Towns to receive federal money as option tax revenue falls

By Katy Savage

With some restaurants, inns and bars being forced to close last year, option tax revenue is down by 50% or more in some towns, but many of them will be able to make up some of that with the help of a federal Covid-19 relief bill.

Part of $2.7 billion in federal money earmarked for Vermont includes $1 billion of direct payments to each municipality, based on population size. Killington is estimated to receive $140,000, according to projections released last week. Woodstock will get about $600,000.  Rutland city will receive $2.8 million, while Rutland town will receive $756,000. Ludlow will get $500,000.

“I think everyone will find this at the local level very helpful,” Rep. Jim Harrison, R-Chittenden, said.

Killington Town Manager Chet Hagenbarth was hopeful the payments will help, but he was unsure how soon it would come.

“Fifty bucks helps,” Hagenbarth said. “Even though the biggest option tax payment is yet to come, it makes up the difference right now.”

Local option tax is calculated as 1% of the taxable (net) sales for each town on meals, rooms, and alcoholic beverages. Killington receives about $400,000 in option tax revenue a year. So far, the town has received three quarterly payments for the fiscal year. The most recent payment is down about $50,000 from the budgeted $94,713, while the other two payments are also down about 50%. The remaining payment for the fiscal year, which is the largest for Killington due to business from Killington Resort, is due in mid-May. Hagenbarth is anticipating the last payment will be down as much as 60-65% from the five year average of about $215,000.

“We could get creamed,” Hagenbarth said. “The resort had no food and beverage sales, which is a big chunk of that. Some hotels seemed to do really well, others didn’t and closed down.”

Option tax revenue in Killington goes into the general fund and is used on capital improvement projects, such as paving.

“Usually our option tax is where we get a little bit of our fluff,” Hagenbarth said. “We’re not going to have any of that this year.”

Hagenbarth budgeted about $410,000 in option tax revenue for 2021, which is based on a five-year average.

“We’re budgeting as normal because we can’t predict the future,” Hagenbarth said. “We can have a special meeting vote to ask the voters to transfer [money] if we need to. I’m not overly concerned at this point.”

Hagenbarth was optimistic the federal money combined with the uptick in real estate sales might sustain some of the losses.

“There’s a whole secondary economy that’s doing pretty well,” he said.

Hagenbarth was more concerned about next year.

“There’s going to be a lot less stimulus money — a lot of businesses were being buoyed by it,” he said. “We’re just trying to make sure we come out whole at the end of the year. I’m thinking we’ll be OK.”