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In a push to have tourists chip in for the upkeep of the towns they visit, Montana lawmakers once again have a bill before them that would give local governments the chance to create a luxury tax.

Bozeman leaders hold up the idea as one way to offer property owners some relief as the price to live in the city climbs.

House Bill 195 would allow municipalities to impose an up to 2 percent tax on certain goods and services. That money would help pay for “critical” infrastructure needs. It targets businesses travelers are likely to use like restaurants and hotels.

During a House Taxation Committee hearing Wednesday, bill sponsor Rep. Dave Fern, D-Whitefish, said Montana’s traditional ways to fund infrastructure haven’t kept up with the need.

“Local governments are handcuffed,” Fern said.

There’s a backlog of projects in Montana. In a recent American Society of Civil Engineers report, Montana received a C grade for its mediocre infrastructure. The last two legislative sessions, lawmakers weren’t able to agree on how to pay for major construction projects.

Fern said cities, towns and counties largely rely on property taxes to pay for infrastructure projects. Under his bill, voters would have to approve a local sales tax before one is enacted in their town. It would also come with a sunset. Fern said while there’s some flexibility for local governments to define what counts as a luxury, items like groceries and medicine aren’t on the list.

He said at least 25 percent of the revenue from the tax would have to return to property owners through a rebate.

Aimee Grmoljez, lobbyist for the city of Bozeman, spoke in support of the bill. She told the committee tourism is a top industry in Montana and the city has serious needs that get pushed on people who live in town.

“Ironically, most of us say we’re for local control and yet when it comes to this bill, we oftentimes hear there should be a more broad-based state approach,” she said.

She said the city of Bozeman supports both types of discussions.

Tim Burton, executive director of the Montana League of Cities and Towns — of which Bozeman is a member — said local officials also go to voters for ways to pay for projects that accumulate city debt.

“It’s clear that the status quo of 20, 30 years is not working,” Burton said. “If not this tool, then what tool do we propose to fix this problem?”

Representatives from Billings, Missoula and groups like infrastructure coalitions also stood behind the bill.

Opponents said a local sales tax could hurt rural residents who become tourists in their own state as they make supply runs to larger neighbors. Others said a local tax could create winners and losers in businesses based on location.

Brad Griffin, president of the Montana Retail Association, said the bill could also hurt businesses competing with online retailers left out of a local tax. He was one of the voices that advocated for a statewide sales tax to spread the impact across business throughout Montana.

“I believe we are reaching a tipping point where, in a weird way, a statewide sales tax just might help save main street retailers,” Griffin said.

Throughout the hearing, Fern said the 10 towns in Montana that are small enough to opt for resort taxes prove a local option can work.

Bozeman’s Republican Rep. Kerry White pointed out that the bill would require fewer tax district voters to sign a petition to propose the district than it would to try to dissolve one.

Fern said he’s willing to consider changes and hopes Wednesday’s hearing is the beginning of that process.

The committee did not immediately vote on Fern’s proposal.

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Katheryn Houghton can be reached at or at 582-2628. Follow her on Twitter @K_Hought.

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