Hotel Room Occupancy Tax The Commonwealth of Massachusetts has a state room occupancy excise tax rate of 5.7%. In addition, a city or town may adopt a local option room occupancy tax rate of not more than 6%. The Board of Aldermen of the City of Newton voted to accept the local option on October 7, 1985. As a result of the acceptance of this local option the City of Newton received more than $2 million of Hotel Room Occupancy Tax Revenue in each of the eight years prior to the pandemic. Prior to the pandemic, Newton had three hotels in operation ̶ the Four Points, the Marriott and the Hotel Indigo. Ultimately, the Indigo closed in March 2020 due to COVID and will not reopen. In addition, almost immediately following the onset of the coronavirus pandemic, the hospitality industry began to experience unprecedented cancellations of conferences, vacations, weddings, and more. Consequently, we reduced our FY2021 forecast down to approximately $300K. Fortunately, room tax revenues have since rebounded, and the city have increased its FY2025 forecast to $2.25M, and level-funded our FY2026 budget projection. The high degree of uncertainty over tourism and business travel suggests that a budget for FY26 in line with FY25 is appropriate. Meals Tax The Commonwealth of Massachusetts imposes a sales tax on meals sold by or bought from restaurants or any restaurant part of a store. The tax is 6.25% of the sales price of the meal. Additionally, a local option meals tax of 0.75% may be applied. In October 2009, the City of Newton adopted the local option meals tax effective January 1, 2010. This decision had provided the city with a steady revenue stream of approximately $1.9 million prior to the pandemic. COVID-19 also hurt the restaurant industry. Approximately 3,600 or 20% of all restaurants across the Commonwealth have permanently closed. Fortunately, we have seen a robust rebounding of this industry which is so vital to the success of our village centers and commercial corridors. The city increased its FY2025 forecast for the meals tax to $2.56M and have budgeted $2.6 M for FY2026. Revenue from Building Permits Permitting activity is influenced heavily by the economy, interest rates, construction costs, as well as global events such as the pandemic and tariffs. Although the Northland project was approved by both the City Council in 2019 and Newton voters in 2020, the coronavirus pandemic slowed its construction schedule. Additionally, the expected Riverside project is still on hold for the time being. Despite FY2025 revenue running significantly higher than originally budgeted, there are still considerable headwinds from the continued high borrowing rates, inflationary pressures, labor market and supply chain issues, tariffs and project delays, so we continue to be careful with this projection. The FY2026 budget for revenue from building permits has been set at $9.81 million. Revenue from Interest Income Interest income earned on the City’s cash and investments has been as low as $200,000 during the past decade when interest rates reached a record low of 0.25% in December 2008. In late April 2020, the Federal Reserve Bank decided in response to COVID-19 to again lower the Federal
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