Missoula Wants a Chance to Tap Its Visitors With a Tax

By Robert Struckman, 11-18-08

	Caption: Missoula Mayor John Engen

Rising costs and slower growth mean a municipal budget that’s tighter than ever at Missoula’s City Hall.

Missoula Mayor John Engen has asked department heads to cut costs, and he has planned with Alec Hansen of the Montana League of Cities and Towns to lobby for a local option sales tax at the upcoming legislative session in Helena.

“We’re going to come back with the same thing we’ve promoted for years and years, which is the local option tourist tax,” Hansen said.

The bill has been rejected in part because legislators from the rural reaches of eastern Montana—which have been struggling financially for years, even as growth in the western part of the state has kept some cash coming—because such a measure would benefit only the places most visited by tourists. Also, rural Montanans feel they would be unfairly shouldering the tax, because they come to towns like Billings and Missoula to shop, often dining and spending the night in a motel. Those are just the sort of activities the tax would target.

The local option tourist tax, as Hansen calls it, would be, at most, a 4 percent levy on hotels, motels bars and restaurants. If it were to be approved by the Montana Legislature, it would then have to be approved by a city’s voters and be renewed every 10 years.

A significant portion of tax revenues would be shared with other local governments through a regional or statewide distribution formula, Hansen said. At least 30 percent of the proceeds would have to be used to lower local property taxes.

Here’s how it might work out if Missoula enacted a 2 percent tax along these lines. Lodging, eateries and bars in town generated about $180 million in sales in 2002, according to the census. A 2 percent tax on those, as well as select other luxury item sales, would generate about $4.3 million. Missoula’s general fund budget is just short of $39 million this year.

The local option sales tax would not cure all Missoula’s budgetary ills, but it would give the town added revenues from an untapped source—its visitors.

In the past, Hansen and others have also asked the Montana Legislature to undo a law passed a decade ago which limits the state’s money for cities by one-half of the rate of inflation, which some legislators and city council members have likened to a slowly tightening noose.

This year, Hansen doesn’t plan to even ask.

“If you go in there and start asking for money, you have to get in line,” he said. “We need to solve our own problems. We’re not asking for a nickel. It’s worth a shot.”