Border Town?

News out of the state house is that we are getting closer and closer on the three basic conditions under which Governor Patrick would support the proposed new tax package. Those conditions were pension, transportation and ethics reform. The last piece of that trio is being worked on right now.

It is note worthy that some of Patrick's posturing on the issue was mostly bluster since it was probable that senate and house leaders would have a veto proof majority if Patrick did take issue with any of the proposed legislation.

The center piece of all of this is the proposed increase in the sales tax from 5% to 6.25%. It will also include a sales tax on liquor (tax on a tax) as well as local options for increasing the hotel tax and a new piece of the meals tax.

At a business function this week Speaker Deleo was asked about the rationale between an increase in the sales tax versus one on the gas tax. His response was that a gas tax would heavily hit working families for a basic such as transportation while the sales tax was more of a choice and would hit those that have the means to spend more.

There has also been some justification in that the sales tax has not been "raised in 20 years." While it is true that the rate hasn't changed it is also true that the tax income has risen dramatically because things certainly don't cost today what they did 20 years ago.

So what does it mean for Burlington? It is certainly likely that the town's leadership will opt for the increase in the local option taxes. That may result in over 200 thousand dollars in increased income from the hotel tax and also a very sizable take from the meals tax.

What may be more difficult to measure and will only be born out by time is what impact the sales tax increase will have on retail sales, retail property values and the corresponding retail property taxes in town. We have already seen some softness as a result of increased competition, what will happen if a good deal of retail sales simply by pass Burlington and travel the extra 21 miles to the New Hampshire border?

Retail sales along the border have long suffered because of the difference in taxation between Massachusetts and New Hampshire. Has the border gotten closer to Burlington with imposition of a substantially higher sales tax?

Land Locked Option Expiration

If I am reading the copy of the 20 year option on the Landlocked Land property correctly, then the expiration date is May 14, 2010, exactly 20 years after the option agreement was executed.

As we are getting closer and closer to that date, the current holder of the option is likely to become more and more desperate in their attempts to lock up the town in some sort of an exclusive deal so that they may maintain control over the property.

Those efforts are likely to include a request for some sort of referendum question that asks the voters to endorse the option holder in some way or there is likely to be some sort of grass roots efforts to promote the cause of development on the site and specifically the option holder's proposal.

One such effort is under way under the heading of "fiscal responsibility." The argument is that the property should be developed and developed by the option holder because it would significantly impact the tax rate.

Let us for a moment completely agree with that rather dubious premise. Let us say that the town is unanimous in support of selling the property and building it out to the maximum. The question then becomes if we intended to maximize the yield from the sale why would we restrict ourselves to the current option holder?

Wouldn't we want the option to run out so that:

1. We wouldn't be selling the town's largest capital asset at the absolute bottom of the commercial real estate market and into the teeth of the worst recession in 70 years?

and

2. We would have any number of very well financed and nationally recognized companies bidding for the property?

Letting the option run out is the fiscally responsible thing to do if you wish to maximize the return to the tax payer. There is nothing that distinguishes this option holder from anyone else in the development market. Any life science company or elderly housing complex builder that has interest in the property while the option is in force over the next 11 months is still going to have interest after the option expires.

If you favor developing the property and feel it is in the best financial interest of the town then let's wait till the option runs out, conditions are better and have a town wide referendum asking the question "should the property be sold" and then move forward one way or another. Any other action is simply a strategy that places the option holder in an exclusively favorable position. Doing that cannot be trumpeted as "fiscally responsible" by anyone other than champions for the option holder, not the taxpayer.

Since the holder acquired this option in some sort of a bankruptcy fire sale, the tax payer is not obligated in anyway to give them any thing other than a fair chance to win a deal in an open competition.