Manchester afloat despite tough economy
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By PATRICK McARDLE STAFF WRITER - Published: November 20, 2009
MANCHESTER — While the town collected less in local option taxes on retail sales for the quarter that ended this month than in 2008, it is still on track to meet its own expectations and revenue is off less than state projections.
For the most recent quarter, the town will receive about $182,300 in local option tax revenue on retail sales. During the same quarter in 2008, the town received about $188,700.
The difference between the exact figures in both years is about $6,400, a decrease of about 3.3 percent.
Town Manager John O'Keefe said the town's budget for the fiscal year projected $675,000 from the local option tax on retail sales. To reach that goal, the town would need to collect $167,000 in the fourth quarter, which is traditionally strongest due to holiday sales and visitors who come to the area to ski.
That doesn't seem unlikely after the town received about $192,000 for the second quarter.
O'Keefe said the state was projecting a decline of about 4 .4 percent in local option tax revenues, but Manchester has beaten those expectations by dropping about 1 percent less than that in the recent quarter and collecting almost 10 percent more in local option taxes for the quarter ending in August than it had in 2008.
Local option taxes are the only taxes that Vermont municipalities may impose other than property taxes. They are available only to towns that are considered "gold towns" or "sending towns" because they send more money to Montpelier for education funding than they get back to support their local schools.
The taxes add 1 percent to retail sales; meals and alcohol; hotel and motel rooms; or a combination of the three categories.
Manchester was the first town to impose the local option tax after voters 10 years ago approved their collection from retail sales. More recently, the tax on meals and alcohol was added and in March, voters approved a local option tax on rooms.
Because of the recent addition of the rooms tax, it is difficult to compare how Manchester's other local option tax collections have fared from 2008 to 2009. In 2008, the town collected about $51,500 on the meals tax for the quarter that ended in November.
This year, the check will be for about $101,400 but O'Keefe said the state did not itemize that amount to specify how much was collected from rooms and how much from meals and alcohol.
While that makes it an almost impossible comparison, O'Keefe said he was pleased with the amount the town would collect for the combined local option taxes.
When the local option tax was first created by the Legislature, it was expected to expire after a number of years. As a result, the Manchester Select Board had traditionally split up the revenue and applied some to the budget, to reduce the burden on taxpayers, and put the rest in a "taxpayer relief fund." The "sunset" provision has since been removed from the local option tax law.
The relief fund was tapped into for the first time last year and again this year but the funding request made by the Select Board, and approved by voters, states that only a certain amount of the reserve will be used. This year, voters approved $455,000.
If the local option tax revenues are high enough, the money will not be needed from the reserve. O'Keefe said that only enough will be taken from the reserve to balance the town's accounts, regardless of the amount approved.
Given the amount of local option taxes collected to date, the town's reserve fund should not be needed for any more than voters approved and, in fact, less money than expected may be taken out of the reserve fund.
O'Keefe pointed out that in addition to the revenue for the town, the amount collected in local option taxes also indicated that Manchester's merchants and hospitality industry still seemed to be performing well in a weak economy.
patrick.mcardle@rutlandherald.com
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