Town manager to talk new local taxes at Monday’s Select Board meeting
August 20, 2023 | By Lisa ScagliottiWaterbury town officials are considering joining a growing number of Vermont communities in establishing a local option tax that would add to revenue collected from property taxes.
Municipal Manager Tom Leitz estimates that adding 1 cent (per dollar) to the sales tax as well as rooms and meals purchases could generate approximately $600,000 per year.
Municipal Manager Tom Leitz, courtesy photo
Leitz outlined the proposal in a memo to the Waterbury Select Board in July. At Monday’s Select Board meeting, he will give an overview of how the tax would work, how the revenue it generates could be put to use and the process involved to make this happen.
Overall, creating new local taxes would involve first adopting a charter for the town that includes language regarding local taxes.
Several steps would be required starting with Select Board approval to proceed, Leitz said. Next would be a town vote by Australian ballot, most likely at a special election before Town Meeting Day 2024 in order for the matter to go to the state Legislature when it convenes in January. Town officials have discussed holding a vote in November or December to fit that timeline.
A charter would need legislative approval and the governor’s signature. Leitz said state Tax Department officials have told him that it takes about six months to implement the new setup with all of the affected businesses.
“We’re talking January 2025,” he said, as an estimated time when the new taxes might go into effect given those steps.
According to the Vermont Tax Department website, 23 communities in the state charge an extra 1% local sales tax in addition to the 6% state sales tax including Barre City, Burlington, South Burlington, Williston, and Stowe, where it went into effect July 1.
The state lists 25 communities with a 1% local rooms, meals and alcoholic beverages tax including Barre City, Montpelier, South Burlington, Stowe (since 2006) and Williston. The state rooms and meals taxes are each 9% currently and the tax on alcoholic beverages is 10%.
Leitz estimates that adding a penny to the sales tax in Waterbury would generate about $300,000 per year in new revenue. Sales tax does not apply to food, medicine, and most clothing items and it would not affect sales of motor vehicles, he noted. The new tax would apply to short-term rentals and internet purchases.
Leitz estimates that revenue from 1 cent on the rooms and meals at $210,000 annually and another $30,000 from adding 1% to the alcoholic beverages tax.
The language voters would consider establishing the charter with the new local taxes does not need to specify how the new tax revenue would be spent, Leitz said. Town officials could use new revenue to pay for new initiatives or to offset property taxes for existing expenses – or some combination of the two depending on needs, Leitz noted.
In addition to the local tax issue, Leitz and the Select Board have discussed other elements to include in a charter. So far they have considered language that would clarify and simplify the role of the municipal manager in hiring and firing town staff.
Leitz said there is no data available to estimate how much of the potential new local taxes would be paid by residents versus visitors. However, he offered an example noting that raising $600,000 in revenue from the property tax would translate to about 8 cents on the property tax rate. For a home valued at $300,000, that would equal $240 on its tax bill, Leitz said.
By comparison, someone would have to spend $24,000 on taxable purchases in Waterbury to pay $240 in new sales/rooms and meals tax, he pointed out.
The goal, Leitz said, would be to have a broader source of revenue than relying solely on property owners.
“It’s the only opportunity we have to collect money from non-residents,” Leitz said.
The Waterbury Select Board meets at 7 p.m. Monday, Aug. 21, in the Steele Room at the municipal building. The meeting is also available online via Zoom and it is recorded and posted online afterward at OrcaMedia.net. The option tax/charter presentation is on the agenda at 8:15 p.m. The agenda has the Zoom link.