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APPROPRIATION COMMITTEE-2.020 ATM 25 March 2020
<br /> hotels, motels, bed and breakfast establishments, and lodging houses. Beginning July 1, 2019, the room
<br /> occupancy tax also applies to short term rentals of property for 31 days or less.
<br /> The room occupancy tax is collected by the Department of Revenue and the portion attributable to local
<br /> option taxes and community impact fees is distributed quarterly to municipalities.
<br /> The table below shows the history of the Town's excise tax revenue since FY2015 along with 3-and 5-year
<br /> averages. Revenue in the current fiscal year is estimated at$970,000, an increase of 2.4%from FY2019.
<br /> Excise Tax Category Other Room Occupancy Jet Fuel Meals
<br /> FY2015 Actual $1,698,096 $880,026 $346,731 $471,339
<br /> FY2016Actual $1,727,554 $951,942 $278,337 $497,276
<br /> FY2017Actual $1,616,713 $1,056,493 $78,074 $482,146
<br /> FY2018 Actual $1,562,971 $902,617 $203,854 $456,499
<br /> FY2019Actual $1,659,673 $947,681 $240,085 $471,907
<br /> Average 2017-2019 $1,613,119 $968,930 $174,004 $470,184
<br /> Average 2015-2019 $1,653,001 $947,752 $229,416 $475,833
<br /> FY2020 Estimated $1,648,000 $970,000 $200,000 $478,000
<br /> Revenue Impact
<br /> The community impact fee of 3%on short term rentals would be in addition to the current local option 6%
<br /> tax and the state 5.7%tax, resulting in a 14.7%tax on short term rental units in Lexington. Hotels,motels,
<br /> bed and breakfast establishments and lodging houses would not be subject to the community impact fee.
<br /> At least 35%of the community impact fees must be dedicated to affordable housing or local infrastructure
<br /> projects. By a vote of the Select Board, this 35%portion could be deposited directly into the Affordable
<br /> Housing Stabilization Fund,bypassing appropriation by Town Meeting. The remaining 65%would flow to
<br /> the General Fund.
<br /> The Committee does not have sufficient information to provide a detailed analysis of the revenue impact
<br /> that would follow approval of this article. An estimate of revenue from the community impact fee would
<br /> be based on the number of short term rental units and on the average annual revenue from such units. At
<br /> the moment,we have neither figure.
<br /> All operators are legally required to register their properties with the Department of Local Services. Lex-
<br /> ington currently has 42 properties registered, of which 36 are for short term rentals. If Article 36 is ap-
<br /> proved, some of these units may no longer be allowed to be used for short term rentals. It is also likely that
<br /> a significant number of unregistered properties are being used for short term rentals in Lexington. This
<br /> makes it difficult to estimate in advance the number of units that will be subject to the community impact
<br /> fee.
<br /> Since short term rentals have been subject to the room occupancy tax for less than a full year, we have
<br /> insufficient data with which to calculate an average annual revenue.
<br /> Based on regional estimates of short term rental activity, the Committee assumes that community impact
<br /> fee revenue will be under 5% of the current 5-year historical average for room occupancy tax (which is
<br /> currently derived mostly from large commercial hotels), and possibly much lower. If that assumption is
<br /> correct,the revenue would be under$50,000.New regulations on short term rentals may also generate new
<br /> expenses for enforcement,which will offset this new revenue.The net revenue impact may be quite limited,
<br /> but we will need to re-evaluate the impact once we have more data.
<br /> The Committee recommends approval by a vote of(7-0-1).
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