Local option tax revenue rising for Vermont towns
By Patrick McArdle
STAFF WRITER | January 26,2014
Increased revenue from local option taxes in towns like Manchester and Stowe have Vermont officials optimistic about an economic recovery.
Administration Secretary Jeb Spaulding said the Shumlin administration was “generally encouraged” by the statewide trends through December.
“The personal income tax is up almost 5 percent over last year,” he said. “The sales (tax) is up a little bit. Rooms and meal tax: a very healthy increase on a statewide basis, up 6.3 percent over the year before, so we are seeing good activity out there and hope it continues.”
Vermont municipalities generally can’t impose any local tax except property tax. But because the state’s education funding formula has a greater impact on towns with high property values, the Legislature created the local option tax to help “gold towns” such as Manchester, Killington, Rutland Town, Stowe and Burlington.
The local option taxes, which can only be imposed at the will of the local governing board and with voter approval, add 1 percent to retail sales, restaurant meals and alcohol or lodgings, like hotel and motel rooms. A town can impose that 1 percent on any one of those three categories, all three or a combination.
The local option taxes are collected by the state and then distributed to the towns every quarter of the fiscal year. The towns that impose the tax get 70 percent back, while 30 percent is distributed to other towns via the Payment in Lieu of Taxes, or PILOT, program.
Manchester Town Manager John O’Keefe said the most recent quarter for which there were returns — July, August and September 2013 — showed a 6.24 percent increase in option tax revenue over the same quarter in 2012.
The town received about $186,000 from the tax on retail sales and almost $117,000 from the combined taxes on meals and alcohol and rooms. For retail sales, the amount was the highest in that quarter since 2008. For meals and alcohol and rooms, it was the most the town has ever received from that quarter.
Comparing the quarter from year to year, 2013 saw an increase of 7.5 percent in retail sales and 4.3 percent in meals and alcohol and rooms over 2012.
O’Keefe said he believed that a Manchester road project, as well as the economic recovery, played a part in the improvements from 2012 to 2013.
“We’ve seen a huge positive response from visitors and and residents alike on the roundabout (that replaced the intersection of Routes 11/30 and 7A),” he said. “All new streetscaping downtown, I think had an impact on it. We’re expecting those numbers to go up even more as we see more shops coming in and more shops being built.”
O’Keefe said the town is seeing a lot of economic activity in addition to the large retail space already being built on Depot Street at the former site of the Sirloin Saloon.
Because of Manchester’s proximity to ski resorts and its outlet stores, it attracts a large number of tourists, especially in the winter.
“The fact that there’s good news coming out of Manchester is probably a good indicator that the travel and recreation industry is recovering. With Mother Nature’s help, we should see good trends going forward,” Spaulding said.
Maribeth Spellman, director of policy, outreach and legislative affairs at the Vermont Department of Taxes, said the most recent quarter showed a slight increase in the amount collected from towns that impose local option taxes.
The state collected about $5.3 million for that quarter, which was an increase of about 6 percent from approximately $5 million from the same quarter in 2012.
“It’s not a massive increase, but it’s an increase,” Spellman said.
She has noticed an increase in the number of towns calling the Tax Department because they’re considering imposing the local option tax.
Joseph Zingale, town administrator for Rutland Town, said that in his town, which only collects the local option tax on retail sales, the income has been “fairly consistent and above what we would expect.”
The Green Mountain Shopping Plaza on Route 7 accounts for much of that income, he said, but pointed out that the town also collects from areas like phone service and fuel use, which are also counted as retail sales.
Wilmington Town Manager Scott Murphy reported growth in the town’s option tax revenue, but said it was difficult to interpret because the town had only imposed it recently and had only seen returns from five quarters to date.
“We’re happy with it. We’re hopeful that it continues to increase,” he said.
Like some of the towns that collect local option taxes, Wilmington is somewhat dependent on ski resorts. Murphy said option taxes from this industry might be more influenced by the weather and less on the general economy.
In Stowe, Town Manger Charles Safford has also seen an increase in what the town collects from option taxes imposed on meals and alcohol and rooms.
“It’s hard to tell if it’s a sign of economic recovery,” he said. “We have a major expansion that continues to go on up at Stowe Mountain Resort. I’m sure that’s been a contributor.”