Officials Push for Local Option Tax Vote in March
11/22/21 Joint Selectboard and Trustee Meeting
by Ken Signorello
December 13, 2021
At the November 22nd Joint Selectboard and Trustee Meeting, Unified Manager Evan Teich and Deputy Manager Greg Duggan asked the boards to consider putting a Local Option Tax (LOT) on the March Ballot.
A LOT is an additional 1% sales tax from retail consumers. LOTs are levied in three ways: Sales; Meals and Rooms; and Alcoholic Beverages. The LOT would apply to online purchases, utility bills, and items purchased in Essex.
Manchester was the first Vermont town to adopt a LOT in 1999, followed by Williston in 2003. Winooski became the 17th municipality in 2019.
Essex Town voters rejected a proposed LOT at their 2009 Annual Town Meeting, as did Essex Junction voters in 2010.
Selectboard member Dawn Hill Fleury asked why voters might approve a LOT now, after past rejections.
Municipal managers have promoted a LOT as a new revenue source that would be partially paid for by non-Essex residents.
According to Duggan, the Vermont Tax Department projects that a LOT, including a Meals and Rooms tax, in Essex would generate $1.5m to $1.6m in revenue per year, after the state withholds a mandated 30% administrative fee of approximately $700,000.
Duggan suggested that revenue might be split according to population, if not by the actual sales location. Past requests to the state to break out TIV revenue from TOV revenue were denied because the two parts of town share one zip code.
Duggan explained that revenue from in-person sales may now be traceable. He did not mention the origin of online sales, which will prove to be a challenge. For example, if Town voters (both inside and outside the Village) pass a LOT in March, only the Town would be listed on the State Sales Tax return. Out-of-state vendors who deliver to Essex would not have a way to report sales tax separately for deliveries in the Village vs the TOV, even if they know which part of town an on-line sale is shipped to.
According to Teich, Essex is a net exporter of sales tax to its neighbors.“ Williston generates over $3m in a LOT. I would venture to say a good chunk of that is from us”.
Teich claimed that Essex should be getting back some of the LOT collected by Williston retailers. He did not say what would motivate Essex residents or others to stop making purchases in Williston and instead shop in Essex, if its sales; rooms and meals; and alcohol tax increased.
The Town of Williston collects more LOT per resident than any other municipality in Chittenden County. With only half as many residents as Essex, it nets greater than 4.5 times more projected LOT revenue per resident than predicted for Essex. One reason for this may be Williston’s concentration of big-box retailers drawing Essex shoppers via Route 2A and others via Interstate 89.
Town and village managerial staff have circulated a survey to gauge community receptiveness to another tax and potential ways to spend the revenue.
Selectboard member Tracey Delphia raised concerns about the regressive nature of sales tax in general. Those with less income pay proportionally more sales tax.
Trustee Raj Chawla supported the LOT, despite its regressive nature, acknowledging, “it is what it is”.
Town resident Paul Austin stated that he did not want to see a LOT go on the ballot in March. He expressed his concern that the average person will only see it as an additional 1% sales tax. He views it as much more because a 1-cent increase on 6 cents is a 16.7% increase over the current sales tax rate.
Austin believes that not having a LOT attracts customers and that Essex needs to highlight its business-friendliness. Austin noted that Essex businesses also purchase goods. If they are taxed an additional 1%, that may affect their desire to do business in Essex.
Village Trustee George Tyler argued in favor of a potential LOT. Tyler said, “In Chittenden County, because everybody else has [a LOT], but we don’t, we are nuts if we don’t do it.”
In fact, Chittenden County has 18 municipalities, per the Regional Planning Commission. Of these, five of these 18 have a LOT.
Unified Manager Teich incorrectly stated: “Over the 8 or 9 or 10 years since this was brought up, all the other communities around us have instituted the local options tax.” The record shows that only Colchester and Winooski instituted a LOT since the last Essex vote in 2010.
Teich went on to list neighboring towns that have a LOT, but he neglected to list four that don’t: Milton, Westford, Underhill and Jericho.
“Williston’s property tax rate is 0.2 and that’s because they have a gold mine,” said Tyler.
Williston’s property tax was 0.2 back in FY 2010. It is now 0.2721. It does have a lucrative retail center, which preceded the LOT by 6 years
Williston’s LOT enables it to maintain a significantly lower tax rate than that of any nearby towns. Furthermore, its relatively large grand list ($2.1b) and relatively small budget ($11.5) keep its overall tax rate low. Essex’s combined budget is double that of Williston, but our projected LOT is $1.5m, half of Williston's at $3.1m.
Tyler also claimed, “If you look at municipal spending per capita and you look at what taxes are raised, and … it’s – pretty much always, with a few exceptions – almost completely accounted for by that community having a LOT.”
The Retorter examined Essex's neighboring towns to test Tyler's claim: Municipalities with a LOT are able to support more spending per resident while collecting less property tax per resident. The graphic below shows town's most recent populations, budgets and LOT estimates, sorted by the metric that Tyler singled out.
His claim comparies apples to oranges. Each town's circumstances are vastly different.
Here are some characteristics which greatly affect the metric upon which Tyler based his statement:
Burlington, top of the list, gets only 7% of its budget from its LOT. It has large non-property tax revenue sources.
Burlington collects its own Meals, Rooms and Alcohol Tax, thereby saving 30% in state fees.
Colchester reserves its LOT for future voter-approved spending.
Underhill received significant grants in FY22.
Williston collects 64% more LOT per resident than any other municipality in the county, funding 27% of its budget.
Comparison of Neighboring Municipalities
*Includes payments in lieu of taxes