South Burlington voters rejected a proposal to raise the local sales tax with an additional 1 percent option tax, but overwhelmingly approved a tax on short term rental cars in the city.
Article III asked voters to amend the city charter to include language for a “Limited purpose sales, rooms, meals, and alcoholic beverages tax,” also known as an option tax, up to 1 percent.
The proceeds from the tax would only have be used to finance specific, voter-approved capital projects within the city.
The measure failed, 1,458-1,158.
There were three projects being considered as possible candidates to be funded by proceeds from the option tax, had it been approved: an indoor recreation facility next to Cairns Arena; a performing arts center in City Center; and a pedestrian/bike bridge over Interstate 89 linking Dorset Street to Burlington’s Main Street near Staples Plaza.
But the 1 percent option tax would have raised South Burlington’s sales tax to 8 percent, the highest in the state, a fact that city councilor Tom Chittenden said was a deal breaker for him. The council approved the charter language change for the ballot in January by a vote of 3-1 with Chittenden dissenting.
Burlington’s sales tax is currently 7 percent, although the Burlington rooms and meals tax is 8 percent.
It should be noted that the city’s Economic Development Committee voted not to recommend that the city enact an option tax.
Voters did approve the other city charter amendment on the ballot, Article IV, which will allow the city the impose a 0.5 percent tax on short-term car rental transactions in the city. The proceeds will be used to repair roads and highway infrastructure.
Article IV passed, 1,703-892.
The city staff proposed the tax based on the fact that a majority of car rentals in Vermont originate in South Burlington between car rental agencies along Shelburne Road and the car rentals at Burlington International Airport, located in South Burlington.
Representatives from Enterprise Holdings, which maintains a fleet of 800 cars in South Burlington out of a total 1,300 cars statewide, protested the proposed tax at a January city council meeting, saying it was discriminatory against the airport rental car companies. The city disagreed, saying it is not discriminatory since the tax would apply to all rental care locations in the city, not just the airport.
With voter approval, the charter change must go to the Legislature for approval before it can be implemented. The state collects 30 percent of any option tax adopted in a Vermont municipality, and the municipality keeps 70 percent. The change would also have to be signed by the Governor.
The rental car tax should generate roughly $120,000 a year for road repair.
City Council Chair Helen Riehle said she saw both charter amendment articles as referendums that looked beyond property taxes to fund city projects that improve the quality of life here. She reiterated that the city was trying to avoid raising the property tax rate.
“Maybe we jumped the gun,” she said, “but the school is looking at some major bond initiatives and they only have the property tax to rely on.”
Riehle said she wasn’t surprised that the rental car tax passed and the option tax didn’t.
“I thought the car tax was a much clearer tax to help maintain and fix our roads,” she said. “The option tax was very nebulous and didn’t have a concrete plan to apply it to. The indoor rec facility is the most solid, but it’s not a concrete plan yet.”
Riehle didn’t rule out a traditional bond question going forward.
“I guess I’m a little disappointed but I think it was a long shot in the Legislature, frankly,” she said. “So, you have to regroup and go forward. The rec center has the most support. We can go for a bond but this was an alternative to raising property taxes.”
Riehle added that she thought perhaps the city didn’t do enough public outreach with the option tax proposal.
“If people weren’t ready (for the option tax), I support that,” she said. “It’s clear we have to have something more concrete, and we didn’t do the kind of campaigning and public outreach we needed to. But now we’ll have $120,000 to spend on roads and maintenance, and Lord know after this winter, we need it.”