by Brian Keaney

Two proposed new taxes and one existing tax could raise as much as $1.3 million a year, money that would be earmarked for capital building projects under a proposal by one selectman.  Chairman Mike Butler presented his plan for the new revenue last night to a room full of department heads and other elected and appointed officials.

Under Butler’s proposal a special purpose stabilization fund would be set up by the Special Town Meeting next month.  Moneys from that fund could only be spent on the construction or major renovation of a Town building, but not only regular maintenance issues like a new boiler or roof.

Butler noted that there are 14 major buildings owned by the Town, including the schools.  If each building can be expected to last 100 years then Butler said it suggested a schedule where one should be replaced every seven years.  The fund Butler proposed would provide a way to pay for the buildings without asking voters to approve additional property taxes via a debt-exclusion.

Town Meeting will be asked to approve two new taxes in November, both of which will take effect on January 1, 2010.  The first is to raise the existing tax on hotel rooms from 4% to 6%. 

The hotel tax revenue has fluctuated greatly in the past few years, but a 2% additional tax would likely bring in between $265,000 and $370,000 a year.  For the current fiscal year, with a down economy, Town officials estimate it would have come in at $275,000.

The second tax would be a new tax of .75% on all meals served in Town.  As this would be a completely new tax never imposed by the Town before, estimates on its impact are sketchy.  However, the state Department of Revenue estimates it would be around $244,000 a year.

The estimate of $244,000 a year does not take into account any new restaurants at Legacy Place.  When fully operational, Legacy Place will increase the number of seats by 50% from about 3,000 to more than 4,500.

Butler also proposed slowly phasing in all of the hotel tax revenue into the special fund beginning in fiscal year 2012.  Under his proposal 1% would be shifted each year into the fund, so that by fiscal year 2015 the entire 6% tax would be directed towards capital projects.

Currently the 4% tax goes directly into the operating budget.  In the past Town Administrator Bill Keegan has opposed plans to reduce the operating budget by dedicating revenue for capital needs.

After Butler’s presentation, and a similar discussion by the Selectmen last month, Keegan sounded more open to the plan.  “It’s six in one and half a dozen in the other,” he said, adding that he would simply take a similar amount out of the operating budget currently being spent on debt service and other infrastructure projects.

Finance Committee member Derek Moulton said he would oppose any new tax increase, but that placing a “sunset provision” on it would make it more palatable.  He said he would want Town Meeting to have to reauthorize the new taxes every few years.

Town Economic Development Director Karen O’Connell said she did not believe the additional meals tax would be a “deciding factor” when people chose to eat out. 

The proposed meals tax “is so low,” O’Connell said, “I don’t think that’s going to impact your decision making about whether you go out to eat or not.”

If all the hotel and meals taxes were placed into the fund, it could provide $1.3 million a year in revenue.  The debt service on the Middle School, the newest building owned by the Town, is $1.2 million annually.  Town Meeting will also be asked to approve the construction of a new Avery School at $23.67 million.

Butler acknowledged that more discussions were needed before Town Meeting to recommend policy on how best to use the fund.  Funds could either sit in the fund and build up until they were sufficient to construct a building, or they could be collected and appropriated annually to pay for the debt service on a project.

Money could only be appropriated from the fund with a two-thirds vote of Town Meeting.  Finance Committee Chairman David Martin warned that future Town Meetings could choose to place the revenue from these taxes in the operating budget, before it ever got into the stabilization fund.

Selectman Carmen Dello Iacono, who proposed a similar plan several years ago, said that the Town would have to establish a policy and then stick to it. 

“We would have to discipline ourselves to make sure it happened that way,” Dello Iacono said, “year, after year, after year.”

Related coverage:

• Selectmen talk taxes