Livingston grew up as a railroad town, and the tracks running east and west past the iconic brick train depot not only are a sign of the community’s roots but also one of its biggest infrastructure challenges going forward.

There’s just one underpass to move vehicle traffic from one side of town to the other. All the other rail crossings are at grade, something that can cause headaches with about 23 trains passing through a day, and plans for that number to reach the low 30s.

That’s before you factor in the potential for thousands of additional residential lots on the northwest side of town, across the tracks from downtown businesses, a grocery store and other services.

“That really puts a bottleneck on our one underpass,” said Shannon Holmes, the town’s public works director.

When asked about the No. 1 item in the community's strategic plan, Holmes can respond quickly: building another way to cross the tracks. What’s harder for Holmes to answer is how Livingston will pay for the project.

Livingston officials asked the Legislature this year for the chance to levy a narrowly crafted gateway local option tax to help fund proposals like the crossing. But this session, as in years past, bills to open the door for that opportunity were quashed before gaining much traction.

As often happens when the Legislature works through its 90-day session, the larger debate about bonding and the role it plays in big state building projects draws all the attention when it’s time to talk infrastructure.

That forces local needs out of the discussion, said Darryl James, the executive director of the Montana Infrastructure Coalition.

“Local government needs additional tools and the Legislature continues to deny those tools,” James said during a hearing on this session’s major $80 million infrastructure bonding proposal.

James is talking about proposals like a variety of local option and gateway local option taxes, which would allow communities to vote to leverage a small tax on some goods, and put the money toward local infrastructure projects, property tax relief and services.

Montana does allow for a resort tax, now capped at 3 percent. But it’s only for communities with populations below 5,500 for incorporated towns and 2,500 for unincorporated areas.

Local option tax bills brought in 2017 died in standing committees. Those were the first efforts since 2009, when a bill was defeated in the Senate.

The Legislature doesn’t entirely turn a blind eye to local infrastructure. There are community-level projects in the bonding bill, and some types of local water, wastewater and similar projects get funded every year through a series of bills that distribute money from things like the Treasure State Endowment Program.

But that’s not nearly enough to address a massive backlog of local communities’ needs, James said.

“Not every community meets criteria to be eligible for those grants, and they’re only for certain types of projects, and the funding is capped,” James said. “They’re not a silver bullet for the critical infrastructure needs we’ve identified.”

A report produced for the coalition in 2016 found Montana's local communities had immediate need for waste and wastewater repairs totaling $1.5 billion, and that replacement costs would reach $12 billion to $15 billion.

This session, legislators in the House Taxation committee defeated several bills related to local option taxes. Concerns over businesses complying with tax collections, questions of how communities spend the money they already have, and other long-standing issues convinced enough lawmakers to vote against the legislation.

Though those on both sides of the issue, however, acknowledge there’s a need to sit down and hash out a solution for communities pleading with the Legislature session after session for ways to get more infrastructure funding.

One of the bills voted down was from Rep. Laurie Bishop, a Democrat from Livingston, to let communities vote on implementing a gateway local option tax. Voters would have defined the area to be taxed, with a big chunk of the revenue generated going to property tax relief. The rest could have paid for things like another railroad crossing.

The depot in Livingston used to be the hub for travel on Northern Pacific Railroad's line into Yellowstone National Park, taking passengers down to Gardiner. While tourists still use Livingston as the jumping-off point for adventures to the park and bordering towns, Gardiner and Livingston have dramatically different options when it comes to capturing spending from those visitors.

That’s because Gardiner fits the definition of towns that can levy a resort tax, with a population of below 5,500 for an incorporated town, or 2,500 for an unincorporated area, and with a major portion of the economy based on tourism.

Since 2014, unincorporated Gardiner, with about 800 year-round residents, has levied a 3 percent resort tax that's generated $2.7 million to date. That money has paid for a dozen projects, including an $80,000 water main replacement.

The state "already consider(s) it a valuable tool,” Bishop said of the resort tax, “but you’ve limited who you offer it to. … I don’t know what the barrier is to opening it up to the needs of other communities.”

The Senate this session has already passed a bill that would allow communities to levy an additional resort tax of up to 1 percent. That’s Senate Bill 241, carried by Sen. Jeff Welborn, a Republican from Dillon.

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Senate President Scott Sales, a Bozeman Republican, voted for Welborn's bill when it cleared the Senate. It's a narrow-enough proposal, Sales said, because it's project-specific and expires when work is paid for.

“For me that’s a big difference than just another 1 percent they can basically do as they please,” Sales said. 

Another bill already defeated this session would have allowed for a local option luxury tax to pay for critical infrastructure projects in communities all around Montana. House Bill 195 was carried by Rep. David Fern, a Democrat from Whitefish. Fern has said he’s seen the resort tax benefit his community and believes others should have the same option.

That bill drew support from cities around the state, like Billings and Missoula. Billings Mayor Bill Cole traveled to Helena to testify on the bill and said his community is facing pressures from many directions.

“We see significant costs from … visitors and we don’t see any immediate and direct measurable tax revenue from those visitors,” Cole said. “Every year there’s less and less brick and less and less mortar to tax relative to the increasing demands on local government.”

Sales said he supports giving the tax option to small communities that have a huge influx of seasonal population, where the local year-round tax base is small and there's out-of-state money to leverage. But for him, the idea doesn't scale up.

“People like myself … where we live on the outside of a larger community where our people shop, they’re not going to get any benefit (from a local option tax) but they’re going to have to pay the tax,” Sales said. “Ii think it creates a real unfair system for a good portion of our population and I haven’t ever bought into it.”

Tim Burton, with the Montana League of Cities and Towns, told the committee the conversation is part of an overall struggle the Legislature faces over Montana’s tax structure.

Debate over how the state collects revenue and the idea of a statewide sales tax has simmered over the years. This session it's nearing a boiling point. In 2017 a special legislative committee was directed to look at the state’s changing economy and how it relates to Montana’s tax structure. But the committee only met a few times and did not bring forward any recommendations.

There are increasing calls to seriously look at the issue this session, with one piece of a package of infrastructure bills calling for a tax modernization study.

That bill is part of a trio representing a dramatic revamp of how Montana goes about bonding to build big infrastructure projects. This session lawmakers are creating a framework that establishes how much debt the state can take. That's an attempt to get past the spats over taking on debt in past years that have killed a comprehensive bonding package since 2011.

Bishop said there’s also bipartisan interest in working after this session ends to figure out a way to get past the disagreements on local infrastructure issues.

“If there’s one tiny little glimmer of hope that came out of this, it was putting pressure on highlighting we need to do something,” Bishop said. “We can’t talk about how the tax structure works for Montana and only look at state government and how it gets funded. We have to consider local government as well.”

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