The Oak Bluffs Select Board mulled over the possibility of implementing a community impact fee for short-term rentals at its Tuesday meeting.
Select board chair Emma Green-Beach said the purpose would be to collect fees from people who’ve made businesses out of renting out town properties on a short-term basis.
She said it would apply to property owners who, through their rentals, have an impact on the community considered “above and beyond” that of someone like a year-round resident who rents an accessory dwelling unit for a short period of time.
“The challenge of the community impact fee is that you need to know what these properties are, and that requires registration,” Green-Beach said, adding that there is currently no local register for short-term rentals in Oak Bluffs.
Select board member Jason Balboni suggested a continuation of research to determine exact numbers of short-term rentals in Oak Bluffs, information that currently no municipal entity is privy to on Martha’s Vineyard.
He noted that creating a register would be both time-consuming and costly. Balboni said one way to go about the impact fee is to just implement the community impact fee, and “hope people fill out all the paperwork properly” for registration.
Even without a precise count of the number of houses, apartments, and units available for short-term rent throughout the town of Oak Bluffs, reports from the state have shed light on the massive amount of revenue the town has accumulated in fees and taxes of the rentals.
But since the short-term rental tax law went into effect in 2019, many Vineyard towns have been wary of spending the collections, citing the variability of revenue, and the need to accumulate more data over time, before allocating the money toward anything in particular.
The short-term rental tax is an amendment to the state’s room occupancy tax law, which pertains to hotels and inns, and therefore does not require municipalities to differentiate the kind of rental that’s generating the most revenue.
According to the Massachusetts Department of Revenue, between fiscal years 2013 and 2019, revenue from traditional rooms tax on the Island increased 6.67 percent each year, maxing out at $2.1 million.
By 2020, the first year towns were able to collect short-term rental tax, the rooms tax revenue rose dramatically — by 63 percent, Island-wide.
In 2021, Island towns took in a cumulative $5.5 million from all rooms tax; $4.3 million came from short-term rentals.
Last year, that short-term rental collection total grew to $5.77 million.
Just in Oak Bluffs, those collections amounted to $2.85 million throughout fiscal years 2021 and 2022.
In the first three quarters of fiscal year 2023, Oak Bluffs generated $1.7 million in short-term rental tax. That does not yet include reports from the last quarter.
Still, on Tuesday, town administrator Deborah Potter reiterated the town’s stance. She said short-term rental tax revenues have “fluctuated extensively” since going into effect, hence why the town’s “‘wait and see’ position was so fiercely supported and advocated for.”
Potter says the last three periods in this fiscal year show a decrease in the collections “even though we are 6 percent up in total over last year.”
During a financial update presented to the select board, Potter said the town has surpassed the previous year’s local estimated receipts (LER) by $779,000.
“While all of this is positive, we still need to remain very conservative with the use of the LERs for a variety of reasons,” Potter told the board. “Because we really want to protect against sudden unanticipated shortfalls in any category, help increase free cash available for use, [and] to increase free cash unused reserved balance.”
Because there’s “no consistency” in the short-term rental collections, Potter said, the town has to be “extremely careful when we’re looking at how this is impacting our budget and local estimate receipts and what we’re using it for.”
During Oak Bluffs Select Board meetings, Potter has often repeated the town’s policy on LERs, (town funds consisting mostly of short-term rental tax), and emphasized the need to be conservative with the revenue.
Per the town’s budget policy: “LERs, because of their potential unpredictability, will not be used as dedicated revenue sources for other purposes. For budgeting purposes, the goal is to budget at 80-85 percent of the preceding year’s actual receipts to provide the responsible protection against unforeseen changes.”
On Tuesday, Potter said this approach “demonstrates that our financial policies, processes, and procedures are working the way they’re intended by giving us this really healthy budgetary buffer in case of unanticipated downfall.”
Meanwhile, Island affordable housing committee members and housing bank advocates have often cited the potential of using short-term rental tax for various housing initiatives, including much-needed workforce housing.
During a Martha’s Vineyard Commission–hosted joint affordable housing meeting last month, Island Housing Trust CEO Phillipe Jordi briefly spoke on the options available for funding some of the housing projects currently being developed, one of which is the rooms tax.
“These projects are getting more and more expensive,” he said. “That’s just the reality of the environment we’re working in.”
Short-term rental revenue can’t cover all of it, but a combination of making better use of towns’ Community Preservation Act funds and working through each town’s housing trust fund could really make a dent.
“Clearly there’s available cash that towns can allocate to their trust funds from short-term rental tax,” Jordi said, adding the roughly six IHT projects coming down the pipeline “could really use some of this short-term rental tax in order to help supplement [other] funds.”