Laconia pushes state to keep its promise on Rooms and Meals revenue

LACONIA — The city is pushing the state, after 53 years, to live up to its pledge to share 40 percent of the revenue from the Meals and Rooms Tax with cities and towns in the Granite State.

“For far too many years, the state had shortchanged municipalities on the agreed upon local share,” City Manager Scott Myers said in an email to the Senate Ways and Means Committee, which held a hearing Monday on a bill to require municipalities to receive the 40 percent share starting July 1.

“For Laconia alone, the impact of not receiving our 40 percent share going back to just 2011 is over $6 million,” Myers said in his statement emailed to the Senate committee for its virtual public hearing.

The requirement is contained in a bill — SB 99 — sponsored by six state senators and two state representatives — all Republicans. Senate Majority Leader Jeb Bradley, of Wolfeboro, is one of the co-sponsors.

When the tax was first enacted in 1967, the plan was to share the revenue with municipalities, with the state retaining 60 percent and municipalities receiving 40 percent. The goal of that sharing formula has never been achieved.

Over the last 10 years, Laconia’s share has ranged from $712,514 in Fiscal Year 2013 to $848,715 in the last fiscal year. That last distribution amounts to between 20 percent and 25 percent of the total amount of Rooms and Meals Tax collected statewide.

Since 2011 the amount of Rooms and Meals Tax collected has increased every year, except for last year when the amount dropped by about $34 million due to the impact of the COVID crisis, which closed down restaurants and lodging establishments for a time, and now limits the capacity of restaurants in order to adhere by social distancing guidelines.

In 1993 the Meals and Rooms statute was amended to provide a municipal “catch-up” formula where 75 pecent of the year-over-year increase — but not more than $5 million — would be added to the prior year municipal share in order to work toward the 60/40 split.

That catch-up formula was suspended following the Great Recession of 2008 and has never been reactivated.

“The Rooms and Meals Tax has too often been the go-to to balance the (state) budget,” according to Laconia Mayor Andrew Hosmer, who served in the state Senate from 2013 to 2016. “They tried to balance the budget by suspending the distribution (formula).”

If the state were adhering to the 60/40 split Laconia would have received an additional $654,000 last year in Rooms and Meals Tax revenue, for a total of $1.5 million. All told, cities and towns across the state would have received more than $122.7 million, according to the state’s financial reports.

Both Myers and Hosmer noted that SB 99 in its present form calls for the switch to the 60/40 split to occur all at once on July 1, and not to be phased in over a number of years.

“They’re looking to do it in one fell swoop,” Hosmer said of the bill’s sponsors. “They feel it’s time the state finally lives up to its responsibilities.