Proposed change in way meals & rooms tax receipts are distributed appears to favor Southern N.H.

Published Date Written by Michael Kitch

CONCORD — A bipartisan group of lawmakers has introduced legislation that would change the formula for distributing revenue from the meals and rooms tax among cities and towns, which is currently allocated exclusively according to their populations, by distributing a share of the revenue based on the amount collected in the municipalities.
At first glance, it appears the effect in Belknap County would be to award a greater share of the pie to towns with extensive waterfront property  where the lion's share of the establishments that collect the tax are located. However, all the muncipalities of Belknap County would find themselves competing for funds with those of more populous counties, where the number of estabishments and the volume of tax receipts are greater.
Beginning in 1995 the Legislature embarked on a program intended to ultimately distribute 40-percent of the annual revenue from the meals and rooms tax to municipalities. That year cities and towns received 75-percent of what they were allotted in 1976, plus three-quarters of the annual increase in tax receipts. Each year thereafter municipalities were to receive the prior year's amount plus three-quarters of the annual increase in revenue until the total distribution to cities and towns reached 40 percent of all receipts.
However, since 2009, when the tax rate was raised from 8 percent to 9-percent, the amount distributed to municipalities has been frozen at $58.8-million, which in fiscal year 2012 represented about 25-percent of total revenues of $238.5-million.
Senate Bill 121 would reallocate funding to municipalities by basing 44-percent of the distribution on the amount of tax revenue collected in the cities and towns and the remaining 56-percent on their respective populations. If the amount distributed remains unchanged at $58.8-million, $25.9-million would be apportioned based on the origin of tax receipts and $32.9-million according to population.
Senator Nancy Stiles (R-Hampton), the prime sponsor of the bill, has said it is intended to distribute a greater share of the revenue to the municipalities that generate the largest share of the revenue to compensate them for the costs they incur providing the services required to accommodate tourists and visitors who pay the tax.
While the bill would have no effect on the total amount of money distributed, it would change the relative shares of municipalities. But, these changes cannot be calculated since the New Hampshire Department of Revenue Administration (DRA) is bound by statute not to disclose the taxes paid by particular establishments in the hospitality industry. Moreover, tax receipts are recorded only by county, not by municipality.
However, the DRA maintains a list of "operators," or businesses liable for meals and rooms tax, by municipality, which indicates where the largest share of revenues are collected. Currently there are 646 "operators" in Belknap County, 188 of them in Laconia, 99 in Gilford, 94 in Meredith, 70 in Alton, 74 in Tilton. 36 in Belmont, 23 in Sanbornton, 22 in Center Harbor, 18 in Gilmanton, 13 in New Hampton and 9 in Barnstead. Nearly three-quarters of the "operators" are located in the four municipalities with extensive waterfront, which would likely benefit from the proposed change to the distribution formula.
In fiscal year 2012 total meals and rooms tax receipts collected in Belknap County amounted to $13,343,206, or about 5.5-percent of all revenues from the tax. That same year the eleven municipalities in the county received $2,684,115 in revenue from the tax, or 4.6-percent of the $58.8-million distributed throughout the state. Laconia received $712,514, Belmont $328,578, Gilford $318,310, Meredith $278,800, Alton $234,513, Barnstead $205,183, Gilmanton $168,709, Tilton $159,333, Sanbornton $132,503, New Hampton $96,698 and Center Harbor $48,974.  
Compared to the $13.3-million in receipts collected in Belknap County in fiscal year 2012, Rockingham and Hillsborough counties, the two most populous in the state, accounted for $76.2-million and $63.3-million, or 32-percent and 27-percent, of all revenues during the same period. Receipts totaled $21.5-million in Grafton County, $19.7-million in Merrimack County, $16.9-million in Carroll County and $14.4-million in Strafford County. Belknap County seventh, ahead of Cheshire County at $8.1-million, Coos County at $6.7-million and Sullivan County at $5.9-million. Basing a share of the apportionment on the origin of tax receipts would appear to favor those municipalities with most establishments in the counties generating the most revenue at the expense of others.
Senate Bill 121 is schgeduled to be heard by the Senate Ways and Means Committee on Tuesday, February 12 at 9:15 a.m. in Room 103 of the Statehouse.