6. Senate Bill 213City of Kalispell
Post Office Box 1997 - Kalispell, Montana 59903-1997 -Telephone (406)758-7700 Fax(406)758-7758
REPORT TO: Honorable Mayor and City Council
FROM: Chris A. Kukulski, City Manager
SUBJECT: Support for Senate Bill 213.
MEETING DATE: March 19, 2001
BACK GROUND: Attached is a letter written by Mayor Boharski in support of SB-213. I feel the letter
is very well written and represents the broad opinion of the Council. SB-213 is a local option tax bill that
allows local voters to drastically revise their tax structure. In Kalispell, we see nearly 2.5 million visitors
annually and receive no reimbursement for the services we provide. I remind you and all of our citizens that
SB-213 is enabling legislation, which in order to institute, would have to be approved by the local voters.
A simple motion of approval is all that is necessary to show our support of SB-213. Attached is a draft letter
for your signatures. If approved, I will be meeting with as many local business groups as possible in order
to gain their support for this enabling legislation. Also attached is a copy of a memo from Alec Hansen and
the latest copy of SB-213.
RECOMMENDATION: The City Council pass a motion of support for SB 213.
FISCAL EFFECTS: Unknown at this time. Through a similar tax, Whitefish has successfully reduced City
property taxes by approx. 32% and has invested nearly $5 million in repairing streets and parks.
ALTERNATIVES: As suggested by the Council.
{%Respectfully subbriliitted�,
Chris A. Kukulski
City Manager
Report compiled March 15, 2001
Page 1 of 1
March 14, 2001
Honorable
Dear Legislator,
As someone who served five terms in the Montana State Legislature, I can
appreciate the tremendous amount of mail you folks receive on a regular basis. I
know it is difficult to find time to read all of the correspondence you receive.
However, I would very much appreciate if you would take the time to read this
short message.
It should be obvious to anyone involved in the legislative process that a
statewide sales tax is probably never going to pass either the legislative process or
a general vote in Montana. As you have discovered over your legislative career,
you must sometimes choose to "skin the cat" a different way in order to establish
correct public policy. It is my belief that the onerous burden placed on Montana's
businesses and individual homeowners as a result of our sole dependence on
property taxes is crippling business and forcing hard-working Montanans into the
poorhouse.
As you know, we have attempted through numerous legislative proposals
and one public vote to establish a statewide sales tax. None of these proposals
have succeeded. S.B. 213, while not a perfect piece of legislation, is the best
chance Montanans have had for some period of time for true tax reform. As
drafted it is not what I would consider a perfect piece of legislation, but I believe,
given the nature of the debate, it is the best you'll probably be able to do. The
entire Kalispell City Council is in support of this legislative proposal. We
represent the entire political spectrum from what you would consider liberal to
March 15, 2001
H.B. 213
Page Two
conservative, and all recognize that a proposal of this nature is necessary if we are
to move forward in the interests of our businesses and our homeowners.
At the risk of telling you how to do your job, I would like to remind you that
supporting this piece of legislation merely means that you are supporting enabling
language. No tax will be imposed upon Montana's citizenry without their vote.
None of you, no matter what your political background or philosophy is, should be
afraid of supporting this proposal. Ultimately, it is the voter who will make the
decision whether or not to impose this tax upon themselves, the nature of the tax,
and how it will impact their property taxes.
Please seriously consider this proposal in the form which you are best able to
draft it and the tremendous potential it has for removing the property tax burden on
Montana's citizens. It is certainly worth a try, and I can't imagine that there would
be any negative political repercussions for any of you no matter what your political
background might be.
If I can offer any further information or input on this proposal, please feel
free to contact me at 758-7704 or 756-3217.
With my appreciation and respect,
Mayor William E. Boharski
City of Kalispell
[Fwd: SB 213, amendments]
Subject: [Fwd: SB 213 amendments]
Date: Thu, 15 Mar 2001 14:46:00 -0700
From: Alec Hansen <mlct@mt.net>
Organization: Montana League of Cities and Towns
To: Brentt Ramharter <BRamharter@ci.missoula.mt.us>,
chris kukulski <ckukulski@kalispell.com>, Clark Johnson <cjohnson@bozeman.net>,
dennis taylor <taylord@ci.billings.mt.us>, Janet Stevens <JStevens@ci.missoula.mt.us>,
Jani McCall <jmccall@wtp.net>, John Lawton <jlawton@ci.great-falls.mt.us>,
judy jacobson <chiefexec@co.silverbow.mt.us>, Shelby Mayor <mayor@gec-isp.net>,
tim burton <tburton@ci.helena.mt.us>
ladies and gentlemen:
i am forwarding the latest version of sb-213 -- the local option tax.
the major changes are:
1. all local governments, even large cities and urban counties,
share in the regional distribution
2. 70% of the revenues are earmarked for distribution, but the
effective rate out of the enacting jurisdictions is
25% or less
3. 10% of the money collected must be used to reduce property
taxes
4. there is a mandatory vendor allowance of 5%
5 there is a new section #9 that requires uniformity if a tax
is imposed by a city and county
6 existing resort cities and districts are grandfathered
7. a resort district may not be established in a county that
imposes the tax. --
section 9 was drafted yesterday. the legislative staff has asked me to
circulate the bill to see if any of you have suggestions on how this
could be improved.
the bill, as amended, will go to the senate taxation committee on
tuesday, and should hit the floor later in the week. now is the time to
get your letters of support into your senate delegations.
this is a good bill. it works for the big cities, small towns and
rural counties, and if we can keep it from getting tangled up in the
politics of the sales tax, particularly in the house, we have a shot.
best wishes,
alec
Subject: SB 213 amendments
Date: Thu, 15 Mar 2001 14:23:33 -0700
From: "Heiman, Lee" <lheiman@state.mt.us>
To: "'mlct@mt.net"' <mlct@mt.net>
Please check section 9. Thanks, Lee
<<SB021303.agp.doc>>
1 of2 3/15/01 3:48 PM
Amendments to Senate Bill No. 213
1st Reading Copy
Requested by Senator DePratu
For the Senate Taxation Committee
Prepared by Gregory Petesch / Lee Heiman
March 15, 2001 (3:49PM)
** Version after March 14 Subcommittee meeting. Changes in percentages (70%,
20%, 108), deleting 7 major cities/counties from distribution, and even more
clarification of double taxation provision.
1. Title, lines 10 through 12.
Following: "EFFECT" on line 10
Strike: remainder of line 10 through "TAX" on line 11
Following: "SECTIONS" on line 11
Strike: remainder of line 11 through "7-6-1507," on line 12
Strike: "7-6-1509, 7-6-1531, 7-6-1542,"
Insert: "7-6-1532,"
Following: "7-7-4424,"
Insert: "AND"
2. Title, line 13.
Strike: "16-4-420, AND 20-9-501,"
3. Page 1, line 17 through page 19, line 8.
Strike: everything after the enacting clause
Insert: "NEW SECTION. Section 1. Local option sales tax -- definitions.
As used in [sections 1 through 91, the following definitions apply:
(1) (a) "Luxury goods and services" means any gift item, luxury item, or
other item or any service normally sold to the public and to transient
visitors or tourists, including but not limited to the following:
(i) lodging facilities and campgrounds as defined in 15-65-101;
(ii) meals prepared either for onsite consumption or to take out;
(iii) alcoholic beverages sold by the drink;
(iv) rentals of automobiles, boats, snowmobiles, off -road vehicles, and
other vehicles used for travel or recreation;
(v) rentals of camping, hunting, fishing, or other recreational
equipment;
(vi) ski lift tickets, hunting and fishing guide services, guided tours,
trail rides, and other recreational services and
facilities;
(vii) admissions for movies, theatrical presentations, exhibits, and
sporting events other than school -related events
or nonprofit events;
(viii) daily fees at golf courses that are not owned by a governmental
entity;
(ix) admissions for water slides, amusement parks, or hot springs or
other resorts; and
-
(x) souvenir items.
(b) The term does not include food purchased unprepared or unserved,
medicine, medical supplies and services,
appliances, hardware supplies and tools, or any necessities of life.
(2) "Medical supplies" means items that are sold to be used for
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curative, prosthetic, or medical maintenance purposes, whether or not
prescribed by a physician.
(3) "Medicine" means substances sold for curative or remedial
properties, including both physician -prescribed and
over-the-counter medications."
Insert: "NEW SECTION. Section 2. Local option taxing authority --
specific delegation. As required by 7-1-112, [sections 1 through 9]
specifically delegate to the electors of each respective municipality or
county the power to authorize their municipality or county to impose a local
option sales tax within the county or within the corporate boundary of the
municipality."
Insert: "NEW SECTION. Section 3. Limit on local option sales tax rate -
- luxury goods and services subject to tax. (1) The rate of the local option
sales tax must be established by the election petition or resolution provided
for in 7-6-1504, but the rate may not exceed 4%. The tax rate must be
applied uniformly to all luxury goods and services subject to the tax.
(2) (a) The local option sales tax is a tax on the retail value of all
luxury goods and services sold as provided in the petition or resolution,
except for goods and services sold for resale, within the municipality or
county.
(b) Establishments that sell luxury goods or services, or both, shall
collect the sales tax on luxury goods and services subject to the tax."
Insert: "NEW SECTION. Section 4. Local option sale tax -- election
required -- procedure -- notice. (1) A municipality or county may not impose
or, except as provided in [section 51, amend or repeal a local option sales
tax unless the local option sales tax question has been submitted to the
electorate of the municipality or county and approved by a majority of the
electors voting on the question.
(2) The local option sales tax question may be presented to the
electors of:
(a) a municipality by a petition of the electors, as provided by
7-1-4130 and 7-5-131 through 7-5-137, or by a resolution of the governing
body of the municipality; or
(b) a county by a resolution of the board of county commissioners or by
a petition of electors as provided in 7-1-4130 and 7-5-131 through 7-5-137.
(3) The petition or resolution referring the taxing question must
state:
(a) the luxury goods and services subject to the local option sales tax;
(b) the rate of the local option sales tax;
(c) the duration of the local option sales tax;
(d) the date when the tax becomes effective, which may not be earlier
than 35 days after the election; and
(e) the purposes that may be funded by the local option sales tax
revenue.
(4) Upon receipt of an adequate petition, the governing body may:
(a) call a special election on the local option sales tax question; or
(b) have the local option sales tax question placed on the ballot at
the next regularly scheduled election.
(5) (a) Before the local option sales tax question is submitted to the
electorate of a municipality or county, the governing body of the
municipality or the board of county
commissioners in the county, as applicable, shall publish notice of the goods
and services subject to the local option sales tax in a newspaper that meets
the qualifications of subsection (5)(b). The notice must be published twice,
with at least 6 days separating publications. The first publication must be
no more than 30 days prior to the election and the last no less than 3 days
prior to the election.
2 SB021303.agp
(b) The newspaper must be:
(i) of general, paid circulation with a second-class mailing permit;
(ii) published at least once a week; and
(iii) published in the county where the election will take place.
(6) The question of the imposition of a local option sales tax may not
be placed before the electors more than once in any fiscal year."
Insert: "NEW SECTION. Section S. Local option sales tax administration.
(1) In this section, "governing body" means:
(a) the governing body of a municipality; or
(b) if the local option sales tax has been approved by the electors of
a county, the board of county commissioners.
(2) Not less than 30 days prior to the date that the local option sales
tax becomes effective, the governing body shall enact an administrative
ordinance governing the collection and reporting of the local option sales
tax. This administrative ordinance may be amended at any time as may be
necessary to effectively administer the local option sales tax.
(3) The administrative ordinance must specify:
(a) the times that taxes collected by businesses are to be remitted to
the governing body;
(b) the office, officer, or employee of the governing body responsible
for receiving and accounting for the local option sales tax receipts;
(c) the office, officer, or employee of the governing body responsible
for enforcing the collection of the local option sales tax and the methods
and procedures to be used in enforcing the collection of local option sales
taxes due; and
(d) the penalties for failure to report local option sales taxes due,
failure to remit taxes due, and violations of the
administrative ordinance. The penalties may include:
(i) criminal penalties not to exceed a fine of $1,000 or 6 months'
imprisonment, or both;
(ii) civil penalties if the governing body prevails in a suit for the
collection of local option sales taxes, not to
exceed 50% of the taxes found due plus the costs and attorney fees incurred
by the governing body in the action;
(iii) revocation of a county or municipal business license held by the
offender; and
(iv) any other penalties that may be applicable for violation of an
ordinance.
(4) The administrative ordinance may include:
(a) further clarification and specificity in the categories of luxury
goods and services that are subject to the local option sales tax consistent
with [section 3];
(b) authorization for business administration and prepayment discounts.
The discount authorization must allow each
vendor and commercial establishment to withhold 5% of the local option sales
tax collected to defray its costs for the administration of the tax
collection.
(c) other administrative details necessary for the efficient and
effective administration of the tax."
Insert: "NEW SECTION. Section 6. Use of local option sales tax revenue
-- bond issue -- pledge. (1) Unless otherwise restricted by the
voter -approved tax authorization provided for in [section 4], a municipality
or county may appropriate and expend revenues derived from a local option
sales tax for any
activity, undertaking, or administrative service that the municipality or
county is authorized by law to perform, including
costs resulting from the imposition of the tax.
3 SB021303.agp
(2) A municipality or county may issue bonds to provide, install, or
construct any of the public facilities, improvements, or undertakings
authorized under 7-7-4101, 7-7-4404, and 7-12-4102. Bonds issued under this
section must be authorized by a resolution of the governing body, stating the
terms, conditions, and covenants of the municipality or county that the
governing body considers appropriate. The bonds may be sold at a discount at
a public or private sale.
(3) A municipality or county may pledge for repayment of bonds issued
under this section the revenue derived from a local option sales tax, special
assessments levied for and revenue collected from the facilities,
improvements, or undertakings for which the bonds are issued, and any other
source of revenue
authorized by the legislature to be imposed or collected by the municipality
or county. The bonds do not constitute debt for purposes of any statutory
debt limitation, provided that in the resolution authorizing the issuance of
the bonds, the municipality or county determines that the local option sales
tax revenue, special assessments levied for and revenue from the facilities,
improvements, or undertakings, or other sources of revenue, if any, pledged
to the payment of the bonds will be sufficient in each year to pay the
principal and interest of the bonds when due. Bonds may not be issued
pledging proceeds of the local option sales tax for repayment unless the
municipality or county in the resolution authorizing issuance of the bonds
determines that in any fiscal year the annual revenue expected to be derived
from the local option sales tax will pay the amount of the principal and
interest payable on the bonds and any other outstanding bonds payable from
the local option sales tax except any bonds to be refunded upon the issuance
of the proposed bonds even if the county in which a municipality is located
or other municipalities within a county enact a local option sales tax."
"NEW SECTION. Section 7. Local option sales tax -- property tax
relief. At least 10% of the annually anticipated receipts from the local
option sales tax received by a municipality or by a county must be applied to
reduce the municipal or county property taxes."
Insert: "NEW SECTION. Section 8.- Distribution of local option sales tax
proceeds. (1)(a) Local option sales tax revenue must be must be allocated as
follows:
(i) 70% must be allocated to the entity imposing the tax;
(ii) 20% must be allocated to the region in which the entity imposing
the tax is located; and
(iii) 10% must be allocated to the subregion in which the entity
imposing the tax is located.
(b) Local option sales tax revenue received by region or subregion
must be distributed, at least quarterly, to the eligible municipalities and
counties and within the region or subregion on a per capita basis. For
purposes of distributing the revenue, individuals residing within a
municipality are not considered county residents.
(2) A local option sales tax imposed by the county must be levied
countywide. Unless otherwise provided by agreement with municipalities, the
county shall, at least quarterly, distribute local option sales tax revenue
to the municipalities in the following manner:
(a) 50% of the amount of local option sales tax revenue retained by the
county must be distributed based on population by calculating the ratio of
the population of each municipality in the county to the population of the
county as derived from the most recent estimates by the U.S. bureau of the
census or, if estimates are not available, derived from the most recent
federal
decennial census; and
(b) the remaining 50% of the amount retained by the county is
4 SB021303.agp
distributed based on the point of origin of the local option sales tax
revenue.
(3) For purposes of revenue distribution under this section, a resort
community, resort area, or resort area district that has imposed a tax
pursuant to Title7, chapter 6, part 15 must be excluded from the revenue
distribution and population calculations.
(4) For the purposes of this section:
(a) Region 1 consists of the following subregions:
(i) Flathead and Lincoln Counties; and
(ii) Granite, Lake, Mineral, Missoula, Ravalli, and Sanders Counties.
(b) Region 2 consists of the following subregions:
(i) Broadwater, Jefferson, Lewis and Clark, and Meagher Counties;
(ii) Beaverhead, Deer Lodge, Powell, and Silver Bow Counties; and
(iii) Gallatin, Madison, and Park Counties.
(c) Region 3 consists of the following subregions:
(i) Cascade, Chouteau, Fergus, Glacier, Judith Basin, Pondera, Teton,
and Toole Counties; and
(ii) Blaine, Hill, Liberty, and Phillips Counties.
(d) Region 4 consists of the following subregions:
(i) Big Horn, Carbon, Golden Valley, Musselshell, Petroleum, Rosebud,
Stillwater, Sweet Grass, Treasure, Wheatland, and Yellowstone Counties;
(ii) Daniels, Garfield, McCone, Roosevelt, Sheridan, and Valley
Counties; and
(iii) Carter, Custer, Dawson, Fallon, Powder River, Prairie, Richland,
and Wibaux Counties."
"NEW SECTION. Section 9. Double taxation prohibited. (1) Except as
provided in subsection (2), a local option sales tax may not be imposed on
the same goods or services by more than one local government, including a
resort community, resort area, or resort area district imposing a tax under
Title 7, chapter 6, part 15.
(2) (a) If both a county and municipality adopt a local option sales tax
the combined rate may not exceed 4%. The second entity to adopt the tax is
limited to imposing a tax rate that is equal to or less than the difference
between the amount of the existing rate and 4%. If a county has adopted.a 48
sales tax no municipality within the county may adopt a local option sales
tax.
(b) A county or a municipality that adopts a local option sales tax in
an area where a local option sales tax has already been adopted is limited to
taxing the same goods and services as are taxed by the first entity to adopt
a local option sales tax.
(c) To coordinate two local option taxes imposed within the same area,
the rate of the local option tax, the goods and services to be taxed, the
duration of the tax, if any, and restrictions on the use of tax revenue may
be changed by submitting the question to the electorate of the local
government that has an existing local option tax. The ballot question may be
submitted contingent upon adoption of a local option tax by another entity.
The governing bodies of the municipality and county may, by agreement,
establish common administrative procedures for the administration and
collection of the tax.
(3) A county local option sales tax may not be imposed in an existing
resort community, resort area, or resort area district.
Insert: "Section 10. Section 7-6-1508 , MCA, is amended to read:
117-6-1508. Establishment of a resort area -- taxing authority --
approval by electorate. (1)(a) sae Subject to subsection (1)(b), the
establishment of a resort area for the purpose of imposing a resort tax may
be initiated by a written petition to the board of county commissioners of
the county in which the area is located. The petition must contain a
5 SB021303.agp
description of the proposed resort area and must be signed by at least 15% of
the electors residing in the proposed area.
(b) A resort area may not be created in a county that has imposed a
local option sales tax as provided in [sections 1 through 91.
(2) The petition must include a proposal to impose a resort tax within
the proposed resort area, including the rate, duration, effective date, and
purpose of the tax as provided in 7-6-1504.
(3) Upon receiving a petition to establish a resort area, the board of
county commissioners shall present the question to the electors residing in
the proposed resort area as provided in 7-6-1504."
(Internal References to 7-6-1508:
7-6-1501* 7-6-1501 7-6-1504 - 7-6-1531
7-6-1531 7-6-1533 7-7-4424*)"
Insert: "Section 11. Section 7-6-1532 , MCA, is amended to read:
117-6-1532. Resort area district authorized. (1) Eleel`-r5 Except as
provided in subsection (2), the electors residing within the boundaries of a
resort area may create a resort area district by proceeding under the
provisions of 7-6-1531 through 7-6-1550.
(2) A resort area district may not be created in a county if the
county has imposed a local option sales tax as provided in [sections 1
through 9]."
(Internal References to 7-6-1532:
7-6-1531* 7-6-1531* 7-6-1532* 7-6-1535*
7-6-1536* 7-6-1537* 7-6-1538* 7-6-1541*
7-6-1541* 7-6-1542* 7-6-1549*)"
"Section 12. Section 7-7-4424 , MCA, is amended to read:
117-7-4424. Undertakings to be self-supporting. (1) The governing body
of a municipality issuing bonds pursuant to this part shall prescribe and
collect reasonable rates, fees, or charges for the services, facilities, and
commodities of the undertaking and shall revise the rates, fees, or charges
from time to time whenever necessary so that the undertaking is and remains
self-supporting. The property taxes specifically authorized to be levied for
the general purpose served by an undertaking, eir resort taxes approved,
levied, and appropriated to an undertaking in compliance with 7-6-1501
through 7-6-1509 and local option sales taxes approved, levied, and
appropriated to an undertaking in compliance with [sections 1 through 9]
constitute revenue of the undertaking and may not result in an undertaking
being considered not self-supporting.
(2) The rates, fees, or charges prescribed, along with any
appropriated property or resort tax collections, must produce revenue at
least sufficient to:
(a) pay when due all bonds and interest on the bonds, the payment of
which the revenue has been pledged, charged, or otherwise encumbered,
including reserves for the bonds; and
(b) provide for all expenses of operation and maintenance of the
undertaking, including reserves."
(Internal References to 7-7-4424:
7-7-4428 )
Insert: "Section 13. Section 7-7-4428 , MCA, is amended to read:
117-7-4428. Covenants in resolution authorizing issuance of bonds. Any
resolution or resolutions authorizing the issuance of bonds under this part
may contain covenants as to:
(1) the purpose or purposes to which the proceeds of sale of the bonds
may be applied and the disposition of the proceeds;
(2) the use and disposition of the revenue of the undertaking for
which the bonds are to be issued, including the creation and maintenance of
reserves and including the pledge or appropriation of all or a portion of the
6 SB021303.agp
property and resort tax revenue referred to in 7-7-4424 or local option sales
tax revenue referred to in [section 6];
(3) the transfer, from the general fund of the municipality to the
account or accounts of the undertaking, of an amount equal to the cost of
furnishing the municipality or any of its departments, boards, or agencies
with the services, facilities, or commodities of the undertaking;
(4) the issuance of other or additional bonds payable from the revenue
of the undertaking;
(5) the operation and maintenance of the undertaking;
(6) the insurance to be carried on the undertaking and the use and
disposition of insurance money;
(7) books of account and the inspection and audit of the books; and
(8) the terms and conditions upon which the holders or trustees of the
bonds or any proportion of the bonds are entitled to the appointment of a
receiver by the district court having jurisdiction. The receiver may:
(a) enter and take possession of the undertaking;
(b) operate and maintain the undertaking;
(c) prescribe rates, fees, or charges, subject to the approval of the
public service commission; and
(d) collect, receive, and apply all revenue thereafter arising from
the undertaking in the same manner as the municipality itself might do."
{Internal References to 7-7-4428: None.]"
Insert: "NEW SECTION. Section 14. (standardâ–º Codification instruction.
[Sections 1 through 9] are intended to be codified as an integral part of
Title 7, chapter 6, and the provisions of Title 7, chapter 6, apply to
[sections 1 through 9]."
Insert: "NEW SECTION. Section 15. (standard} Saving clause. [This act]
does not affect rights and duties that matured, penalties that were incurred,
or proceedings that were begun before [the effective date of this act]."
Insert: "NEW SECTION. Section 16. (standard) Effective date. [This act]
is effective on passage and approval."
- END -
7 SB021303.agp