PROVINCETOWN — How much of the money collected from the new short-term rental tax should go to community housing efforts?
That was the big question on the table at a workshop on Monday at which the select board, community housing council, Year-Round Market-Rate Rental Housing Trust, and other town officials started making plans for next year’s spring town meeting. Their most immediate objective was to establish a permanent funding source for housing efforts from rooms tax revenues, which totaled $3.48 million in the last fiscal year.
After Town Manager Alex Morse proposed allocating 26 percent of the total to housing, which would come to less than $900,000 this year, Nathan Butera, chair of the Year-Round Market-Rate Rental Housing Trust, asked if it was possible to allocate the short-term rental portion of the rooms tax to housing solutions. That amount would come to more than $2 million this year.
“I think it’s a good question,” said Morse.
Before getting down to business on allocating those funds, the group discussed a wide range of proposals that could eventually wind up before the voters, including allowing taller buildings on Shank Painter Road, a larger expansion of the Maushope senior housing complex, and the use of town money to secure more middle-income apartments at the VFW housing development.
Other nascent ideas included a change in the inclusionary bylaw that would allow private developers to pay more into the affordable housing trust, and a change to the accessory dwelling unit (ADU) bylaw to make renting to seasonal workers an acceptable use of those units.
Adding a 3-percent community impact fee to bookings in investor-owned short-term rental properties was debated, as was the feasibility of purchasing deed restrictions in new private developments to secure year-round rentals.
Each of these policy changes would move the needle on the town’s housing crisis. Collectively, they could represent the most ambitious effort at housing development in years.
The rooms tax allocation is complicated because the pot contains money from two different sources — “traditional lodgings” and short-term rentals. Historically, the rooms tax was collected only on the first of those two: stays in hotels, motels, campgrounds, and bed and breakfasts. It regularly brought in around $2 million per year, which was divided up among the tourism, sewer, capital stabilization, and general funds.
In July 2019, that tax was expanded to stays in short-term rentals. In fiscal 2021— the 12 months that began on July 1, 2020 and ended on June 30, 2021 — the expansion of the rooms tax to short-term rentals brought an additional $2.05 million to Provincetown, according to data requested by the Provincetown Independent and provided by the state Dept. of Revenue (DOR).
In the same fiscal year, revenue from “traditional lodgings” was down 32 percent from its prior average, with only $1.4 million in receipts, according to the DOR. Pandemic year tax data from across Cape Cod show that spending on hotels and restaurants was only about 70 percent of normal.
With that $2 million in short-term rental taxes added to the tally, the rooms tax revenue total came to $3.48 million for the last fiscal year — a number that is higher than ever before, even though hotel taxes had plummeted.
A New Formula
On Monday, Morse proposed his new allocation formula based on a $3.4-million future rooms tax estimate. His proposal would maintain the original four funds at just over their pre-pandemic revenue levels and set aside 26 percent of the total rooms tax revenue for housing. If taxes come in at the $3.4-million mark, the formula would direct $884,000 per year to new housing efforts.
Select board member Louise Venden asked Morse about his topline estimate for the rooms tax.
“Right now, our estimate is still $3.4 million,” Morse said. “We don’t have a solid year of no interruptions, absent Covid,” he added. Morse said a lot of collections and payments were deferred until this month. He will know more by December, he predicted.
Morse explained that he wanted to be certain that the housing allocation was close to the difference between rooms tax revenues before and after the change.
The $884,000 would represent “almost 100 percent of the increase,” he said, “while still being committed to obligations we have to support the economy of Provincetown and the general government, to carry out the work that we have to do in the years to come.”
“Our hope would be that we can build a formula that can last another decade for the town,” Morse said. “That’s not to say that you can’t make changes before a decade — but the last formula lasted almost 11 years, and I think it’s time we do that again.”
Details are important because formula changes can’t be made easily. Even after town meeting passes a home rule petition to alter the allocation formula, the state legislature has to approve it, a process that can take months.
At the end of the workshop, the boards appeared broadly supportive of Morse’s proposal. No votes were taken, but another workshop with the three boards will be scheduled soon.