OPINION: Vote For A 1% Local Rooms, Meals and Alcohol Tax

by Phil Dodd, Montpelier

If Montpelier votes on Town Meeting Day in favor of a 1 percent local rooms, meals and alcohol tax, the city will be joining 17 other Vermont cities and towns that already have such a tax. The list includes Stowe and a number of towns in Chittenden County: Colchester, Williston, South Burlington, and Burlington, where the tax is actually 2 percent.

Ironically, Montpelier voted to implement a similar tax before almost all of those 17 towns. In March of 1993, Montpelier voters approved a 1 percent meals and alcohol tax by a 61 percent to 39 percent vote (lodging was not included then). At that time, however, the Legislature was not open to allowing local option taxes and refused to let Montpelier amend its charter. Today the Legislature has opened the door to such local taxes.

Since the 1993 vote, Montpelier has twice downed a rooms, meals and alcohol tax (once narrowly), but in both cases it was paired with a local 1 percent sales tax, which is a less popular and, I believe, a more problematic tax.

The “yes” vote in 1993 followed the release of a report issued by a city-appointed “Property Tax Relief/Alternative Study Committee,” of which I was chair. The report contained 18 suggestions, including adoption of the 1 percent meals and alcohol tax. It was recommended on an 8-to-2 vote of the committee.

The logic behind the proposal 23 years ago was the same as the city council used to put the tax on the ballot this year. Montpelier’s municipal property taxes are high; our median non-income sensitized municipal tax bill may be the highest in Vermont, which itself has among the highest average overall property taxes in the nation. Given our expenses as a regional center, it seemed only fair to our committee for those who live elsewhere but visit Montpelier to help pay a relatively small amount toward our expenses.

Montpelier’s population doubles on weekdays, when many people come to work in or visit Montpelier. Our police and fire departments serve not only residents, but also nonresidents when they are in town. We are glad to have visitors, but they do drive on our streets and walk on our sidewalks, which must be repaired, plowed, salted, lit and controlled with traffic signals.

This year’s proposed 1 percent rooms, meals and alcohol tax is relatively small – 2 cents on a $2 cookie, or 25 cents on a $25 meal — for purchases that are largely optional. It is true Montpelier residents who eat out would pay the tax, too, but a substantial portion of the money brought in by the tax would come from outside the city.

Some in the lodging and restaurant business here may be worried that the tax will drive business away. But no Vermont town that has enacted the rooms, meals and alcohol tax has repealed it, and cities and towns like ours that have the tax in place reported no problems with it when I checked with them last week.

Kate O’Connor, executive director of the Brattleboro Chamber of Commerce told me the 1 percent rooms, meals and alcohol tax “hasn’t impacted us — it is not problem at all.” People don’t notice the tax on their bills and “no one has complained about it,” she said.

Jamie Gaucher, director of business development and innovation in Middlebury, said he has not heard anything negative about the town’s rooms, meals and alcohol tax. “No one is talking or thinking about it,” he said.

The town of Woodstock just began collecting the rooms and meals tax for economic development purposes on July 1. Beth Finlayson, director of the Woodstock Chamber of Commerce, said that, personally, she thinks the 1 percent tax “is great,” and reported that it was supported by the Woodstock Chamber’s Board as well as the Woodstock Inn.

“There were complaints from some restaurants and one B&B beforehand, but I have not heard anyone complain about it since it went into effect,” she said. “I don’t think that people notice it.”

In Montpelier, after the state takes 30 percent of the amount collected, the tax would bring in about $220,000 every year to the city, which equals more than 2.5 cents on our municipal tax rate. We could certainly use the money to help us with our infrastructure repairs, take a bit of pressure off the municipal property tax, and promote economic development.

The 30 percent portion the state keeps is not all lost: for that amount, the state collects and enforces the tax and sends towns a quarterly check. Moreover, most of the 30 percent goes toward funding the PILOT program, which provides a payment in lieu of taxes to municipalities where the state owns property. Montpelier is the biggest recipient of PILOT money in the state, so we would get a decent portion of that 30 percent back.

I am very appreciative of the dynamism that our hospitality businesses have brought to the city in recent years. If I thought this tax would hurt these businesses, I would not be supportive of the tax, and I will support repeal if it does. But based on what has happened in 17 other Vermont towns, I doubt that a year from now anyone will be paying attention to it. I will vote yes on Article 15.

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