Extra room occupancy tax revenues could ease housing crisis, in Select Board vote

PROVINCETOWN — The millions projected in room occupancy tax revenue over the next decade could help provide housing for year-round residents in a plan proposed at a recent workshop in Town Hall.

On Monday, the Select Board directed town staff to prepare a draft town meeting article — for discussion at a future workshop — to allocate some room occupancy taxes for housing, and to prepare a slate of other housing articles for town meeting as well.  

Currently, and for the last decade, the money the town receives from room occupancy taxes is spent on promotion of tourism, general fund expenses such as salaries, sewer expansion and capital costs. A new category — year-round housing — was proposed in the plan discussed Oct. 18 by the Select Board, the town Community Housing Council and the town Year-Round Market Rate Rental Housing Trust.

The proposal to dedicate room occupancy taxes for year-round housing comes at a moment of change for the town: The tax revenue the town will receive is increasing substantially with the taxation of short-term private rentals, as of July 1, 2019. The short-term rental tax adds to the existing room occupancy taxes on traditional lodging such as hotels and motels.

There are currently other sources of support for housing, though, that the town provides beyond the proposed room occupancy tax reallocation, according to comments made at the workshop.

Room occupancy taxes on the rise

For Provincetown, the annual room occupancy taxes have brought in millions — the total was $1.98 million in fiscal year 2016 and increasing to $2.21 million in fiscal year 2019. With the July 1, 2019, legislation, the taxes now paid to the town have increased by over 50%. In fiscal year 2021, the total was $3.48 million.

For now, the town is predicting $3.4 million in room occupancy taxes for fiscal year 2022.

The lack of adequate housing has been prioritized by the Select Board for the town staff and the board itself, Town Manager Alex Morse said in convening the workshop. About 20 committee members and town staff members attended.

"I've been here just over six months now, and it's been very clear that Provincetown, I think, and the region has really led the way on housing," Morse said. "But despite all our best efforts, obviously, we're still in the midst of a housing crisis that COVID has only added to and exacerbated over the last 18 months, or two years."

There is a need to find common ground among the three groups gathered for the workshop, according to the presentation. A better understanding of existing housing programs is also needed, as is an agreement on how to effectively spend new funds.

Percentage spent on tourism would decrease

In the proposed town meeting article, the current 35% allotment of the room occupancy taxes to tourism would be reduced to 25%; the 27% allotment to the general fund would be reduced to 19%; the 25% allotment to capital stabilization would be reduced to 20%; and the 13% allotment to sewer expansion would be reduced to 10%. The new housing allotment would be 26% of the total, in the proposal drawn up by Morse. 

No votes related to the proposal were taken at the Oct. 18 workshop, and another workshop was planned to talk further about, among other items, what the mechanism would be to hold the housing allotment, which is estimated to be $860,000 in fiscal year 2022. Existing fund accounts for housing money include the Affordable Housing Trust Fund, overseen by the volunteer Community Housing Council, and the Year-Round Market Rate Rental Housing Trust Fund, overseen by the volunteer committee with the same name. 

Another option would be to create a separate fund overseen by the Select Board, according to comments at the workshop.

One issue is flexibility, where the spending mechanism needs to allow town leaders to move on a real estate opportunity, Select Board Chairman David Abramson. Or the ability to be "nimble," said board member Leslie Sandberg.

Among the variables brought forward at the workshop were:

• the potential increase in property management companies buying rentable rooms;
• the lack of research on the housing needs of the town;
• changing perceptions about zoning restrictions on building height or neighborhood exclusivity;
• the existence of inter-connections, such as between sewer capacity and housing;
• whether to trust volunteer committees with large-dollar decisions;
• the decreasing inventory of rentable rooms in Provincetown as inns are converted to single-family homes;
• the need for the three groups to nail down policies;
• the need to communicate to the community about why an annual amount such as $860,000 could help produce more housing.

Being able to add a sum such as $1 million to a proposed housing project will make it more competitive for state aid, Morse said. 

The town is anticipating financial help from the American Recovery Plan Act from Barnstable County, which has been award $41 million, according to remarks made at the meeting. "It's there," said Sandberg. 

Three projects in the pipeline

Currently there are three housing projects in the pipeline — a privately-funded seasonal workforce and year-round apartment housing complex called "The Barracks"; a publicly-funded year-round housing project at 3 Jerome Smith Road; and a publicly-funded expansion at Provincetown Housing Authority property at 46 Harry Kemp Way.

The "Barracks" project is currently ensnared in a lawsuit brought by four neighbors. In an unusual move, the Select Board has approved the use of town legal expertise to partner with the private Shank Painter Associates to pursue a resolution in court, Abramson said at the workshop. The town and Shank Painter Associates are currently seeking a trial by year-end, or a transfer to the state Land Court for resolution. A decision on the motion is expected Oct. 28.

A recommendation for The Community Builders to develop 47 units at 3 Jerome Smith Road was made at the Oct. 25 Select Board meeting, after the review of three proposals by Morse and a review committee. The Select Board voted to award Community Builders the contract, and start negotiations.