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Town explores raising tax
With lodging occupancy rates down nearly five percent statewide, this is not good news for the Town of Washington which relies on tourism for most of its revenue and which is about to break ground on a new wastewater project.Timing could not be more critical to ensure the project moves forward. Notwithstanding a no-interest $4 million loan in an incredibly tight credit market, the Washington Town Council is exploring raising the meals and lodging tax in the event that current revenue doesn't cover the costs of the wasterwater system.
Currently, the town levies a 2.5 percent tax on lodging and meals - significantly below the 4 to 6 percent that other towns in the region charge. No one wants to acknowledge publicly there may be problems, but official sources have said privately they expect there will be a drop in revenue due to the current financial and stock market turmoil.
According to town officials, revenue from the meals and lodging taxes has remained fairly consistent through the end of the fiscal year on June 30. The Inn at Little Washington said it has paid more to the town this year through the end of August than it did the previous year over the same period.
But with collections lagging at least 60 days behind the month they would be reported for – and with all that has happened in the financial markets since August – there may be cause for concern especially as the town is about to embark on the public works project.
The town has been approved to build a new wastewater collection system and treatment plant – and promised a no interest $4 million dollar loan – by the Virginia Department of Environmental Quality. But already the town has had to reissue solicitations for bid proposals for the wastewater treatment plant as the first round of bids came in well over what the town could afford within the $4 million loan amount.
The original bid amount for the collection system was $1.72 million with the second round low plant bid coming in at $2.46 million for a total of $4.18 million or about $200,000 over the $4 million DEQ loan amount. Town officials have been working with the engineering firm appointed to lead the project – WW Associates of Charlottesville – to identify more potential cuts in the project.
Items from the original bids were cut so that the two bid totals would be within the $4 million loan amount, however, some of the items cut will nonetheless have to be paid for in the future. For instance, $300,000 was removed from the collection system bid for paving in order to bring the two loan amounts within the $4 million, but patching and paving during construction will still have to be paid for while the work progresses. Other items such as continuing engineering costs, consulting and legal fees, and a five percent contingency fee will also have to be addressed.
Some of these additional costs may be offset by the general fund, however raising the meals and lodging tax – if revenue falls significantly due to further declines in tourism – may be the only option available if more project cost cutting – what is euphemistically called "value engineering" – is not possible.
The town is committed at this point as the council bid selection committee has recommended approval of the bid awards for the new wastewater collection system and treatment plant and the DEQ is preparing the loan closing documents.
The Town Council was scheduled to vote Wednesday night on the bid awards; however, it was too late to make it for this edition.
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