Some Are Thinking Long-term About Short-term Rental Tax

By: Ed Maroney

Topics: Municipal Finance

With Selectman David Currier Skyped in from another location, John Kanaga spoke to the board with daughter Madison in his arms Jan. 23. Kanaga supported the previous speaker, Luke Chapman, who had called for a percentage of short-term rental tax revenue to be dedicated to balancing sewer betterment charges. He said the system of assessing betterments based on water usage, as chosen by selectmen, could cost his brewery and Currier's bowling lanes and restaurant close to $500,000. “That's a lot of loads of laundry and a lot of pints of beer,” he said.  ED MARONEY PHOTO

ORLEANS The state will begin taxing short-term rentals of vacation homes, one or more rooms in houses, condos and the like beginning July 1. Town officials and business leaders are already thinking long-term about the uses of the new revenues.

“Taxes will be collected by the Commonwealth of Massachusetts Aug. 20, and then on the 20th of the month from then on,” Selectmen Chairman Alan McClennen said Jan. 16. “Whatever comes in will be reimbursed to the towns on a quarterly basis. As someone who is a little bit fiscally conservative, I hope we create a special stabilization fund so this new unknown amount goes in for, we might say, housing and wastewater stabilization.”

McClennen said Orleans has “two incredibly important issues to deal with financially: affordable housing and wastewater... I hope we don't go down the road of, 'It's new money. Let's start spending it.' The first time we'll have any idea of what it is is October.”

Speaking at the board's Jan. 23 meeting, Luke Chapman, owner of Del Mar Vacations in Orleans, proposed three uses for the new funds in equal proportions: a tourism department, affordable housing and adjusting the formula for sewer betterment charges to help balance charges to residential and non-residential properties.

Chapman said Provincetown spends $1.4 million annually to promote tourism, while “we have zero.” He cited challenges unique to Orleans. “At Nauset Beach, a third of our parking lot is gone,” he said. “Sharks are here. We have to spend money as a community to retain our primary industry. We should try to grow it, too. There are a lot of things hurting the potential for tourism here. We need to reverse that trend.”

Tourism “contributes to year-round jobs,” Chapman said. “Affordable housing can provide year-round workforce housing. Betterments to support (wastewater) infrastructure will support jobs and housing year-round. It's a trifecta.”

A section of the state legislation creates the Cape Cod and Islands Water Protection Fund with an additional tax on short-term rentals of 2.75 percent; revenue will be distributed by a management board to the towns to pay debt service on loans and for other financial assistance related to water pollution abatement projects. Also eligible are “utilization of innovative strategies and alternative septic system technologies that result in nutrient reduction for marine and fresh waters.” Up to 10 percent of annual revenues can be used to evaluate adaptive management measures, monitor water quality, and pay for further water quality modeling.

At the selectmen's Jan. 16 meeting, Town Administrator John Kelly said the town can have a seat on the water protection fund board for a selectman, Finance Director Cathy Doane or himself. “We're able to regulate where that money goes and deal with applications that come in,” he said. “It gives us a voice for projects to help us pay down principal and debt.”

Later, Selectman Kevin Galligan offered “to put my name in the ring. This is an important tool we ought to make sure we maximize. I've been with this since the beginning,” he added, noting his service on the town's water quality advisory panel. Kelly smiled and observed, “Selectmen can say things at meetings that administrators can't.”

Kelly ran down other funding opportunities provided by the state law.

“We have a 4 percent excise on hotels and motels that will automatically apply to short-term rentals if we do nothing,” he said. “You can go up to 6 percent; it takes a town meeting vote.” That body would also have to approve a community impact fee of up to 3 percent, of which 35 percent must be dedicated to affordable housing or infrastructure projects.

Kelly asked the board to consider the expenses associated with the law. “We haven't been licensing these short-term rentals,” he said. “We don't have the ability right now. You could license them, require annual inspections, charge a fee. We know half the homes in Orleans are not owner-occupied year-round. How many are being rented out, we don't know. Under this law, the state takes the onus of registering (them).” Kelly added that Town Counsel Michael Ford “doesn't see anything in here that was problematic for the town if we wanted to go forward (at the May town meeting) with some of these local options.”

Speaking for herself and not her board, affordable housing committee chair Katie Wibby asked that Orleans use the new revenue tools to bolster the affordable housing trust. That board was to hold its initial meeting yesterday (Jan. 30).