BARRE — One year after imposing a tax on those who drink, dine out and rent rooms in Barre, city officials acknowledge a short list of local option taxes has generated far less revenue than they had hoped.
City Clerk Carol Dawes said it now appears clear the 1% tax on rooms, meals and alcohol will under perform the City Council’s data-driven expectations by a wide margin.
The local taxes, which went into effect on Oct. 1, 2018, have now generated a full year’s worth of revenue. The city won’t receive its fourth quarterly check from the state until sometime next month.
If statistical trends are an indicator, the check should be bigger than the three it has already cashed, but Dawes said it would have to be worth all of them combined to come close to matching projections the local option taxes would generate roughly $215,000 in extra revenue a year.
So far, Dawes said, the city has received three checks reflecting its share of option tax revenue after the state takes its 30% cut.
The first was received in February and reflected tax revenue for the second quarter of the fiscal year that ended in August. That $32,127 check was initially blamed on businesses being slow to charge the extra tax despite 90 days of prodding.
The subsequent check for the months of January, February and March was lower still and while that tracked a seasonal trend, the $29,904 total was significantly less than expected.
The next quarter — April, May and June — was better, as statistics compiled by the state Tax Department indicate it historically has been, totaling $43,103.
In a fiscal year when the city had hoped the new taxes would generate roughly $215,000 in new revenue, it raised $105,134. Part of that was due to the taxes not being charged during the first quarter — July, August and September — in order to give restaurants, bars, hotels, motels and bed and breakfasts time to prepare for its July 1 launch.
That quarter, which includes three typically lucrative months for those in Vermont’s hospitality industry, should yield the largest check yet.
However, Dawes, City Manager Steve Mackenzie and Mayor Lucas Herring don’t believe it will validate an estimate they say was based on flawed data gleaned from reports on the Tax Department’s website.
The problem, according to Dawes, who has spent a year trying to correct it, involves the fact that previous reports have reflected rooms, meals and alcohol receipts generated in neighboring Barre Town and parts of Berlin to Barre due to their common zip code.
Based on what is now known, Herring predicted revenue generated by the local option taxes would be much closer to $150,000 than $200,000. While that’s significantly less than expected, he stressed it’s not nothing.
“It’s still another revenue stream that’s allowing us to raise money to work on our streets,” Herring said, defending the option taxes.
In a city where every penny on the tax rate raises roughly $50,000, Herring said the $105,000 in option tax revenue the city booked during the fiscal year that ended June 30 represented a real savings for those who own property in Barre.
“That’s two cents on the tax rate,” he said.
Assuming the revised estimate is close to accurate, the local option taxes should generate roughly $150,000 a year — about 3 cents on the tax rate — going forward.
Herring said every little bit helps.
“There’s only so much residents can take at one time,” he said, stressing the importance of identifying alternate sources of revenue in a city with mounting budgetary demands.
Mackenzie, who is in the process of drafting a budget for the council’s consideration, agreed.
“The enormity of the financial challenge will be as great this year as ever,” he said.