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Middlebury to decide on local option taxes on Tuesday

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By JOHN FLOWERS

MIDDLEBURY — Middlebury residents on Tuesday, May 20, will be asked to approve local option taxes of 1 percent on sales, rooms, meals and alcohol as a means of generating revenues for a new, in-town bridge that would span the Otter Creek at Cross Street.

Middlebury officials are banking on the local option taxes to finance $7 million of the $16 million bridge project, which would link Main Street with Court Street as a means of reducing gridlock in the downtown. Middlebury College has agreed to bankroll $9 million of the project, through annual donations of $600,000 during what will be a 30-year bonding period.

It was on Town Meeting Day that local residents authorized bonding for the project and supported a charter change that would enable Middlebury to consider local option taxes. Tuesday’s referendum will allow residents to decide whether they want to now follow through and implement local option taxes for the next 30 years.

“My clear concern right now is that we get a good turnout,” said Middlebury selectboard Chairman John Tenny.

He added that after many months of planning and debating, town officials are now looking for residents to become “bridge builders.”

Local option taxes will be key if there is to be any bridge building because selectmen don’t want to lean on Middlebury’s already-hefty property tax as a means of financing the new span, which could open to traffic as soon as 2010. Selectmen have reasoned that local option taxes would be a reasonable vehicle for financing, as they would be borne — in great part — by non-residents who would use the new span and already use other Middlebury roads and bridges.

“Local option taxes give us the ability to fund and build a bridge without local property taxes and involve a larger surrounding community to pay for a project that helps that larger community,” Tenny said.

A 1-percent local options tax on sales, meals, rooms and alcohol would have netted Middlebury a combined total of $725,319 in revenues in 2007, according to the Vermont Department of Taxes. That sum reflects the 30 percent in local option tax revenues that Middlebury — and any other community implementing such taxes — must turn over to the state for its payment-in-lieu-of-taxes program.

Local option taxes would be combined annually with $600,000 from the college to pay interest and principal on the 30-year bond. A chart prepared by Middlebury town administrators shows that debt service on the bond would reach its apex — around $1.2 million — in year three. Payback would then decrease gradually during each of the ensuing years, to roughly $600,000 during the last year or two of the bond, according to current estimates.

Middlebury voters, as part of the annual budgeting process, would determine what to do with any local option tax revenues in excess of what is needed for debt service on the bridge bond.

“We are not making any promises about extra funds at this point,” Tenny said. “Voters get to have their full say in how such funds are used.”

Manchester, Vt., has had a local option sales tax since 1999. Town Manager John O’Keefe said the community of around 4,200 people endorsed the new tax after Vermont enacted Act 60, the school funding law that equalized the ability of communities to raise money for public education. Towns like Manchester and Stratton suddenly saw their education property taxes spike, and used the local option tax as a way of offsetting municipal taxes. By law, local option taxes cannot be used for school purposes.

Manchester’s current municipal tax rate is 18.5 cents per $100 in property value.

“The experience has been very favorable,” O’Keefe said of the local option sales tax, which had, until recently, been generating more than $1 million. But that revenue took a dive last year when the Streamlined Sales Tax Agreement (SSTA), of which Vermont is a member, resulted in removal of the sales tax on clothing and shoes. Manchester, home to many clothing outlets, lost around $350,000 in local option sales tax revenue. To fill that void, Manchester recently voted to implement local option taxes on meals and alcohol. Residents chose not to implement a local option tax on rooms, however.

O’Keefe said the local options taxes did not generate much opposition when they were proposed and have not generated a lot of controversy since they were established. He said he does not believe the taxes have been a substantial deterrent for tourists and shoppers considering Manchester as a destination.

“Manchester has coined itself in some respects as a high-end destination,” O’Keefe said.

Gail Freidin, coordinator of the Middlebury Business Association, said she has not received much negative feedback from downtown merchants about the proposed local option taxes. That relative silence, she said, could be construed as meaning the business community backs the bridge project and recognizes the new taxes will capture a broader revenue stream to fund it.

“I think it’s a recognition of the equity and fairness issue that has resulted in people not voicing a lot of concerns,” Freidin said. “It makes sense.”

Burlington, South Burlington, Williston, Dover, Brattleboro and Stowe are examples of other Vermont communities that implemented some, or all, of the four possible local option taxes. Middlebury Business Manager Joseph Colangelo said Middlebury needs to implement all four (sales, rooms, meals and alcohol) local option taxes to generate the revenues necessary to meet its share of the bridge bond obligations.

A special town meeting will be held on Monday, May 19, at 7 p.m. in the municipal building to discuss the tax proposal. Australian ballot voting will be held the next day from 7 a.m. to 7 p.m., also in the municipal building.

Also on May 20, Bridport residents (see related story) will go to the polls to reconsider a $1.25 million school improvement bond, and Ferrisburgh residents will consider a $1.5 million repair plan for their school.

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