EASTHAM — The controversial residential tax exemption (RTE) is off the table for fiscal year 2022. Eastham’s select board voted at its Jan. 25 meeting not to adopt the exemption but will consider instead ways to raise money for programs to assist year-round residents, including increasing taxes on short-term rentals.
Select board chair Jamie Demetri opened the work session by reading from a prepared statement noting that board members had received “countless emails” about the exemption.
“I have to say, given the tone and content of the emails, we really aren’t sure what triggered such a vehement reaction,” she said.
She reminded the virtual meeting’s attendees that the board is required to consider adoption of the RTE each year as part of the tax classification process.
Wellfleet, Truro, and Provincetown all have adopted the RTE, which allows home owners to apply for an exemption on their primary residence. The policy results in a small tax increase for second-home owners.
According to a recent analysis by the town, only 45 percent of the 5,676 residential properties in Eastham are second homes.
But those numbers don’t match up with data from the Cape Cod Commission and the American Community Survey, which are based on census figures. The commission’s statscapecod.org website reports that Eastham has a total of 6,206 housing units, of which 3,761, or 60.6 percent, are seasonal. According to the 2010 census, 55.8 percent of Eastham’s houses were seasonal.
The latest figures from the American Community Survey show the proportions of seasonal homes in the other Outer Cape towns as 62.6 percent in Wellfleet, 79.1 percent in Truro, and 58.1 percent in Provincetown.
Enacted in 1979, the RTE allows domiciled home owners to reduce the taxable value of their primary residence by a fixed amount determined by multiplying the average value of a single-family residence in that town by a rate of up to 35 percent. The tax levy is then applied against the reduced overall property values, resulting in an increased residential tax rate.
“The key point there is we are not generating any new revenue,” said Eastham Finance Director Rich Bienvenue. “It’s just who’s paying it that is different.”
Bienvenue offered a list of revenue-producing options, including implementing a community impact fee of up to 3 percent on short-term rentals, increasing the short-term rental tax from the current 4 to 6 percent, and pursuing special legislation to create a dedicated revenue stream for a specific purpose which, he wrote in a memorandum, typically takes the form of a transfer tax on the sale of property over a certain amount (for example, a 1 percent tax on sales over $1 million).
“If we’re going to go after special legislation, perhaps the more ambitious idea here would be something like an Eastham community type fund,” said Bienvenue.
“I think they’re all really great options to look into,” said board member Aimee Eckman. “The only thing I probably wouldn’t suggest yet is the short-term rental tax going from four to six, since it’s only been one year.”
Demetri disagreed, noting that some rentals are already fully booked for next year. “It’s an untapped resource we should be looking at,” she said. “I don’t think it has had any negative impacts on the rate at which places are renting right now.”
Board member Jared Collins agreed with Demetri. “We’re talking about a way of working together with the part-time residents and the full-time residents,” he said. “How can we find a way to help the locals without hurting each other? The way to do that is going for tourism. Two percent for people on vacation is nothing.”
Any increase in the short-term rental tax would need to go before town meeting, Collins noted. “I prefer the residents decide rather than we do,” he said.
Based on last year’s figures, a 2-percent increase in the short-term rental tax would have generated about $310,000 additional revenue, said Bienvenue.
Town Administrator Jacqui Beebe recalled conversations “two select boards ago” about implementing the meals tax. “The reason Eastham kept saying we don’t want to do the meals tax,” Beebe said, “was people will just go eat somewhere else. Ten years went by and, in that time, other communities collected the revenue and we didn’t, and we lost $1.3 million.”
The board agreed to put discussions of the various options on a future agenda.