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Local option tax collection better than expected

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Posted on August 20, 2009 |
By John Flowers



MIDDLEBURY — Middlebury’s local option taxes generated a healthy $165,417 during the second quarter of this year — a sum that not only puts the town on a comfortable pace to meet its first-year debt obligation on the new Cross Street Bridge, but also provides positive signs the local economy may be turning the tide on the recession.

The $165,417 represents Middlebury’s take on its local option taxes of 1 percent on sales, rooms, meals and alcohol. Those new taxes — which kicked in last fall — were designed to raise at least $600,000 annually over 30 years to cover Middlebury’s debt obligations on the $16 million Cross Street Bridge project. Middlebury College has pledged an additional $600,000 annually to contribute toward the new span over the Otter Creek that will link Main Street to Court Street via Cross Street.

The new piers and related site work are taking shape at the construction site near Mister Ups Restaurant.

While the Vermont Department of Taxes estimated Middlebury’s local option taxes could generate enough to meet the $600,000 payments, the new taxes came into effect last year just as the recession bore down on Vermont and the rest of the nation.

Initial local option tax revenues from the fourth quarter (October, November and December) of 2008 — which includes the key foliage and holiday shopping seasons — came in at $157,901, according to information supplied by the Department of Taxes. That was followed by revenues from the first quarter of 2009 (January, February, March), which showed a fairly predictable dip, to $131,702.

But no one predicted the second-quarter revenues (April, May, June) of this year would actually exceed last year’s fourth quarter — often a high-water mark for sales tax revenues.

“Our second quarter … is usually 5-percent lower (in revenues) than the fourth quarter in a typical year,” said Middlebury Assistant Town Manager Joe Colangelo.

“I think it is a good sign for the town and the bridge project, and hopefully a good sign for the economy in Middlebury,” Colangelo added. “It shows that things are picking up.”

The first three quarters of Middlebury’s local option taxes have generated a combined total of $455,472. That means the taxes will need to generate at least $145,000 during this quarter (July, August, September) to reach the $600,000 threshold for the year. That would seem to be a safe bet, as the current quarter includes the height of summer tourism and the beginning of the foliage season.

If the local option taxes raise more than what is needed to pay the Cross Street Bridge debt, disposition of those “surplus” funds would be decided at town meeting. For example, residents could choose to use potential surplus money to lower the municipal property tax rate or to fund capital improvements.

Ted Shambo, membership director at the Addison County Chamber of Commerce, said the good revenue numbers seem to back up recent anecdotal reports from local merchants.

“No one is breaking any records, but people seem to be doing OK,” said Shambo, who said the chamber has given information this year to a lot of European and Canadian travelers, as well as Vermonters who have decided to vacation and shop close to home.

“I’ve got to think the positive tax numbers are a positive reflection of the number of people who are coming to see us,” Shambo said.

Cheri Franklin, manager of Vermont’s Own Products in downtown Middlebury, has been pleased with recent customer traffic.

“We have had a very decent summer, better than expected,” Franklin said, noting the economy and the weather had loomed as potential hurdles.

Franklin said maple products and wood pottery have been particularly good sellers.

“If this keeps up, I can’t complain,” she said of current sales trends.

Tax holiday this Saturday
Middlebury’s local option sales tax will go on a one-day hiatus this Saturday, Aug. 22, in conjunction with Vermont’s sales tax holiday. Here are some details about that “holiday,” as provided by the Department of Taxes:

• Sales of items of tangible personal property costing $2,000 or less purchased for personal use are exempt from sales tax and local option sales tax on the holiday.

• All Vermont businesses making sales of tangible personal property on Aug. 22 are required to participate in the holiday. Out-of-state retailers registered to collect sales and use tax in the state of Vermont must also participate in the holiday.

• The holiday does not apply to the meals and rooms tax. That means food and beverages, including alcoholic beverages sold in restaurants and bars, will remain taxable.

John Flowers

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