December 20, 2007
By JOHN FLOWERS
MIDDLEBURY — Middlebury residents on Jan. 31 will be asked for their feedback on the notion of slightly raising one or more of the town’s sales and use, meals, rooms or alcohol taxes as a means of generating revenues to help pay for a new in-town bridge.
Selectmen on Tuesday voted unanimously to call for the Jan. 31 public hearing, which will focus on the concept of Middlebury adopting “local option taxes.”
Residents would then get a chance on Town Meeting Day to vote for or against a plan to lobby the Legislature for a change in the town charter that would allow Middlebury to boost, by 1 percent, one (or a combination of several) of its sales and use, meals, rooms or alcohol taxes.
If the Legislature were to approve a charter change, selectmen would then have the authority to call a townwide vote to ask residents to endorse one or more local option taxes. The resulting revenues would flow into Middlebury’s general fund and be put toward paying off the proposed $16 million in-town bridge project. Middlebury College has already promised $9 million in financing for the project, the centerpiece of which would be a new bridge that would connect Main Street with Court Street across the Otter Creek, via Cross Street. That leaves a $7 million gap that selectmen are trying to creatively fill without hammering locals with a property tax increase.
“Certainly, (local options taxes) are an option that would allow us to get to our goal of financing the remaining $7 million for the bridge without having a significant impact on the property tax, which we are all very concerned about going through this budget,” said Selectman Dean George, who is chairman of the town’s bridge committee.
Selectmen on Tuesday lamented the introduction of local option taxes into the bridge funding debate so soon. But they explained that residents will need to weigh in on the issue by Town Meeting Day in order to give the Legislature time to act during the 2008 legislative session, which begins early next month.
“We need to launch it forward, but that does not mean we are not looking to a community-wide discussion,” selectboard Chairman John Tenny said. “We certainly expect this is a topic people will have strong opinions about, that will be controversial. We want to make sure that we can work together to find the best way to move forward.”
The issue is likely to be particularly controversial among local merchants and consumers, who would see their respective bottom lines affected by a tax increase on goods and services.
Addison County Chamber of Commerce Executive Director Andy Mayer said he is concerned about the extent to which local option taxes could affect buying patterns in town. He noted that at 9 percent, the rooms and meals taxes are “already high.”
Mayer added, however, that current traffic conditions in Middlebury are already causing some potential shoppers to steer clear of the downtown. He said a new bridge could alleviate that problem. That said, Mayer believes the community will have to decide whether some higher consumer taxes can be offset by the benefit of having a bridge that could open up the downtown to more shoppers.
“I imagine there is a compromise that will work for everyone,” Mayer said.
Some board members argued a local option tax would spread the economic burden of bridge financing over a larger segment of citizens who would all benefit from the new span.
“There are a lot of communities that surround Middlebury that obviously benefit tremendously by having this project in place,” George said. “This is a way for them to share in paying for it, in buying goods and services in our community.”
“It would spread the load of funding needs of the municipality … over a broader base, to the community which is doing business in the town, so that it covers a more regional impact,” Tenny said. “And we are a regional center town, so there is an appropriateness to that.”
If Middlebury ultimately adopts some local option taxes, it would join a growing list of Vermont communities that have already taken such a step as a means of softening their local property tax burdens while reflecting the economic pressures they face as regional hubs. Burlington, South Burlington, Brattleboro, Williston, Rutland City, Stratton, Dover and Manchester are examples of Vermont towns that currently have local option taxes.
State law allows towns to keep 70 percent of the local option taxes they realize each year; the remaining 30 percent must be placed in a “payment in lieu of taxes” (PILOT) fund that is distributed amongst communities that host state buildings. Middlebury is a PILOT recipient.
RKG Associates Inc., a firm Middlebury has hired to help plan the new in-town bridge, recently completed a study to determine potential revenue the town could derive from local option taxes. Using 2006 tax-revenue statistics, RKG determined Middlebury’s 70-percent cut of a 1-percent local option sales tax would have been around $560,000. The town would’ve netted $103,199 from a 1-percent local option tax on meals; $38,935 on rooms; and $15,822 on alcohol.
All together, the taxes could’ve generated  $717,835 — a sum that RKG consultants said could grow in future years with new retail development.
Officials noted a local option tax on sales alone could provide $8.6 million in bonding capacity for a new in-town bridge — eclipsing the $7 million balance of the project that needs to be raised to go along with the college’s offer of $9 million.
Still, selectmen stressed they are viewing local option taxes as just one in a menu of revenue options to help fund the bridge. Others include financial gifts; grants; federal/state funding for specific segments of the project, such as a planned roundabout intersection that would feed the bridge at the intersection of Main and Cross streets; property taxes; and a Tax Increment Finance (TIF) district.