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Manchester rakes in local option tax revenue | Business

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MANCHESTER — No disrespect to Valentine’s Day classics like candy and flowers, but few chocolatiers or floral arrangers could ever match what the state of Vermont delivered to the town of Manchester last week.

Namely, a check for $403,887.

That tidy sum represents Manchester’s share of its 1 percent local option tax on rooms, meals, alcohol and most sales (except clothing) for the three months between Oct. 1 and Dec. 31.

Even with the state keeping 30 percent of gross receipts plus fees, the windfall puts Manchester well ahead of projections for fiscal 2022 and points to its continuing strength as a destination, said town and business leaders.

Those dollars are, for now, headed for the town’s Taxpayer Relief Reserve Fund.

“Anything we collect over $1.2 million goes into the reserve fund,” Town Manager John O’Keefe said. “But voters can always approve a use for it later. For the short term, it’s a very hefty deposit into our rainy day fund.”

Sales taxes accounted for $245,873 in net revenue for the three months ending Dec. 31, while rooms, meals and alcohol provided $158,015 in net revenue.

The state does not separate online and brick-and-mortar sales tax revenue, making it more difficult to track trends in local retail sales. So town leaders have looked to meals, rooms and alcohol tax revenue as a stronger indicator of whether Manchester’s appeal as a destination — and the Manchester Business Association’s marketing efforts — are still strong.

The rooms and meals local option revenue for Oct. 1 through Dec. 31 shattered the previous high-water mark for the period — $130,683, set in 2019. It marks a 51 percent increase over the same three months in fiscal 2021.

The sales local option tax revenue for Oct. 1 through Dec. 31 were the best for that span since 2006 — the last year Vermont collected sales taxes on clothes.

In a prepared statement from the town announcing the results, Manchester Select Board member Laurie Kunz said the data suggests visitors are becoming more interested in buying experiences rather than buying goods.

“Manchester is positioned well in being able to offer experiences even during winter months — skiing, skating, shopping, dining — offering venues for weddings and other events that had been postponed,” Kunz said. “Metro-area families are still holding off on big trips that include flying to far away destinations and deciding to take advantage of family friendly vacations that are less than a day’s drive away. Manchester is positioned well to provide these experiences all year long.”

“We need to stay focused on continuing to support the businesses that are working so hard to make this happen and future infrastructure projects that will keep us competitive as a great place to visit, live and work for years to come,” she said.

While O’Keefe is pleased with the numbers, he said they also point to the potential for greater success if the town can address big challenges it has faced for years: workforce development and housing.

“One thing people remark when they really dig in on these numbers is, ‘What if we had enough employees to staff restaurants seven days a week?’” O’Keefe said. “That’s why I hope that these numbers don’t make people complacent. There’s a lot more to be done.

“When you vett news like this, you think ‘everything’s working great.’ But we know we have a workforce housing crunch. And we know other communities are trying to steal our thunder.”

John Burnham, the executive director of the Manchester Business Association, said the tax returns reflect increased traffic on the organization’s website, manchestervermont.com. “We believe part of that growth can be directly attributed to the marketing efforts of the Manchester Business Association and its member businesses,” he said.

The website “saw a 67 percent increase in visitors, or 20,000 visitors, compared to 2021,” Burnham said. “The website experienced similar growth in the two previous quarters of 2022 Q2 and Q3 and the town’s local option tax revenue grew at similar rates.”

Manchester, one of 16 Vermont cities and towns with a local option tax, has long used that revenue to defray property taxes. Voters will be asked if they want to pursue the same strategy, using $1.38 million in local option revenue, when Town Meeting votes on the proposed budget March 1.

In budgeting for fiscal 2022, the town projected it would net $1,170,000 in local option revenue. Monday’s news means the town has already beat that projection by $13,487 before the fiscal year is over. That does not include a budgeted use of $30,000 from the Taxpayer Relief Reserve Fund.

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