the league to play a lead role in lobbying for it.

“The league would take the lead and the rest of us would fall in in support,” said Ed Bartlett, who is lobbying for the city of Billings again, his fourth session in that role.

Representatives of the major cities have long argued that they need local option taxing authority because they rely almost exclusively on property taxes. In Billings, city officials said that it was only fair to have visitors to Billings pay something toward said maintaining city services.

Tens of thousands of tourists pass through Billings every year, and tens of thousands of Montanans from outside Billings come here for shopping, entertainment and medical services. Some City Council members used to refer to the local option tax half-jokingly as “the Wal-Mart tax,” considering how many non-city residents shopped at the city’s two Wal-Mart stores.

But legislators who represented those outlying areas said they shouldn’t have to pay a local sales tax for the privilege of spending money in Billings. As a result, some of the earlier local option bills included complex formulas for returning a portion of tax revenues to the counties surrounding any of the major cities that would have adopted such a tax. That provision, too, has been omitted from the current bill draft.

The closest supporters ever came to passing a local option tax bill was in 2001. Sen. Bill Glaser, R-Huntley, had introduced the bill, SB 213, and it passed the Senate on second reading by a vote of 24-23. Then, on third reading, Sen. Mike Sprague, R-Billings, voted against it, on a 24-25 vote. It then missed the deadline for transmittal and was never taken up by the House.

McCall said Sprague changed his vote because the city successfully fought one of his bills, which would have changed the rules governing petitions seeking a referendum on local ordinances.

Now, 14 years later, McCall is pinning her hopes on the support of those Eastern Montana cities that would like to have local option taxing authority. Nielsen, the league of cities and towns lobbyist, said a local option tax would complement Gov. Steve Bullock’s “Build Montana” bill, which would steer millions of dollars to Bakken-affected communities for infrastructure improvements.

That bill would be for capital improvements only, Nielsen said, while a local option tax could pay for continuing operational costs of things like water and sewer plants.

“The potential goes hand in hand with any infrastructure bills the Legislature might approve,” he said.

McCall was also encouraged by pre-session remarks made by House Speaker Austin Knudsen, R-Culbertson. The GOP generally is opposed to any sort of tax increase or new tax, she said, but Knudsen said the party had not made a decision to oppose a local option tax this session.

That’s hardly a ringing endorsement, but it’s a start. Bartlett, the city lobbyist, was not prepared to say what he thought the chances were of passing a local option tax bill this year.

“If you ask me that again in about two weeks, I can give you a better answer,” he said. “We’re going to try very hard, but I can’t make a prediction now.”