Stowe voters frustrated with decades of watching the state take most of their property tax money might have another option to offset some of that.
The selectboard Monday agreed to let voters on Town Meeting Day decide whether to adopt a new 1 percent local sales and use tax. The new levy would be in addition to a similar local option tax on rooms, meals and alcohol that already brings roughly $1 million a year into the town’s coffers.
Town finance director Cindy Fuller said, based on sales and use tax receipts for the previous seven years and first quarter of this year, she estimates Stowe would bring in between $700,000 and $925,000 annually. Fuller’s high-end figure is based on projected 10 percent growth compared to the last calendar year, bolstered by a first quarter of this year that was 34 percent higher than the same period last year.
Last year, sales tax receipts in town totaled $119 million. If the town had a 1-percent local option tax, it would have brought in roughly $833,000, after the state’s 30 percent take.
The new 1 percent tax would be added to the 6 percent state sales tax already in effect. Of that extra percent, the town would keep .7 percent, and the state would keep the rest and redistribute it.
Town manager Charles Safford said increases in the town population — along with increases in the level of business activity in town, the number of zoning permits being requested and issued, and increased costs related to stricter state stormwater requirements — will likely lead to increased costs for operating the town.
“The reality I’m facing right now on my desk for fiscal year 2024 is a 14.71 percent increase in the general fund budget and a 12.43 percent increase in the property tax unless we cut some things,” Safford said. “With that, coupled with inflation, we’re facing real economic pressure to continue providing the level of services we’ve historically had.”
Safford noted that those are raw, preliminary numbers, and the town, especially the selectboard, has not yet truly rolled up its collective sleeves and gone full bore into budget crafting. Still, selectboard chair Billy Adams said that, in the 12 years he’s been on the board, he’s been accustomed to budget increases closer to 1 to 3 percent.
“I’ve got to be honest with you folks, I’ve tried to prepare the board and the community reasonably,” he said. “People say, ‘Well, cut.’ Well, if you’ve always been fiscally constrained, you tell me where.”
According to Safford, Stowe is authorized to institute the 1 percent sales and use tax on top of the 1 percent rooms, meals and alcohol tax because Stowe was considered a “gold town” prior to Act 60.
Also known as the Equal Educational Opportunity Act, Act 60 was a law enacted in 1997 in response to a Vermont Supreme Court ruling that the state’s education funding system was unconstitutional — towns with high property values, which came to be known as gold towns, were able to pump more money into their schools than less wealthy towns.
Of the 23 Vermont towns that have some sort of local option tax, 19 of them have both kinds — sales tax and meals, rooms and alcohol tax. Stowe, Hartford, Montpelier and Woodstock only tax the latter, and Burlington only taxes the former.
Selectboard chair Billy Adams said a second 1 percent local option tax would provide an opportunity to offset increasing property taxes, especially in lieu of the state controlling the purse strings with education funding and especially as the town undergoes a comprehensive property reappraisal that, when it is finished in two years, will result in higher property values — and higher tax bills.
“There’s been a lot of hope in this community that the people in Montpelier might find a different way of taxing communities throughout Vermont to fund education, and that just has not happened,” Adams said
Fuller broke it down using the previous fiscal year’s tax collection. Of the $51 million Stowe voters paid in property taxes, roughly $27 million went to the state for redistribution, $13 million went to support the schools, and $9 million was left over for the town.
Board member Nick Donza asked about applying the town’s share of federal COVID-19 relief money, but Safford said that’s not a good idea. The federal funds are currently sitting in an undesignated surplus fund until the town chooses where to apply them, but when it does, Safford said it would be better to go toward a one-time project.
Because the federal funds come with spending deadlines, the town opted earlier this year to apply its $1.3 million toward the police department payroll, since it was the most similar line item. The town then took that amount out of the police budget and put it in the special fund.
“I would not apply it to an operating budget because it is not sustained funding, and it’s going to create tax shock,” Safford said. “You’re gonna be happy this year and you’re just gonna get the double whammy in a future year.”
Safford said if voters at Town Meeting Day approve the option tax — which would be listed at the top of the annual meeting agenda — it would immediately go into effect. It would still be a guessing game as to how much the town could apply to the municipal operating budget, but Safford said the town would likely estimate for the low end of $700,000 and refine that in future years.