Vermont Legislature SmartTranscripts:

[Rep. Mollie Burke (Member, House Transportation Committee)]: Good morning.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: This is a joint meeting of the House and Senate Transportation Committees. And what we wanted to do from the Senate side, we've been taking a fair amount of testimony on local option taxes. And the senator from Washington and myself, what kind of started this off is we were in a community that presently has the 1% local option tax in place. That community is now voting in March on going from 1% to 2% on the local option tax. And in the backdrop, in our afternoon committees, two of us, we sit on appropriations and in appropriations in the pilot fund where the 25% that goes to the state is deposited, right now there's a surplus and the administration is moving, has recommended in their budget to move a couple of pieces out of that surplus and paying for items within the tax department. The league is not very happy with that and sees that pot of money in the local option taxes as money for the tenants. So as we had those conversations and we began to dig into the issue of what the local option taxes are and where they go in towns, we decided that we would dig in and we'd take a look and see what we might do with that to create something for the towns that was more consistent and formula based to send money back. The only place there is formulas to send money back to the towns is in transportation. And on the municipal side of government, for many smaller towns, the transportation budget is 70 to 75% of their municipal budget. Fast forward to that, and we took testimony yesterday from one of the towns that I represent, Morristown, who is putting up a local option tax. And that local option tax, they will vote on in March Of the 1.2 that they estimate to raise, 800,000 of it is going to be dedicated just for paving, not for bridges, not for anything else, but dedicated for paving for the next four to five years for them to catch up to a place where I think 60% of their roads would be in good condition. As, and we've taken all kinds of testimonies. So I'm giving a little overview to all of this. The nexus for us with local option is that is money raised at the local level. If there's a surplus there and the numbers produce some extra money, is there a way that we could find to dedicate that money to go back to help the towns in a organized fashion and not as we're doing in the pilot fund, send a little here, send a little there, all over the place. So the joint fiscal staff will be here today to kind of give you a primer and bring you up to speed on some of the things that we have heard in our committee And you can do what you want from that point on, but we know that there is an interest within your committee as there is in ours of doing something constructive for the tenants. So at this point, Chris, you're on.

[Christopher Rupe (Joint Fiscal Office)]: All right, well, good morning everyone. Christopher from the Joint Fiscal Office. I'm gonna be brief and then turn it over to some of my colleagues, but I just wanted to sort of kick things off with just a few framing remarks about leading into this conversation to try to make sense of it. I apologize to the Senate members here. A lot of this is going to be a repeat of what you heard last week, but this will be new content for the House members. It's great to see you all here listening to this jointly. I think as Senator Westman mentioned, this is really intended to be a starting point of a conversation around potential strategies to wrestle with this fiscal challenge that you all are very familiar with, which is that the T Fund is severely constrained and struggles to keep up with federal match needs, let alone coming up with additional revenues to provide aid to the municipalities. At the same time, our municipalities are struggling with the same cost pressures and property tax pressures that you all are very familiar with. One of the things I think is worth keeping in mind, and I know you all know this, but it's worth remembering is that our transportation system really is a network. And when we all go to work or go anywhere, we cross town lines, we go on interstate highways, state highways, class two roads, class three roads, and towns have different abilities to keep up with their sections of that network. And they also have very different cost pressures. Not every town can raise a lot of money for a local option tax, but some towns really struggle to keep up with the mileage that they have. So is there a way to create a system where towns can generate local resources and also have some of those resources spread to support the network that benefits everybody, but not every town can really raise the same amount of money to take care of the same amount of mileage. So I think those are sort of the goals that this conversation was attempting to further. I did just wanna remind everybody that we do have an existing law around 1% local option taxes. So we're gonna split this conversation today. My colleague, Ted Barnett, who the transportation committee has never seemed to hear from, because he's always hiding in ways and means. I'm just gonna walk him through a overview on what the current law is on the 1% local option tax. So that'll be some good foundational grounding and what is currently in place. Then Damian Leonard from Legis Council is gonna go through a draft proposal, again, to start a conversation that deals specifically with the towns that Senator Westman mentioned that might be interested in going to a 2% local option tax. So that piece will deal specifically with that second 1%. So the language you'll see doesn't change current law. The first 1% that's already in place, it really deals with towns who are looking to go a little bit higher up. So as Senator Westman mentioned, I think the proposal would have, again, is all starting point, would split the revenue. So the town that generates the local option tax revenue through its commercial activity would keep 50% of the money, 40% of the money would then essentially be run through existing town highway programs like the town highway aid formula and 10% would go to the pilot special fund. So with that, sort of kicking off the context around this conversation, I'll invite my colleague, Ted Barnett to come up and he has some slides that goes through current law on local option tax. But I know many of you in this room have been interested in tools like this. This is something that does leverage an existing tax type. We already have a lot of the administrative infrastructure in place to do this type of thing. So also just keep that in mind as a second.

[Ted Barnett (Joint Fiscal Office)]: Good morning, everyone. I'm going to attempt to share my screen and talk at the same time. We'll see how well that goes. Ted Barnett joins fiscal office. It is great to be in front of different committees, mix things up a little bit. Generally in a session, I try and get in front of as many committees as possible. So thank you for helping me achieve that. So yes, as folks have set the table, this is a general primary on local option taxes. We're gonna talk about local option taxes itself, the 1%, where the revenue goes into the pilot special form and allocations. And then talk a little bit high level of general tax policy considerations when thinking about different tax types, who bears the responsibility for paying the tax, etcetera. That's where we're going to go. Okay, so local option taxes. The authority for local option taxes is found in '24 BSA 138. But lawyers, folks with Ledger Council will probably spend a lot more time on that than I will. Towns can place a 1% local option tax on any combination of sales, meals and alcoholic beverages and rooms. Folks do, you will see folks do implement any sort of combination of those. This was originally created as a mechanism to help municipalities transition to statewide property tax created by Act sixteen nineteen ninety seven. As part of that legislation, there was specific towns called out referred to as gold towns that met certain property tax criteria or criteria on the brand list. And originally local auction taxes were envisioned to sunset in 2002, that sunset kept getting pushed back. Now we have a structure that is permanently in statute. Before Act 144 of 2024, folks who weren't called out as gold towns were required to do a charter change and get approval from y'all to implement a local option tax. Now a lot can be implemented by a majority of voters in the municipality after it's been approved by the select board to go on ballot. However, we'll talk about this at the end of the presentation, implementing a new local option tax can be administratively burdensome for the Department of Taxes. So act 144 allows the commissioner of taxes to limit the number of new local option pounds to five per year. If they determine that the fleet that's coming through in a particular year would be too cumbersome for them to administer. Local option taxes are collected and administered by the Department of Taxes. There are two separate ones, which I'll talk about in the next slide, Burlington and Maryland City that operate differently. But for the rest of municipalities, these are implemented at the statewide or collected and administered at the statewide level. State law, a portion to the revenue from local option tax 75% to the count that implements the lot and the 25% to the pilot special fund. The Department of Taxes collects a per return fee to help administer the program. Also, it helps fund the state appraisal mitigation program. A return is filed when a business reports their monthly or quarterly sales or rooms taxes to the department. I will, this was a question last time, so I'll answer it now. That 5.96 return fee was lowered from $9 in 2011. So it's been around for a while. Revenue allocations changed from 70%, 30% split to the current 70 five-twenty five last year, that could be seven. That was effective in October on October 1. With an asterisk, there are in municipalities that have a local option tax on the sales tax that applies to jet fuel sales. And so in act 57, although the general local option tax percentage was changed from seventy-thirty to 70 five-twenty five, act 57 left these local option taxes alone. So that split of seventy-thirty stayed in place for jet fuel sales. The full amount of the local option tax, both the municipal and the state portion must be used for aviation related purposes. And so yes, there are two municipalities that generate local option sales taxes on jet fuel, South Burlington, and then Berlin just started with a local option tax. And so Napster Airport sells jet A. And so they are also generating local option to Texas on jet fuel. It's not a large amount of money. In FY '25, the T fund portion of local auction taxes on jet fuel generated a little bit less than $10 This is a slide with the asterisk about our two special municipalities that received authority in their town charters to implement local option taxes that are collected at the municipal level rather than the Department of Texas. And so they hold on to 100% of that revenue because they are the ones collecting and administering it. In Burlington, this is referred to as the grocery seats tax and it is levied at 2.5% on admissions, alcoholic beverages, amusements and meals. A lot of those categories when you're looking at the charter, to amusements or some of it is kind of older school. Businesses and then hotels and hotels, it's a 4% tax on those businesses and then short term rentals, 9%, that rate is much higher. Burlington sharply regulates their short term rentals. So that's Oh, tax policy is a bit of that piece to discourage short term rentals. In Burlington, in Rutland City, it's called the rooms, meals and entertainment tax, and it's 1% on the grocery streets of specified business activity. Rooms, meals and entertainment category. So with the general information out of the way, moving on to revenue collections. And so this slide shares information about local option tax revenues that have been collected since fiscal year twenty seventeen. The key piece in this slide is that you'll see from 2017 to 2021 local option tax revenues collected. They increased a little bit, but the rate of change wasn't quite that strong. And then after 2021, see pretty sharp ramp up in tax collections. So since 2017, total local auction tax revenues have increased by 102. And it's important to note that of this overall share, 75% of it comes from the sales of the option tax. And generally speaking, so fiscal year twenty five total local option tax revenue, 56,300,000.0. The towns received 37,000,000. The pilot funds received, we'll talk more about the pilot fund in a bit, received 15,800,000.0 and it's been fine, it's almost 90,000. And then return fees is $3,200,000 So yes, out of the 56,300,000.0, 42,200,000.0 was sales book collection taxes.

[Rep. Walker (Chair, House Transportation Committee)]: Just a quick question. Do you know if that's due to inflation or transactions or less one that's been going up over the years? Like the cost of goods, do you track? Are there more people buying stuff out there?

[Ted Barnett (Joint Fiscal Office)]: Sure. It's a good question. So on this slide, we're going to talk about two sources of revenue strength. Inflation certainly plays a part. It's not on this slide, but absolutely as there's more inflation, the cost of goods are increasing, but sales in meals is levied on as a percentage of the cost of what is sold. So share inflation would increase the revenue collections. The two other pieces, one is there were changes in pandemic era how people were spending money. So on the sales tax side, right after the pandemic, weren't able to go out and spend money on services going up to, well, consumer services. They were maybe looking around their house. They had some extra stimulus money. They were maybe deciding to buy a new temperature. We saw an overall shift to more spending on goods. On the meals and rooms side, you'll see that on where my mouse is between fiscal year twenty one and fiscal year twenty two, meals and rooms taxes increased by 15%. And so once I saw drop off right after the pandemic, folks weren't able to go out to eat, weren't able to go on vacation. But once Vermont in particular was able to, effective management of the pandemic, they were able to open relatively quickly. And so we saw building rooms tax collections increased substantially. That fed into local option tax revenue as well. And then the second piece is since, especially recently with the legislation change for act 144, we're seeing more municipalities implement local option taxes. So in 2017, there were 17 municipalities with meals and rooms tax, but by 2025, there were 32. But the sales tax is 14 in 2027, but 25 in 2025. So as there are more municipalities with a lot, it's not surprising to see that local option tax revenues increase. So we're now going to pivot to the 25% of local option tax revenue that goes to the pilot special fund. The pilot special fund primarily funds the general pilot program. ANI pilot is a separate funding stream and it compensates lands. The general pilot program compensates municipalities for the insurance value of state owned buildings, prisons and UVM buildings, which UBM buildings are captured at $750,000 in statute. Some examples of state owned buildings. We have 115 State Street Annex, which is Annex the might be referring to a portion of the State House. I know some folks see the 34,000,000 and wonder how we can rebuild the State House for $34,000,000 but maybe it's just referring to the Annex parts. But also IoT buildings, garages, the Albert Welcome Center. So anything that's state owned, that goes on a state building inventory and that value is translated into a pilot payment for the town. And I will spare you the details of how that payment is calculated. So the pilot payments are funded by 25% of local option tax revenue minus return fees. In fiscal year twenty twenty six, pilot payments, the general pilot payments totaled almost $11,400,000 This number does not include Newport and Springfield have special contracts for hosting correctional facilities in their towns. Importantly, pilot payments, as far as I understand it, since the beginning of the pilot program were prorated. So there wasn't enough revenue generated through local option tax to fully fund pilot payments to municipalities starting in fiscal year twenty twenty four. With our increase in local option tax revenue that we discussed in the previous slide, they were able to be fully funded. This slide is showing that there are more towns that receive pilot payments, showing a few things. But one of them is there are far more municipalities that receive pilot payments than who have a local option tax. So on the left, the different colors reflect different types of local option taxes. So the municipalities highlighted in green, meals and rooms, blue only. There are only a few on here that are blue only. Have local option tax and sales. So you can see there's the key there. And then on the right, we're showing the amount of pilot payments. And so the lighter green colors reflect relatively small pilot payments. And then as the color becomes more blue, there are larger pilot payments. The vast majority of municipalities are receiving smaller local option or pilot payments. Maybe they have some buildings on a state park, a gazebo, lean to buildings that aren't generating, there's not a lot of value in those buildings. So we're not seeing large pilot payments, but municipalities with correctional facilities with They have a state college campus in town, so Johnson and Linden. Those are receiving larger pilot permits.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: Yeah, I think

[Rep. Patrick "Pat" Brennan (Member, House Transportation Committee)]: this Can you go over exactly how the amount of pilot Apparently, where the correctional institutions are, the special formula there or special, but just for regular municipality has one of these state valued property, what's the calculation to figure out? Because you got two moving, you got at least one moving piece, much is in the pilot program? And then so how much do they what's the calculation? If you have a gazebo, how does that number determine?

[Ted Barnett (Joint Fiscal Office)]: Sure. I will what I will do is I will go over generally using my words. And then I had in the slide I presented to Senate Transportation. I figured folks may not wanna get all the way in the weeds on the calculation, but I do in that slide deck have a slide that goes through the specific steps in the calculation. So I'll provide it to you all so you can review. Generally speaking, the insurance replacement value, so the value of the building is multiplied by the CLA. So to convert that statewide value down to the grand less value at the local municipality multiplied by 1%. So you have a grand less grand less kind of municipal value of state owned buildings within the town. Then based on the amount of the budget in the town, they can calculate an adjusted tax rate and then apply that adjusted tax rate to the brand list value that was calculated in the previous steps. So I'll provide that on a separate slide, but that's the general mechanics of how they get there. And it's done, the Department of Taxes calculates all those values and so they update, as far as I understand, the values are updated annually. So they're running those calculations and then the payments go out in the late fall, early winter, November, December. Oh yeah, and we didn't talk about this slide. So this gives some background on the general trend that I mentioned about how for a while pilot payments were prorated. And so on the table, you can see the amount of the prorated pilot payment based on available revenues, percentage of proration, and then what the full pilot payment would have been if there was enough revenue to make those full pilot payments. And then yes, fiscal year twenty four, we started to see payments funded fully. Since even with fully funding pilot payments, the amount of revenue generated by local option taxes is more than it's needed for pilot payments. So you'll see this purple bar reflects the ending balance in the pilot special funds and increased substantially even with fully funded power payments. So ended that little over 15,000,000 at the end of fiscal year twenty five. I'm gonna quickly run through other neighboring states that have different, it's easy to think that because Vermont has a specific way of doing local action tax, That's the way it's done everywhere. That's not true. Our neighboring states have different structures of what they allow municipalities to do. And so one is Massachusetts. They have a rooms occupancy tax and a short term rental impact fee. Municipalities can levy up to an additional 6% on that rooms occupancy tax above the statewide rate of 5.7%. Municipalities can also levy at 3% on short term rentals as an impact fee. 35% of the revenue generated by that impact fee must be used for affordable housing in the local municipality. Of three fifty two municipalities in Massachusetts, two thirty three have a municipal local occupancy rooms tax rate and 42 have chosen to implement the short term rental impact fee. And similar to local option taxes in Vermont, these taxes are collected and administered by the Massachusetts Department of Revenue. New York state has a state sales tax of 4%, but they allow local counties to add up to 4.875% on top of that 4%. Counties then have different negotiating percentages that distribute to cities within the county. When I looked at the map, it looked like the range was about 40% to like 6% of revenue that goes to specific cities and a county. Revenue is collected by the New York Department of Taxation and Finance in that structure.

[Rep. Mollie Burke (Member, House Transportation Committee)]: For these other state examples, what if any percentage goes from the municipality state?

[Ted Barnett (Joint Fiscal Office)]: From the municipality back to the state.

[Rep. Mollie Burke (Member, House Transportation Committee)]: So for example, like the 70 five-twenty five split here in Vermont, does that look like in other states?

[Ted Barnett (Joint Fiscal Office)]: I'm not sure if the, what percentage the state retains Make enough of the notes and clear enough to actually know. Okay, this table shows which counties have decided to implement which local sales tax rate. The vast majority of them have chosen to implement an additional four on top of the state 4%. So they end up at 8%, but a few have gone for the full 8.875. So moving on to some considerations. The first one is complexity. The local option tax administration is currently fairly complicated. And a big piece of this is because USPS residential addresses and zip codes don't neatly match town boundaries. So this is from fantastic testimony given by the Department of Taxes to Senate Finance all the way back in 2023. Was so good. I remembered it and remembered to snip the slide here, but the key pieces. So Montpelier has a recently implemented a look block in sales tax. The yellow dots reflect addresses that have a Montpelier mailing address. And so you see quite a few in Middlesex, a few in Mooredown. Berlin also has a little block option sales tax, but they have a Montpelier address. So when someone's making a purchase online and they're entering their address, it would show up as a Montpelier address for folks in Middlesex. And so how does the Department of Taxes get retailers the information they need to appropriately charge the local option sales tax for right customers? It's challenging. I know they do phenomenal work on it. They've developed shape files that they push out to a lot of the larger like square or Shopify to help figure out which addresses need to be purchased tax. But it's definitely an operation, it's definitely a challenge. And so as you all are considering additional changes to the local options, tax structure broadly, keeping complexity and administration in mind is absolutely important.

[Rep. Patrick "Pat" Brennan (Member, House Transportation Committee)]: You mentioned that Burlington and Rutland, they collect their own. So instead of the money coming to the state, it goes directly to those municipalities and they get a monthly payment or whatever. Is that how it works?

[Ted Barnett (Joint Fiscal Office)]: Yes, businesses are submitting, the municipalities have their own returns and businesses within the municipalities are submitting the returns to the municipal treasurer. And that's happening at that level. Okay. The second piece is equity. And when we're talking about equity, this is often thinking about who pays and who's bearing either a larger or smaller responsibility for a specific tax type. For local option taxes, one thing I didn't mention in the map, but a lot of local option taxes are implemented where commercial activity occurs. So this is towns with a large tourism presence, a large commercial base for retailers. And so they will benefit the most regardless this may be independent of their population thinking about Berlin as an example. That is not universally true in Vermont. There are a lot of municipalities that would not see much revenue if they implemented a low cost index. Maybe they have a single gas station in town. There might even be less than that. So thinking about in terms

[Damian Leonard (Office of Legislative Counsel)]: of equity, that gives you

[Ted Barnett (Joint Fiscal Office)]: the example of myself. Live in Williamstown and Berlin, Montpelier, Barrie all have some burden on the local option tax. And so as myself as a Williamstown resident, I'm spending my money in those towns. They're the ones who are generating or receiving local option tax revenue. But Williamstown also, if we're talking about paving has some paved milestones. Rightly thinking through who is paying local election taxes and who's receiving the revenue is a piece to think through on the equity side. Another piece of this is different tax types are paid by different groups of folks. And so when thinking about the rooms tax, rooms taxes far and away paid by out of state business. So folks coming here from neighboring states internationally, but sales, meals and alcohol taxes, more of a slit. Residents are going out to eat, they're buying goods at local retailers, but the same is true for tourists who are coming there and spending money for local businesses. The final piece is just very broadly speaking, consumption taxes more broadly and specifically sales taxes are progressive, meaning that folks who So it makes up sales tax since lower income folks and younger folks are spending more of their overall income on goods. The amount of tax they're paying on those goods make a larger percentage of their income than folks who are higher income scale. And then finally, when considering particularly in the structure, an increase in taxation, A key piece is to think through how this might place Vermont compared to local or neighboring jurisdictions. So in the sales tax, Uber bond is currently at 6% with a local option tax. It would move in towns that currently have a local option tax at 7%. If they're able to implement an additional 1% that would move sales taxes in certain jurisdictions to 8%. And so that starts to move ahead of some neighboring states. When I looked, New England states generally have a sales tax rate of between 5.57%. So that would certainly move Vermont in those jurisdictions that didn't implement an additional 1%. Beyond neighboring states, Vermont currently has the highest meals tax among neighboring states. So again, increases would push Vermont ahead of neighbors. I will note that when thinking about competitiveness on the lodging side, it's more complicated. A lot of jurisdictions and cities in particular have local tax rates, local surcharges, the Bank of America Convention Center, all sorts of other things. And so these comparisons are challenging. But similarly, New in Hampshire and Maine are certainly when folks are looking at a vacation in New England, in the woods, they're certainly looking at the tax rates in New Hampshire and Maine on the logging site is important. And so overall increases in local option taxes in certain jurisdictions would move those places above comparable locations in other states in a pure competitive mix lens.

[Damian Leonard (Office of Legislative Counsel)]: So there we go.

[Rep. Mollie Burke (Member, House Transportation Committee)]: Thank you. I just had two questions from a little bit earlier. The first, you mentioned that the tax department has the ability to limit how many local option taxes they allow in the state. Just aware, at least one of my towns has that on the ballot for town meeting. Any sense of how many towns are looking at this this year? And could we

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: run into a situation where towns pass local option taxes and the tax credit says we can't handle all those? So I can. So we took testimony. At this point. Their tracking document has seven communities that this year have it on the ballot. I think they have 14 towns that have inquiries in about moving ahead. To this point, they do have permission to not allow more than five, but the tax department to this point has never implemented or enforced any of that to this point. Thank you.

[Rep. Mollie Burke (Member, House Transportation Committee)]: And then my second question was, you spoke that we are fully paying the pilot program, but that we weren't fully paying in the past. Is that legislation that changed? How are we not fully paying pilot funds back to municipalities in the past?

[Ted Barnett (Joint Fiscal Office)]: Sure. It was explicitly because there wasn't enough revenue being generated by local option taxes. So every year, and looking at some of the spreadsheets I started in 2023, so I caught a small window of how this was done. They were after town meeting day and as part of the budget process, looking at based on the current number of local option taxes, seeing who had implemented a new rule option tax, looking at the consensus revenue forecast, putting together an estimated amount of local option tax revenue, and then basing the pilot appropriation on a conservative amount under that estimated revenue to make sure you weren't overspending on the fund. But it was explicitly limited by the amount of revenue. So there was about a, it looked like a 2 and a half to $2,000,000 difference at Delta. And so, yes, it was just within the budgetary tax expense to maximize what this call was given again, but also. No worries.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: And then Senator White.

[Rep. Mollie Burke (Member, House Transportation Committee)]: You have a rep White, can have Senator White. Well,

[Sen. Rebecca "Becca" White (Vice Chair, Senate Transportation Committee)]: you, Ted, so much. It was nice to see that again. And I felt like I I had like an open book test a little bit because I knew some of the answers. I think the main question that I have that I don't think your presentation answers is how much money we actually would be gaining from a second percentage on Stowe, how long it would take us to see that revenue, and then an actual comparison of what is the gap we have, which to my understanding is 33,000,000 plus, and how that would even fit into it other than a couple nickels and dimes for resolving the problem. So I guess I'm wondering if you could give me some information about what the expected revenue would be, and maybe Damian will go over with the language, but what would the expected revenue be for the construct that we heard from Senator Westman, and how long would it take for that money to actually go to Town Highway 8?

[Ted Barnett (Joint Fiscal Office)]: So, to answer the first part, if we're looking only in Stowe.

[Sen. Rebecca "Becca" White (Vice Chair, Senate Transportation Committee)]: Yeah, if my understanding is correct, that's the only town that's doing this hypothetically this March, I believe. This is the only town that's doing a second term.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: That's the only town that has it up for a vote this time.

[Sen. Rebecca "Becca" White (Vice Chair, Senate Transportation Committee)]: But they haven't passed it. And

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: that's a trickier question because Burlington already pre existing did have higher amounts, but given the law the way it is, Stowe is the first community out of the box that has a vote this year or

[Sen. Rebecca "Becca" White (Vice Chair, Senate Transportation Committee)]: this March. So how, yeah.

[Ted Barnett (Joint Fiscal Office)]: So looking at, there are two different ways to look at it when I went through the data. One is the kind of the low end, an additional 1% in Stone would be about $3,500,000 That's not including, there's a portion of the data that's referred to as other, which as far as I understand refers to a lot of online sales. If you include that, it's about $4.2 $4,300,000 So that's the the total amount. The amount of local option tax revenue.

[Sen. Rebecca "Becca" White (Vice Chair, Senate Transportation Committee)]: And the way the constructive is for Senator Westman's bill is 50% goes back to the town, that would bring us down to like 1,800,000.0 going to the town I'm really bad at math so that would be half of that would go to the town. And then 40% would go to the town highway aid fund so how And then 10% would go to the State Pilot Fund. So, what would that 40 Maybe you can just quick math it for me. That nine would be 100 to 1,500,000.0.

[Ted Barnett (Joint Fiscal Office)]: Let's say, hypothetically, it's 4,000,000. And then you could do two. Two would go to Stowe, two would go to state uses, and then 24? Yeah.

[Sen. Rebecca "Becca" White (Vice Chair, Senate Transportation Committee)]: So under 2,000,000 is what we would expect. Like big, numbers going to town highway aid. If they pass it.

[Ted Barnett (Joint Fiscal Office)]: Yes, probably speaking. I don't yes. And given that it's I'm sure the tech department would have thoughts on how soon it can be implemented, but it's put in an effective date. The lift since '10 still already has a low cost in tax. I imagine you can start seeing that revenue over the next fiscal year to '27.

[Sen. Rebecca "Becca" White (Vice Chair, Senate Transportation Committee)]: In 2027. Okay, so you could see it July 2027. Yeah, that's a pretty small amount of money for potentially the amount of work. And I also think if I was STOW and I knew that the secondary percent wouldn't be 70 five-twenty five, but it would be fifty-forty-ten, I would feel less incentive to vote for it as an individual, personally, if that was on my town ballot. So I do think this is an intriguing idea, but I worry about the amount of money being so small for this year. So thank you for that. And yeah, I guess I'll save my questions for Damien about the language then. And I also did we, when this, when I saw this on the agenda, I also thought we might be talking about what the house proposal around the gas tax was. I know they have a local option gas tax conversation that they've been having. So I'm wondering if we could do another joint hearing on this topic and hear about that idea as well.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: We can talk with the chair of the committee, we're happy to hear back. This is meant to bring people up to speed on where we are, what is happening out there. And I would just say in this,

[Damian Leonard (Office of Legislative Counsel)]: if

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: we have an idea that going forward, we wanted to do something for some of the other towns that are feeders for those. In a lot of these communities, I'll take one not close to me. Stratton is a community of under 1,000 people. A majority of the people that make Stratton work are people that live outside of Stratton. And in many communities, that's the same thing. If we're going to create a balance between communities where the host community gets a good chunk, but also the communities that are the feeder communities around that get some. And we have communities around them that may not have the option to do a local option tax. I think if we don't start something before a whole bunch of towns move into this area, we'll never do. So this is an attempt to look at the local option tax and create a conversation. And if some of it the House liked and wanted to do something in conjunction, I'd be happy personally about that. But this is meant to create a conversation, and you can add to it, subtract from it, whatever you would I think there's an opportunity to have a conversation now that if we wait, there won't be any opportunity to have a

[Sen. Rebecca "Becca" White (Vice Chair, Senate Transportation Committee)]: Yeah, and I would just also say, I do hope that we can have a joint hearing around the gas tax conversation, because I know that that's been coming up quite a bit on the House side around local taxes. I would also hope we have a conversation about purchase and use, because that all factors into how I feel about this proposal.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: You had a hand over here.

[Rep. Walker (Chair, House Transportation Committee)]: We're coming over to Representative Perch, I think, now.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: Oh, me. Yeah.

[Rep. Mollie Burke (Member, House Transportation Committee)]: Just for your discussion, I had a bill that my town wanted me to put in, trying to get some local money out of the gasoline stations in town. So, that was $8,007.66, which put on, a local option tax on gas stations. But, I'm understanding that that would be very expensive to set up. It would require setting up a whole new tax system. So, don't know if that's still in the works. It might be helpful because know what that cost might be. But my question is, if a town wanted to adopt a local option tax that already has, like my town has, local option taxes on all the three possibilities, could you just go to one, for instance? We'd say, well, we have local option tax on rooms and meals and alcohol and on sales. Could the town just decide to go to 2% on one of those items? Or would you have to go to 2% on everything?

[Ted Barnett (Joint Fiscal Office)]: I will say something and then hope that it's correct and look to the lawyers to confirm it. My understanding is that a town would pursue a charter change and so they could structure their desired tax in any number, any possible permutation and that charter change would have

[Damian Leonard (Office of Legislative Counsel)]: to be approved by you all. So if I'm understanding the question correctly, your question is if you wanted to go outside of the current local option tax scheme, How would you do that? And the answer is you would do a charter change if there wasn't, if you weren't fitting within the current local option tax. But under current local option tax, you can pick any one of the local option tax options that's there, or you can pick all of them or a combination of them. Under the proposed language that I'm going over in a minute, you can also choose to go to 2% on any one or all or any combination of them. So there's within the local option tax, you have options, you don't have to do it for everything.

[Rep. Mollie Burke (Member, House Transportation Committee)]: I thought you didn't have to go to Charter Change for Local Option Tax, was that for adding If

[Damian Leonard (Office of Legislative Counsel)]: you wanted to, so for example, Burlington had the gross receipts tax, So I may have misunderstood your question, but what I understood was that if you want to go outside of what local option tax allows you to do under the current law, then you do need allowance in your charter. Municipalities are limited to what the law permits absent a charter change. So if you wanna do something different than what the law permits, you do need a charter change within the law itself though, you can adopt any permutation permitted under the law. Local option tax doesn't require you to tax, do local option tax on everything that's available. You can pick and choose within that.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: That was Damian Leonard.

[Damian Leonard (Office of Legislative Counsel)]: Oh, I'm sorry. For the record, I'm Damian Leonard from the Office of Legislative Council.

[Ted Barnett (Joint Fiscal Office)]: And now

[Rep. Walker (Chair, House Transportation Committee)]: that you're on the record, Damian, is there a limit from understanding of representative Burke's question or part of it? Is it limited only to 1%? Can a town do 2% now without a charter change? Can they? Every town is limited to 1% on all of the multiple options. They're all limited to one. You can't go to three

[Damian Leonard (Office of Legislative Counsel)]: Say unless you you wanted to do like Massachusetts has where they have a 3% surcharge on short term rentals. You would need a charter change to do that. You cannot do that within the local option tax scheme. Even if you wanted to just do a 3% additional sales tax, current local option tax scheme limits you at 1%.

[Ted Barnett (Joint Fiscal Office)]: Thank you.

[Rep. Mollie Burke (Member, House Transportation Committee)]: That's helpful, thank you.

[Damian Leonard (Office of Legislative Counsel)]: Thank you for the clarification.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: But the group that people will take is a charter change, which is a variance from state law. And I would just say, I think it becomes very hard to say to a community that comes to the legislature, with a charter change, you can't go to 2% when you already have Burlington and Rutland that are outside of the general law. And Burlington is significantly higher than that. So I think it becomes, we're on a slippery slope. And if we don't set rules now, and I'm speaking for myself, if we don't take a look at this and set rules now, we're in a position where communities are going to be coming with charter changes to do this. And it's hard to say no when we already have examples of people above.

[Rep. Patrick "Pat" Brennan (Member, House Transportation Committee)]: Really appreciate the presentation. I'm gonna be sharing it with my select board where we have this local option up, as a vote this year. This is great explanation. Being on the transportation committee, can't help but when I see revenue somewhere that doesn't seem to be claimed, like what's happening. So the pilot has got extra revenue in there and by legislation, does it say where that goes?

[Ted Barnett (Joint Fiscal Office)]: It stays in the pilot special fund. I will note that in both Act 27 and then the house passed version of the BAA seven ninety, there were additional uses considered for pilot special fund revenue. There was a $500,000 appropriation to the Department of Taxes to implement inventory of commercial property that's being placed on the grand list. As a result of legislation from a few years ago, there is a shift in payment for the per parcel fees to help municipalities maintain their grand list. That's $3,400,000 so I guess the chair mentioned in the lead up to the conversation, there have been more recently, uses here and there envisioned for pilot special fund revenue. But yes, there's no provision in law that the revenue that goes into the pilot special fund has to be used for anything. Aside from in law, there is a specification that it should be used for pilot payments, but you all can choose to not withstand that requirement.

[Rep. Patrick "Pat" Brennan (Member, House Transportation Committee)]: And the requirement for those pilot payments now is sort of fixed. I mean, there's not a lot of new state buildings getting built. So the values will slowly go up but it's almost a fixed.

[Ted Barnett (Joint Fiscal Office)]: And I will also add because of the calculation that we talked about earlier, because the value of stay on buildings is being multiplied by the CLA and we're seeing CLAs drop because of increases in property values that's putting a natural and governor on pilot payments. And so it's unlikely that we'll see large increases in pilot payments, both because the state is not going out and acquiring property and also because of the influence of the CLA in the pilot calculation.

[Rep. Walker (Chair, House Transportation Committee)]: Would it be possible to look at those years of not fully funding that there's a significant amount of towns out there with pilot in effect that I will be sitting on some IOUs that might have expected that money to make up for all those years that they weren't funded at 100%?

[Ted Barnett (Joint Fiscal Office)]: We could certainly investigate that.

[Rep. Walker (Chair, House Transportation Committee)]: So we took their money, and now we have a surplus. We didn't pay them what they were owed before, and now we have a surplus, but we're not having any discussion about making up for the years that we shorted them.

[Ted Barnett (Joint Fiscal Office)]: That would certainly be a policy twist. That's what I thought. Thank you.

[Sen. Rebecca "Becca" White (Vice Chair, Senate Transportation Committee)]: I would just recommend the Vermont League of Cities and Towns has very strong perspectives about the use of the pilot funds and proposals for how it could have supported municipalities and how it could support them moving forward. If you're going down that there has been that conversation representative Walker. Not that bluntly, I would say, but. Thank you very much.

[Representative (unidentified)]: Thank you. I support your idea and initiative. I'm concerned that we're devaluing the properties before we even provide a pilot, just by using the insurance number rather than the grant list number. And there have been years not providing it. I'd like to know, and I know this is kind of off of transportation, but something on my list is I'd like to know how we, when we haven't had the funds to pay all the pilots, how have we prioritized the funds? I think that would be good to know. And just the basic structure of we're getting the funding from the towns, and then that's what we're using for the state to pay its property taxes to the towns. And it just feels cannibal. So I know that's out of this committee, but it's something I'd like to know.

[Rep. Mollie Burke (Member, House Transportation Committee)]: So thank you for that.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: I think I would just say that the proposal that we started to talk about is going from 1% to 2%. What you're talking about is the base pilot payments. The question really is, we're on the prefaces of towns like Stowe talking about expanding beyond the 1%. And if that is what's going to be on the plate, how would you divide that money up? This is not anything about in the proposal that has been in front of our committee. I think at this point, it would be a good time for Damian to come up and explain what we've talked about. And as a starting point. And this is only meant to create a conversation.

[Damian Leonard (Office of Legislative Counsel)]: Morning. Morning record again.

[Sen. Andrew Perchlik (Member, Senate Transportation Committee)]: I'm Andrew Perchlik

[Rep. Walker (Chair, House Transportation Committee)]: from

[Damian Leonard (Office of Legislative Counsel)]: the Office of Legislative Counsel. This time I've actually remembered myself. So I've got a request in to share my screen here and I'll take you through the bill. Only have about ten minutes till you're scheduled to adjourn. So I just want to offer to make myself available to the House Committee that has not seen this language before at your convenience to come up and do a more in-depth walkthrough. So

[Ted Barnett (Joint Fiscal Office)]: the

[Damian Leonard (Office of Legislative Counsel)]: language here would create a new section 24 BSA 138 A. So 24 BSA 138 is the existing local option tax. This creates a new section next to it. And the key piece here is in subsection A, a municipality that already assesses a local option tax may impose an additional 1% local option tax on one or more of the tax basis on which it currently imposes a local option tax. So if you have a local option tax on just sales, you can just impose 1% more on sales. If you have it on all of the different bases for local option tax, then you can pick and choose. You could choose all of them. You could choose just one. It allows municipalities to tailor the additional local option. What's this draft is calling the local option municipal services tax. It would provide that the tax would be recommended and approved using the same process as the existing local option tax. So this starts with a vote by the legislative body of the municipality to recommend a local option tax, and then it requires a vote by the municipality's voters at a regular or special meeting that's worn for that purpose. So frequently, this is town meeting day. It can also be election day. It can also be a special meeting or election held at another time of year. And then a majority of the voters who are present and voting election can approve the tax. So if you have low turnout, you can have a fairly small portion of your municipality voters approve it. It just depends on how many people have turned out, then you need a majority of those people. The tax would be collected and administered in the same manner as a local option tax under Section ten thirty eight. And this is getting back to our discussion of charter changes versus local option taxes here. Ted talked a little bit about administrative simplicity. This does tie things into the current administrative structure that we have for local option taxes. So you do avoid the chance that each tax is tailored slightly differently with a slightly different administration. So this tense would keep things on the same track, and it would also treat the sale of aviation jet fuel and taxes collected on that in the same manner. We have to do that because of federal law. So aviation jet fuel sales tax has to go back to aviation purposes. And then on a quarterly basis, as was discussed earlier, 50% of those taxes would be paid back to the municipality without a reduction for the cost of administration and collection. 40% of the remaining taxes would be deposited in the local option municipal transportation special fund, is set up in section two, Any remaining revenue would be deposited into the pilot special fund. Revenues received by the municipality would be extended for principal services plan life and non per education expenditures. And this tracks the existing tax language. Initially, when local option taxes were enacted, they were enacted out of Act 60 to allow municipalities to raise additional taxes. This resulted in additional lawsuits about how municipalities that had high tourist traffic or a large workforce coming to them daily could generate more money than other municipalities resulting in unequal educational outcomes, which is why we have this language in here to prevent some municipalities that have higher taxing power from being able to do that. But you can direct this to municipal services, whether that is transportation, police, fire, recreation, water, any of those municipal services. And so municipalities can tailor it to their needs. The special fund here is a standard special fund. The purpose of the fund is to provide additional state aid for town highways pursuant to the town highway grant chapter, which I'll go into in a moment. Receipts would consist of the percentage from the local option municipal services tax, any gifts, grants, or contributions made to the fund and any amounts transferred to the fund by the general assembly. So general assembly can add additional amounts to this fund if we have a surplus one year. In addition, the commissioner of transportation can seek out a grant. So for example, if some billionaires foundation makes money available for local infrastructure, they could seek out grants to help support that fund. The commissioner of finance and management would be permitted to anticipate receipts to the fund. So in other words, commissioner finance management can look at the whole years and then issue warrants for grants based on those amounts. So they don't have to wait for the money to come in. Then municipalities or monies in the fund would be used solely to provide state aid and to pay for any costs incurred in administering the funds. I know sometimes we like to forget that there is an accounting cost that goes with all of these funds, but it does need to be covered and this prevents it from being taken out of the general fund. And then the aggregate amount of the monies appropriated would be limited to 95% of the anticipated receipts. This provides a little bit of a cushion if anticipated receipts are down. It's also worth noting that just like other special funds, you cannot withstand this in any given year, if there is, like is happening with the pilot special fund, a surplus that builds upwards. The next section amends the state aid for town highways, and I'll focus on subsection A and then just highlight the other two subsections it touches on. So subsection A is the general appropriation of general state aid for town highways. This is a formula that is based on a different percentage for class one, class two and class three roads. So 6% goes to class one roads and I can't remember the split between class two and three. And then the amounts are apportioned to each town based on the percentage of state class one roads, state class two roads, and state class three roads that are in that town. So it can be very small amount if you have very few roads, it can be a fairly large amount in terms of the fund, if you have more mileage. Oh, I actually left the apportionment in here. So it's 6% for class 44% for class two, 50% for class three. And then out of those percentages, it's your percentage of the amount of state roads in that class. Moneys can be used for highway construction, maintenance, and improvement by the towns. And then as many of you will remember, we've attached an annual inflationary adjustment to this. So what this would do is it would take the money appropriated from the new local option, municipal transportation special funds and add that on top of the base appropriation with that inflator. So you get the base appropriation, which inflates every year depending on the rate of inflation. And then on top of that, there's an additional amount that comes out of this special fund. So very few towns implemented this additional local option tax, you would see a very small amount coming out every year. If more towns implemented it, you could see a larger amount coming out on top. So it's essentially, I don't wanna call it a bonus, but it's an additional amount that goes on top of what's there. And then these amounts would not decrease the amount appropriated or be considered for purposes of inflation. So this won't lead to a hyper acceleration. So if, for example, you had a bunch of accounts in ACTUS and then they decided to pull back the tax because you do have that option, you're not stuck with your local option tax, then this would adjust without impacting the base appropriation. Does that make sense? The other two sections that we did the exact same thing for are state aid for town highway structures and class two town highway roadway program. And when I say that we, I just mean that I drafted with Senator Westman to put together this proposal. So this is not something that I am either for or against. I wanna make that clear, but I unfortunately have a bad habit of using the we term here, which makes it sound like I am supporting or proposing something. So the language on the table here, if you'll remember both the town highway structures and class two town highway roadway program had the inflationary adjustment added to them last biennium. So again, this would allow the money to be used for those programs without affecting that inflationary adjustment. And I have one minute left in my time, but I'll take questions.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: When

[Representative (unidentified)]: this would take effect, like STOW is gonna vote in March. This doesn't take effect till July or even May. How does that impact those voters?

[Damian Leonard (Office of Legislative Counsel)]: So the effective date, I have not in drafting this added an effective date. That's something that needs to be discussed on this language. The vote in Stowe, I don't know how it's being framed for town meeting day, but you would need the state law authorization to move forward with that amount, even if the town votes at its own. And then you need generally with the local option tax, you need ninety days after providing notice to the Department of Taxes that you would be implementing so that they can make adjustments internally and notify merchants, etcetera, that the tax they need to collect and report on their returns is going to be changing. I did forget one thing in here, there's a proposal that's included in this to appropriate $3,000,000 from the surplus and the pilot special fund to fill up the, or to provide initial funding in the special fund, the municipal transportation special fund that's created pursuant to this proposed language for the first year.

[Representative (unidentified)]: And I'm gonna say you, but I'm when you, I mean, senator Westman. Did you consider any supplanting language? Like, it would require the municipalities not to supplant funding. So like take this extra money, but then not really increase what they do for the local roads because they

[Christopher Rupe (Joint Fiscal Office)]: just put money around the municipal budget?

[Damian Leonard (Office of Legislative Counsel)]: In the initial draft that was not discussed, that could of course be added. It's important to note that, so the state aid for town highways is one where we really have two strings of money. So there's the general state aid for town highways, which gets parceled out across the state. And then there's the money that a town like Stowe or another town that voted to have or that could vote to have the additional percentage would be bringing in, which can be used for any municipal services up as comes to scratch.

[Representative (unidentified)]: I didn't mean that money. Meant down highway. If that was to increase, they could not actually increase the money they spend on the roads.

[Damian Leonard (Office of Legislative Counsel)]: Right. They could just move. That gets into a it becomes a policy discussion for you. You can conceivably have a couple of different ways for that to work. And it's worth noting, are a number of different grant funding streams in there, but these grant funds here, the town could choose to take the money, take a little money that they would have otherwise raised and use that, for example, for their wastewater plant or something like that. And so, mean, I think that's more appropriately or appropriately would be a discussion for you. And certainly you could consider adding that supporting but not supplanting language that we use elsewhere when we intend for it to be used for a specific purpose and to grow the amount of money that municipalities are using for a specific purpose. But if you want a lot of flexibility, you may choose to have different language. Thank you. Yeah.

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: We timelines?

[Rep. Mollie Burke (Member, House Transportation Committee)]: If

[Rep. Walker (Chair, House Transportation Committee)]: you have, go on record on White.

[Rep. Mollie Burke (Member, House Transportation Committee)]: So Damian, just so big picture, there's a sense of urgency here because Stowe may be passing this additional local option tax 2%, and if we don't move quickly, we may miss out on being able to direct some of those funds back to municipalities to support road and other infrastructure that is really suffering much. And so just making sure I'm understanding that clearly.

[Damian Leonard (Office of Legislative Counsel)]: I'm not sure about all the details for both of them.

[Rep. Mollie Burke (Member, House Transportation Committee)]: Want We to don't be clear legislation out there about-

[Damian Leonard (Office of Legislative Counsel)]: We don't have legislation. So if it's to propose to go above the 1% that's allowed now, then they need a charter change to do that. If you put this in place and I don't know how this vote is structured and I'm not our municipal lawyer. So I just wanna be careful here. I'm not sure about exactly what the interplay is between this language and Stowe's vote. But you enact, the sooner you enact this language, the sooner municipalities can begin taking advantage of it. That said, obviously there are other policy considerations for you as to whether this is appropriate right now and whether you want to move forward with this right now or delay, give it more thought, etcetera.

[Rep. Mollie Burke (Member, House Transportation Committee)]: But we've already seen, you've shared that both Burlington and Rutland have their own local option tax that they do not share at all back to the state. So And so that ship has kind of sailed, and we've got a current local option tax, and we've got a surplus in the pilot, and that pilot does not have specific legislation in terms of how that excess can be used, do we have an opportunity to pass some legislation to put some guardrails around where that excess pilot money that currently exists, how that is spent?

[Damian Leonard (Office of Legislative Counsel)]: Well, right now it has a very, very tight guardrail around it. It limits it to being used for the pilot unless we not withstand it and withdraw some money like it's done in this bill. So you could certainly look at additional legislation that provided additional guidance on what you could use pilot specials on sport, but that's a bigger policy question that's sort of beyond the scope of

[Rep. Mollie Burke (Member, House Transportation Committee)]: Unless it be something that I look at, like what Chair Walker suggested, which is compensating talents that were shortchanged in the past, because that's within the current language. Or relevant to it.

[Damian Leonard (Office of Legislative Counsel)]: So it's relevant to the existing pilot funds law. Yes. I'll say it's not necessarily an alternative to this, but it's another avenue that you can look at how far from what's in front of you here. And certainly this includes a proposal to use some of that surplus in one way. You could propose other options for using that surplus. It is only about $15,000,000 surplus,

[Christopher Rupe (Joint Fiscal Office)]: At the end of the 04/25, it was $15,000,000

[Ted Barnett (Joint Fiscal Office)]: Yeah, so as

[Damian Leonard (Office of Legislative Counsel)]: was mentioned earlier, there's $15,000,000 is small in the grand scheme of needs. And I will,

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: is about $4,000,000 in the governor's budget for items in the tax department.

[Damian Leonard (Office of Legislative Counsel)]: But again, I do wanna emphasize too that if you wanna dig deeper into the pilot special funds, there are attorneys and folks at JFO who know more about the inner workings of that than I do.

[Rep. Walker (Chair, House Transportation Committee)]: I know that my pouch has up to it.

[Ted Barnett (Joint Fiscal Office)]: No, I'm gonna write with that. Representative Alley?

[Rep. Mollie Burke (Member, House Transportation Committee)]: Thank you. I just wanted to make sure that there is no limit on roads. What can this be used for in terms of town roads? For example, doesn't it to be a paved road or could it be dirt roads as well?

[Damian Leonard (Office of Legislative Counsel)]: The money that is used for each of these programs is limited to what it can be used for within that under each grant program. So if we look at state aid for town highway structures, it's for maintenance and for construction of bridges and culverts for maintenance and construction of other structures, including causeways and retaining walls intended to preserve the integrity of the travel portion of Class I, II and III town highways, and for alternatives that eliminate the name for a bridge culvert or other structure, and it goes on. For the class two roadways, it's for resurfacing rehabilitation or reconstruction of paved or unpaved class two town highways. And then for, and I apologize for the scroll for anyone who's watching the screen. This lays out. Oh, there we go. Each town shall use the money as a fortune to it solely for town highway construction improvement and maintenance purposes or as the non federal share for public transit assistance. So there are limitations on what the grants can be used for. For towns that choose to collect the additional local option percentage, the 50% that goes back to the town can be used for municipal services generally apart from education expenses. So that 50% could be used for other municipal purposes, wastewater, sewer, storm water, police, fire, recreation, etcetera, as the town sees its needs. And so different towns may find with the 50%, if they raise that, that they have other needs besides transportation, that 40% that goes to the special funds is transportation dedicated. Does that make sense?

[Rep. Walker (Chair, House Transportation Committee)]: I would like to very much thank the chair for sharing the inviting a house to join in this presentation. I know there was some significant value in the local options, and we absolutely appreciate anything that will drive the conversation to help for our town highways. We have such a limited ability within the towns to help address town highway. And if we struggle with T Fund dollars, we certainly struggle each town to keep up with their transportation needs. So I appreciate the chair inviting us, I appreciate the conversation to how do

[Sen. Richard Westman (Chair, Senate Transportation Committee)]: we find ways to help our towns. This is meant to be an opening, of a conversation. Nothing weds in this. I think we are at a place where there's going to be more communities that try to do local option taxes and go beyond the 1%. And I will say to you, if the towns that wanna go from one to 2% start bringing us charter changes, in my estimation, it becomes very hard to say no to them when places like Burlington already have a local option tax. Why would we grant a charter change for Burlington and not other communities? That said, how are we going to be fair to the feeder communities around these larger communities that are also starving for budgets? And so this is meant to create a conversation about what's happening with local option taxes. And I would encourage the House to get the tax department in. They will tell a story of numerous towns asking about local option taxes, and this is something we're going to face. And if we don't set parameters now, we're probably going to lose the ability to do that. Thank you. Thank you. And thank you, Phyllis.