2020-10-14-AC-STM#2-STM#3-rpt - Laserfiche WebLink

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(DRAFT V4) APPROPRIATION COMMITTEE 2020-2 AND 2020-3 SPECIAL TOWN MEETINGS 7 OCTOBER 2020 At least 35% of the proposed community impact fees must be dedicated to affordable housing or local infrastructure projects. The Select Board can vote to have this 35%portion deposited directly into the Af- fordable Housing Stabilization Fund, bypassing appropriation by Town Meeting. The remaining 65% would flow to the General Fund. The table below shows the history of the Town's revenue from room occupancy excise tax since FY2015 along with recent 3- and 5-year averages, and a breakout of the excise tax revenue in FY2020 by quarters. Fiscal Year Room Occupancy Excise Tax FY2015 Actual $8801026 FY2016 Actual $9511942 FY2017 Actual $1,056,493 FY2020 Room Occupancy FY2018 Actual $9021617 Quarter Ending Excise Tax FY2019 Actual $9471681 09/30/2019 $284,719 FY2020 Actual $8021003 12/31/2019 $2741311 Average 2018-2020 $8841100 03/31/2020 $169,398 Average 2016-2020 $932,147 06/30/2020 $73,575 FY2021 Original Est. $970,000 FY2021 Revised Est. $2429500 The pandemic had a notable impact on room occupancy excise tax revenue in the final quarter of FY2020. Due to the slowdown in travel related to the Covid-19 pandemic,the original FY2021 estimate of$970,000 in room occupancy excise tax has been revised downward to $242,500, one fourth of the original estimate. The use of short term rental properties is expected to follow the overall trend in room rentals,which will in turn lower the revenue from the community impact fee proposed by this article. Revenue Impact The Committee does not have enough information to accurately project the revenue that would result fol- lowing approval of this article. Revenue from the community impact fee would be based on the number of short-term rental units, the number of stays, and the rates charged for such units. Currently, the Town has very limited information regarding these figures. Short term rentals have been subject to the room occupancy excise tax for about a year, which could theo- retically provide baseline revenue data, but the Massachusetts Department of Revenue does not provide a breakdown for room occupancy excise based on the type of room. Operators of short term rentals are legally required to register their properties with the State Division of Local Services. As of February 2020,Lexington had about 95 properties designated for Short Term Rental use, but it is likely that a significant number of unregistered properties are also in use. Some additional information can be gathered from short term rental broker websites, but details such as the exact address and status of the "operator" of a rental property can be difficult to ascertain. Additionally, if Article 10 of STM 2020-3 is approved, some properties may no longer legally qualify for use as short term rentals in Lexington. All these factors make it difficult to estimate the number of units and the revenue that would be subject to the community impact fee. Based on regional estimates of short-term rental activity(prior to the Covid-19 pandemic), the Committee assumes that community impact fee revenue will be less than 5% of the current 5-year historical average for room occupancy excise tax (which is primarily derived from large commercial hotels). If that 6