Editor’s note: This story by Madeline Clark was published in The Other Paper on April 25.
[A] meeting between South Burlington officials and the Ways and Means Committee on Tuesday, April 16, halted the city’s proposed car rental tax – at least for the time being.
“Frankly, I’m not surprised,” city council chairwoman Helen Riehle said. “It was a long shot.”
The proposal was a 0.5% tax on short-term passenger car rentals in the city with proceeds designated for road repair and emergency services around South Burlington.
It was largely approved by voters on Town Meeting Day, though opposed by rental car company representatives like Shannon Kennedy and John Clark of Enterprise Holdings. Clark and Kennedy attended the Jan. 22 City Council meeting to voice their concerns, even after the proposal had been lowered from its original “up to 5% tax.”
On April 16, city manager Kevin Dorn and Riehle headed to Montpelier for the city’s second testimony. The first was with South Burlington Rep. John Killacky and city attorney Andrew Bolduc. Also in attendance was a rental car company lobbyist.
According to Ways and Means chairwoman Janet Ancel, the meeting was brief but cordial. The committee did not take an official vote on the bill, but agreed to refrain from moving it forward. Ancel told The Other Paper she has no plans to take it up again.
“I think it’s a dangerous precedent,” she said. “It’s expanding [local option] into a whole new area.”
And while Ancel understands a high percentage of vehicles are rented in South Burlington as opposed to in other state towns, she “could not get by [her] initial concern.” Plus, she said, the city has the benefit of its existing local option taxes.
As for Riehle, she said gaining the option tax revenue for road repair was worth a try.
“I appreciate the state likes to keep close to their chest their right to tax,” Riehle said. “[But] if you don’t ask, you never know.”
About 70% of Vermont’s car rentals occur in South Burlington, Dorn said. Given the state’s 9% tax on car rentals, city officials felt they could follow suit with a 0.5% tax.
“We thought given the number of rentals in South Burlington, that was a rough estimate of proportionality [for road impact],” Dorn said. “On a $100 car rental, that’s 50 cents.”
But, he added, in Vermont, communities need the Legislature’s approval for their very existence. Although he doesn’t believe there was bias in the committee’s decision against the rental car tax – rather, a concern for setting precedent – he was disappointed by the decision.
“If the state taxes something, we should be able to tax something,” Dorn said.
Last week, councilors approved a $275,000 increase to the city’s paving budget. Although they did not determine where the additional funds would come from, they had hoped the estimated $125,000 raised by a rental car tax would help finance the effort.
“This would have helped fund it quite easily,” Riehle said, adding that without it, councilors might instead elect to use reserve funds as a one-time paving budget boost. The roads, she said, need attention after this year’s challenging winter.
The funds they might dip into include the balance sheet, contingency funds and the reserve fund, Dorn said. But, tapping into these sources puts other city programs at risk, he added. Some monies from the reserve fund, for example, had already been designated for public infrastructure at City Center.
“It’s really the voters of South Burlington whose initiative is being rejected,” Dorn said. “Therefore it’s not just a disappointment to the council and staff, but to the community.”
Voters’ approval of the option tax does not expire, according to Dorn. But, being the first year of the legislative biennium, the current Ways and Means Committee will remain a team through next year. Asked if South Burlington will broach the rental car tax again next session, Dorn replied that, theoretically, they could, but it’s unlikely the committee’s perspective will change.
“It’s disappointing,” Dorn said. “[But] it wasn’t totally unexpected.”
An earlier version of this story referred incorrectly to the size of the proposed car rental tax. It is 0.5%.