West Yellowstone has stopped allowing new water and sewer hookups, stalling development and limiting the town’s ability to accommodate the thousands of visitors it welcomes each year.

To expand water and sewer capacity and to complete a backlog of other infrastructure projects, West Yellowstone will ask voters in November to approve a 1% increase to the town’s local option sales tax.

The revenue from the 1% increase would pay for a wastewater treatment facility, water storage tanks, new water and sewer lines and reconstruction of streets and sidewalks, said town manager Dan Sabolsky. The proposed tax hike would generate about $1.2 million annually and would be used to back a $28 million bond. The tax would expire after the bond is repaid in 20 years.

“These projects are serious problems we have right now,” Sabolsky said. “Our 1,300 residents have to figure out a way to pay for these projects, but how can you ask them to pay $28 million? We have to have our visitors pitch in.”

If voters approve the sales tax increase, West Yellowstone would complete the infrastructure projects in five years, meeting the town’s needs and anticipated expansion over the next couple of decades.

“Without these projects, we cannot grow,” said Mayor Brad Schmier. “We will be stagnant.”

West Yellowstone is able to ask voters for the sales tax increase because of a law Gov. Steve Bullock signed this spring. The new law allows the state’s 10 resort areas to ask voters for a 1% sales tax increase specifically for infrastructure projects. Sabolsky, along with other Gallatin County officials, advocated for the law during the legislative session because they said it could help resort areas manage their high levels of tourist traffic.

“We look at Bozeman and see how it has similar infrastructure issues but doesn’t have much of a way to fund them besides raising property taxes and overburdening residents,” Sabolsky said. “The Legislature has given us a tool that allows us to address our needs, and I hope the voters see that opportunity too.”

Gallatin County’s other resort area — Big Sky — doesn’t plan to ask voters for a 1% sales tax increase, said Daniel Bierschwale, district manager for the Big Sky resort tax. Big Sky is focused on surveying residents to understand the town’s needs for the next 10 to 15 years but might place the tax hike on the ballot in the future to pay for some of those needs.

The option for resort areas to increase their local sales tax is one of the few tax-related bills that passed the Legislature this year. Several Bozeman lawmakers tried to expand options for cities to create sales taxes because they said a sales tax would help address infrastructure needs that come with the rapid growth in the Gallatin Valley.

West Yellowstone’s November ballot will also include a question asking voters whether they would like to renew the town’s existing 3% local option sales tax. By law, the state’s resort areas can levy a sales tax on luxury items, but voters must approve it every 20 years. Although West Yellowstone’s tax doesn’t expire until 2025, the town would like to secure the renewal now to ensure it remains in place at least as long as the 1% tax increase.

West Yellowstone relies on the revenue from the 3% sales tax to pay for everything from law enforcement to road maintenance.

“It is critical to our operations,” Schmier said.

Perrin Stein can be reached at 406-582-2648 or at pstein@dailychronicle.com. Follow her on Twitter @PerrinStein.

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