Sales tax revenue rebounds

Uptick may forestall property tax hike

May 22 , 2008

By Greg Elias
Observer staff

Sales tax revenue rose slightly during the first quarter of 2008, reversing a yearlong decline in a key funding source for Williston.

Receipts from the local option tax totaled $469,295 for the quarter ending March 31. That represents a 4 percent increase over the same quarter in 2007.

The uptick will likely forestall a property tax hike to balance the municipal budget, town officials said. Falling sales tax revenue prompted a 1-cent property tax increase last year.

Town Manager Rick McGuire said the latest sales tax numbers align with revenue estimates, so he probably will not ask the Selectboard to raise property taxes when the new fiscal year starts on July 1. The town in both the current and coming fiscal years has been conservative in estimates of sales tax proceeds.

"We do have some wiggle room in case things head south," McGuire said. "I guess I'll probably recommend we stay with the tax rate I recommended at town meeting."

McGuire said he will look at other sources of revenue before making a final decision on the recommended tax rate.

In 2002, Williston voters approved the 1 percent tax on local sales. It piggybacks on the 6 percent state sales tax.

In the years since, the town has used the sales tax to greatly reduce property taxes. The municipal property tax rate initially dropped by 70 percent.

The sales tax brought in slightly more than $2.5 million in 2007, funding nearly 40 percent of the municipal budget.

Local sales tax revenue increased steadily until last year, when the state enacted new rules that have apparently hurt Williston, among the handful of Vermont towns that levy local option taxes. The changes came as Vermont joined the Streamlined Sales Tax initiative, a multi-state effort to standardize collections and level the playing field between Internet and traditional bricks-and-mortar retailers.

Starting Jan. 1, 2007, purchases made in Williston but shipped elsewhere were no longer subject to the town's local option tax.

Since then, town officials have watched with concern as sales tax revenue dropped precipitously. Same-quarter revenue fell in each quarter of 2007, and the town finished the year with a half-million dollars less than it collected the previous year.

The rebound in same-quarter collections during the first three months of 2008 may be a statistical blip, not a long-term reversal, town and state officials say. They noted problems with reporting by retailers when the new rules took effect last year, perhaps resulting in an artificially low figure for the first quarter of 2007, the point of comparison for the latest numbers.

A recent downturn in the national economy has yet to be reflected in Vermont sales tax revenue — and presumably in Williston's local option tax. Sales tax proceeds statewide increased 5.6 percent during the first three months of 2008 over the same period last year, according to Bill Smith, a statistician with the Vermont Tax Department. He noted those numbers may not be exactly comparable to the local sales tax returns because of differences in reporting and accounting.

Concerns over the economy may actually be helping Williston due to what could be called the Wal-Mart factor. Though the company does not release sales figures for individual stores, the Wal-Mart outlet in Williston is among the town's largest retailers and so likely has an outsized impact on sales tax revenue.

Wal-Mart reported a 4 percent increase in profits during the fourth quarter of 2007. An analyst told the Associated Press that struggling consumers are choosing Wal-Mart over other stores because of its low prices and a "one-stop shopping experience" that cuts down on trips to other stores and saves gasoline.

Regardless of the quarterly numbers, Smith said Williston residents should feel fortunate to have revenue from the local option tax that offsets property taxes.

"Folks need to realize they have a sweetheart deal compared to some of their neighbors in the region," he said.