House Committee Wants Higher Tax On Rooms, Meals And Alcohol To Fund Water Cleanup

Mar 1, 2017

A key legislative committee is recommending $31 million in new taxes and fees annually to clean up Lake Champlain and other Vermont water bodies, prompting a swift rebuke from a Republican governor who says the “baffling” proposal will hurt businesses and “make Vermont less affordable.”

The House Committee on Natural Resources, Fish and Wildlife issued a memorandum Tuesday that uses eight discreet funding mechanisms to pay for a water-quality effort expected to require $1 billion in new revenues over the next 25 years.

The committee generates the bulk of the money – about $19 million annually – from an increase in taxes on rooms, meals and alcohol. The committee recommends a $10 “clean water fee” on motor-vehicle registrations to generate another $6 million a year.

Westminster Rep. David Deen, the Democratic chairman of the House Committee on Natural Resources, Fish and Wildlife, says the proposed revenue sources dovetail with a tourism industry that’s heavily reliant on the recreational draws of Lake Champlain and other waterways. He says that makes them an appropriate means by which to fund one of the costliest environmental initiatives in state history.

Taxes on rooms, meals and alcohol would go from 9 percent to 10 percent under the committee’s plan.

“People in the industry might have some concerns about an increased tax jeopardizing their competitive edge,” Deen says. “What I ask them to think about about is, imagine what your competitive edge is, and the value of it, if the lake turns green.”

Deen’s rationale has done little to win buy-in from Gov. Phil Scott, whose communications director, Rebecca Kelley, issued a written statement after the committee unveiled its plan Tuesday.

“Gov. Scott has been clear that Vermonters and Vermont businesses cannot afford to pay more and that he will not sign a budget or a bill this year that adds new taxes, fees or surcharges,” Kelley said. “He campaigned on this commitment, and was elected by a strong majority of Vermonters to see it through.”

"People in the industry might have some concerns about an increased tax jeopardizing their competitive edge. What I ask them to think about about is, imagine what your competitive edge is, and the value of it, if the lake turns green." — Rep. David Deen

Kelley went on to say that the governor has already signed onto to a plan, initially put forward by State Treasurer Beth Pearce, that creates a two-year, $50 million funding plan for water-quality efforts.

That proposal would solve the water-funding conundrum until July of 2019.

“Why the Legislature would not take that time to explore alternatives and think creatively, and, instead, instinctively turn to increasing taxes and fees on Vermonters, whether this year or two years down the road, is baffling,” Kelley says.

Deen says he’s “baffled” by the administration’s response. He says lawmakers have spent much of the last two years thinking creatively about the optimal ways to fund water-quality projects that, by all accounts, need to go forward.

“It’s like he wasn’t in this building over the last two years,” Deen says. “We have an expiring revenue source coming up – he knows that – and we are looking to replace it.”

Scott’s own Secretary of Natural Resources Julie Moore acknowledges the need to come up with a longer-term funding plan. And she says she agrees with lawmakers that revenues on the order or $25 million or $30 million a year are needed to address water pollution issues.

But Moore says there may be ways to use “existing financial resources and instruments” to pay for some of that work. And Scott on Wednesday said he doesn’t share lawmakers’ immediate urgency to decide where exactly the money will come from.

“I think this is premature,” Scott says.

For instance, Scott says that an electric transmission line proposed to run from Quebec to the Boston area – it would go under Lake Champlain and through Vermont – might be coming online more quickly than anticipated.

"Gov. Scott has been clear that Vermonters and Vermont businesses cannot afford to pay more and that he will not sign a budget or a bill this year that adds new taxes, fees or surcharges." — Administration spokeswoman Rebecca Kelley

The owner of that line will pay Vermont for the right to run it through the state, if the project goes through.

Scott says that by his calculations, Vermont could see new revenues of “at least $15 million a year” from that project, “which is significant when you think about the total needed to be spent.”

Scott says there’s also a chance that increased revenues from the federal government could obviate the need for Vermont to raise water quality funds through state taxes.

“We’ve been hearing more and more about an initiative of late to spend upwards of $1 trillion over the next few years for infrastructure improvements,” says Scott, referencing a plan touted by President Donald Trump. “What that will entail is unknown. It could be for capital projects surrounding storm water and maybe lake cleanup – we just don’t know.”

House Speaker Mitzi Johnson says the House Committee on Ways and Means will evaluate the plan put forward by Fish, Wildlife and Water Resources.

“Ultimately I would like to have the way we pay for lake cleanup be somewhat related to the kinds of things that generate the problem,” Johnson says. “I think this proposal is a good start,  and we’ll certainly be relying the Ways and Means Committee to see … how they feel these specific proposals relate to both the reason for poor water quality and some of the reasons for needing good water quality.”

Johnson says the fact that lawmakers have a two-year, $50 million plan for bridge funding – it relies largely on reallocating money that had been earmarked for capital projects – doesn’t slow the urgency to identify a funding source when it expires.

“I think the governor is saying, ‘Well, we’ll use this one-time money and we’ll wait and see,’” Johnson says. “I think the Legislature is saying, ‘Great, we have bridge funding. Now we need responsible long-term planning.’”

The $31-million-a-year proposal from the House Committee on Fish, Wildlife and Water Resources would be in place only for two years. Deen says he wants to replace it after that with a per-parcel assessment on every property owner in the state, based on the amount of impervious surface they have on their land.

That proposal more closely mirrors the concept recommended in a water quality funding report delivered to lawmakers by Pearce in January. Deen says policymakers need more time to work out the logistical and technical kinks associated with that plan.

Moore says deferring a decision on long-term funding until next year, or the year after, won’t slow progress on water quality efforts in the meantime. And in fact, Moore says, the projects needed to achieve Vermont’s water quality targets will happen whether the Legislature and governor generate new money or not.

“Fundamentally, the requirements to implement storm-water management practices, to upgrade waste-water treatment facilities and to install conservation measures on farms are already contained in state law,” Moore says. “And there are people who will be on the hook to implement those practices.”

The goal, Moore says, is to use public financing to avoid the economic dislocation that would befall farms, municipalities and developers if they’re left to meet water quality guidelines on their own.

“What we’re looking at is our ability to provide incentives and subsidies to help lessen the financial impact on certain individuals who, because of their position in the landscape, may otherwise see a disproportionate burden,” Moore says.