WELLFLEET — The select board has endorsed the idea of earmarking 80 percent of the revenue from the short-term rental tax to the town’s new affordable housing trust fund.
“A major contributing factor to the shortage of housing in Wellfleet is the financial attractiveness of short-term rentals,” said Harry Terkanian, chair of the trust, during his presentation to the select board on Oct. 12 in which he argued for the policy. The short-term rental and rooms tax netted about $855,000 for the town in the fiscal year that ended on June 30; 80 percent of that amount would be about $684,000.
It’s rare, said select board member Michael DeVasto, to have a revenue stream created by a problem that can be used to help solve that problem. DeVasto is also a member of the affordable housing trust.
The short-term rental tax rate in Wellfleet will rise from 4 to 6 percent on Jan. 1, 2022, maximizing what state law allows towns to collect on vacation home rentals. The increase was approved by town meeting voters last spring. Despite recent troubles in the town’s accounting department, the select board agreed with Terkanian that it was time for a greatly increased commitment of funds for affordable and workforce housing.
The problem, said Terkanian, is that property owners can make more money renting out their houses for the summer than they can by leasing the property for a year. As a result, fewer living units are on the market, and the ones that are become pricier. This makes houses harder both to rent and to buy for working people and those with limited incomes.
Town staff will work on the specifics of the tax revenue allocation policy and return it to the select board by Nov. 30, after interim Town Administrator Charles Sumner finishes the town’s capital plan and a financial forecast analyzing projected revenue over five years.
“You’re going to be looking at comprehensive financial issues facing the town that you’ll have to balance,” Sumner told the board. Other allocations of the tax revenue could include wastewater treatment, infrastructure, and other projects. Several select board members referred to the Cape Cod and Islands Water Protection Fund, which was established in 2018 and is funded by an additional tax on lodgings and short-term rentals. That fund is specifically earmarked for wastewater infrastructure projects.
July 2019 was the first month in which short-term rentals were subject to the rooms tax. For the first 12 months, the state Dept. of Revenue (DOR) didn’t keep track of the new revenue from short-term rentals as distinct from the previously existing tax on other lodgings.
Prior to the expansion of the rooms tax, Wellfleet collected only about $125,000 a year from it, Terkanian said.
The new policy on allocating the revenue could stand on its own, he said, or it could be an addition to the current budget and financial management policy. That policy covers the cash reserves the town should maintain, the stabilization fund, the finance committee reserve fund, and debt management, among other items in the town’s bylaws and charter.
While it was important to start the discussion, there’s no specific deadline for making a final decision, Terkanian said in a phone interview after last week’s meeting.
“We’re just trying to make sure we can develop reliable sources of funding, so that when we are presented with housing opportunities, we have the ability to act on them,” he said.
The affordable housing trust made a push for the allocation policy last March, but in light of the town’s accounting deficiencies, consideration of the request was put off.
While mindful of the town’s financial status, “I’m also mindful that there are big dollar projects out there that we do have to face up to,” Terkanian said during the select board meeting. The policy can be flexible, he added, allowing the board to make exceptions when needed.
The short-term rental tax revenue stream would be the only money available to pay for housing outside the federal Dept. of Housing and Urban Development affordable housing guideline of 80 percent or less of area median income (AMI), DeVasto said during the meeting. This would be important for what is called “workforce housing,” serving households that make more than 80 percent of AMI but still can’t afford to live in Wellfleet.
Wellfleet has a history of allocating revenue streams to specific purposes, Terkanian told the select board. For example, at a 1966 town meeting, voters established the beach fund into which was deposited the revenue generated by the sale of beach stickers. The town has also established an ambulance fund, a recreation fund, two enterprise funds (water and marina), and a shellfish revolving fund.
Efforts by Other Towns
Provincetown, Truro, and Eastham also have made recent moves related to the allocation of short-term rental tax revenue.
Truro voted last May to put one-third of its total rooms tax revenue in a new housing stabilization fund.
“But those funds won’t be available until we certify them at the end of the fiscal year, and they won’t be available for use or appropriation until fiscal year 2024,” said Truro Town Manager Darrin Tangeman. Receipts have to be certified prior to being appropriated, and certification will happen in October 2023.
Eastham’s short-term rental tax receipts go into the town’s general fund, but are designated for specific purposes under the town’s select board policy, said Town Administrator Jacqui Beebe. Originally, the receipts went into the town’s stabilization fund, but Eastham reached its goal for that fund last year.
Now the revenue stream will go towards housing and other infrastructure needs, Beebe said.
“This year, we have collected a little over a million dollars in short-term rental funds,” Beebe said. “Those funds are now going to be available for the board and the finance committee and the town to spend this coming year.” While still in the planning phase, the idea would be to use the money to support Eastham’s six-year housing plan, she said.
Provincetown discussed the reallocation of the rooms tax at a joint housing meeting of the select board, the community housing council, and the Year-Round Market-Rate Rental Housing Trust on Oct. 18. While no formal vote was taken, the boards discussed setting the housing allocation at 26 percent. (See related article on page A5.)
Paul Benson contributed to this report.
