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DRAFT V4) APPROPRIATION COMMITTEE ZOZO-Z AND 2020-3 SPECIAL TOWN MEETINGS 7 OCTOBER ZOZO Warrant Article Analysis and Recommendations Special Town Meeting 2020-2 Article 2020-2.2 Short Term Rental Impact Fee Funds Requested Funding Source Committee Recommendation None N/A Approve(7-0) This article proposes that the Town accept Massachusetts General Laws(MGL) Chapter 64G, Section 3D' and thereby impose a 3%local option community impact fee on short-term rentals in Lexington.This article is closely related to Article 10 of STM 2020-3 which proposes to modify the zoning bylaw to clearly define "short-term rentals"and to regulate such rentals including the types of units that may be used for this pur- pose. Our report focuses on the financial implications of these proposals. Background At a special town meeting in November 2009, Town Meeting voted to accept M.G.L. c. 64G, §3A. This imposed a 6%local option room occupancy excise tax that took effect on July 1,2010. If Town Meeting accepts both M.G.L. c. 64G, § 31)(a)and § 31)(b),then a new 3% community impact fee will be imposed on short term rentals of any unit in a two- or three-family dwelling in Lexington. The zoning bylaw change proposed under Article 10 of STM 2020-3 would further limit short term rentals to units in"operator-occupied"or"operator-adjacent"dwellings only. The state-wide room occupancy excise tax rate is 5.7%. Combined with the Town's 6%local option excise tax, the current room occupancy excise tax is 11.7%. This tax applies to room rentals of 90 days or less in hotels, motels, bed and breakfast establishments, and lodging houses. Beginning July 1, 2019, the room occupancy tax was also applied to short term rentals of property for 31 days or less. The proposed community impact fee of 3%on short term rentals would result in a 14.7%tax on short term rental properties in Lexington. Hotels,motels,bed and breakfast establishments and lodging houses would not be subject to the community impact fee, leaving their excise tax unchanged at 11.7%. IRoom Occupancy Excise Taxes Hotels,Motels, Bed& Breakfasts 5J� 6.0Y 11J9a Short Term Rentals 5.7�� 6.O�o 3.0%, 14.79'0 Stats Excise Tax Local Option Excise Tax Short Term Rental Impact Fee Excise taxes are collected by the State Department of Revenue and the portion attributable to local option taxes and community impact fees is distributed quarterly to municipalities. lhttps://malegislature.gov/Laws/GeneralLaws/Parti/Ti t1eIX/Chapter64G/Section3A, https://malegislature.gov/Laws/General Laws/Parti/Ti t1eIX/Chapter64G/Section3D 5