Stowe Asks the Legislature for Something No Vermont Town Has Ever Had. The Answer Will Shape Municipal Finance for a Generation

Part 3 of Compass Vermont's series on local option taxes, the PILOT Special Fund, and the fight over who controls locally raised revenue.

On Tuesday, Stowe officials stood before the House Committee on Government Operations and Military Affairs and made a request that no Vermont municipality has ever made: legislative approval to impose a 2% local option tax — double the rate the state authorizes under existing law.

The request came through H.954, a charter amendment bill introduced on April 1 by Rep. Jed Lipsky, I-Stowe, along with co-sponsors Rep. Saudia LaMont and Rep. David Yacovone — both of Morristown, one of the neighboring towns whose workers commute to Stowe — and referred to the committee that controls whether it reaches the House floor. Stowe voters approved the increase at Town Meeting on March 3, with the rooms, meals, and alcohol tax passing 532-246 (68%-32%) and the sales tax passing 467-310 (60%-40%).

The committee did not vote. But the hearing exposed a fundamental tension that reaches far beyond one ski town’s tax rate: whether the Legislature will allow municipalities to set their own local option tax rates above the statutory 1% ceiling — or whether it will hold the line and keep that ceiling as a statewide cap.

Why This Matters Beyond Stowe

Under current Vermont law (24 V.S.A. § 138), any municipality can adopt a 1% local option tax on sales, rooms, meals, and alcoholic beverages by voter approval — no legislative action required. Act 144 of 2024 removed the charter-change requirement for standard 1% adoptions. According to the Vermont League of Cities and Towns, fifty Vermont municipalities now collect at least one form of local option tax — twelve of them new adoptions approved at Town Meeting this month, plus Stowe’s vote to double its existing rate. Six others — Castleton, Chester, Hardwick, Londonderry (sales tax expansion), Milton, and Roxbury — voted theirs down.

But nothing in the statute addresses what happens above 1%. The law is silent. And that silence is what makes Stowe’s request a precedent case.

“Stowe is trying to go around statute, which is legal for them to consider, but the statute is silent on anything over 1%,” Sen. Rich Westman, R-Cambridge, chair of the Senate Transportation Committee, has said. “So, if they’re silent on this, the question is, ‘What does the Legislature want this to be?’”

If the Legislature approves Stowe’s charter amendment, it would establish a pathway for Vermont municipalities to exceed the statutory rate through the charter process — one that any of the 50 existing LOT towns could attempt to follow. If it declines, it would signal that 1% is the effective cap, and towns looking for additional revenue will have to find it somewhere else.

What Stowe Told the Committee

Select Board Chair Ethan Carlson presented the town’s case in infrastructure terms. Stowe maintains a roughly 7-mile sewer system serving uphill areas, aging roads, culverts and bridges, a paid fire department, and a mountain rescue operation. The town’s tourism economy drives seasonal traffic that strains those services well beyond what a residential tax base alone can support.

Carlson told the committee that about 49% of Stowe residents currently pay more than 30% of their income toward housing — the federal threshold for housing cost burden. That figure tracks with town data presented in 2025: 26% of Stowe homeowners pay 30%-49% of income on housing and 23% pay more than 50%, totaling 49% of homeowners who are cost-burdened — compared to 14% and 10% statewide, respectively. The distinction matters: the 49% applies to homeowners specifically, not all Stowe households, where CommunityScale’s housing dashboard (as of March 2026) shows an overall cost-burden rate of 38%.

Select Board member Jo Sabel Courtney described the measure as “a modest, locally approved tool to help address those impacts.”

Rep. Lipsky framed the proposal as revenue-neutral for the state. “Local option taxes do not reduce the fiscal capacity of the state,” he told the committee, arguing that local infrastructure investment increases the state tax base.

Stowe’s existing 1% local option tax generated approximately $3.1 million in gross revenue in FY25, according to selectboard budget documents. Town Manager Charles Safford has estimated that the additional 1% would bring in roughly $3 million more per year — though neither the town nor the committee hearing clarified whether that figure is gross revenue or the town’s 75% share after the state’s cut.

The State Gets Paid Either Way

One detail that went largely unexamined in Tuesday’s hearing: the state retains 25% of all local option tax revenue under the existing structure. If Stowe’s 2% rate generates an additional $3 million in gross revenue, the state’s 25% share would add approximately $750,000 per year to the PILOT Special Fund — the same fund that, according to Joint Fiscal Office data, holds a surplus exceeding $15 million, and the same fund that the House Ways and Means Committee is actively repurposing to cover state grand list administration costs. (For a full accounting of the PILOT surplus and its uses, see Parts 1 and 2 of this series.)

As reported in Parts 1 and 2 of this series, the PILOT Special Fund’s original purpose is narrow: compensate municipalities that host tax-exempt state-owned property. The fund has been fully funded since FY24, according to the Joint Fiscal Office. But rather than returning the surplus to the towns that generated it, the state has moved in the opposite direction — appropriating $3.41 million from the PILOT surplus for state property tax administration in the FY26 Budget Adjustment Act (H.790), according to VLCT’s legislative analysis, and proposing through H.933 to make those costs a permanent charge against the fund.

Meanwhile, the House Transportation Committee’s “waterfall” proposal — which would have directed 50% of the annual PILOT surplus back to municipalities as block grants for town highway repair — was stripped from the transportation bill by the House Ways and Means and Appropriations committees within 24 hours of being introduced, as reported in Part 2 of this series.

The financial incentive structure is worth noting: under the current 75/25 split, 25% of any additional LOT revenue flows directly into a fund the state is already drawing on for purposes unrelated to its original mandate.

The Regional Redistribution Question

Not everyone sees it that way. Some legislators have argued that if Stowe generates additional local option tax revenue, the benefit should extend beyond Stowe’s borders.

Stowe’s economy relies on workers who commute from neighboring towns — Morristown, Waterbury, Hyde Park — that lack the tourism infrastructure to generate significant LOT revenue of their own. Those towns’ roads carry Stowe’s workforce, but their tax bases don’t benefit from Stowe’s visitor economy.

Westman, who earlier this session proposed a “waterfall” mechanism to redistribute PILOT surplus funds to all municipalities for town highway repair, has raised both a redistribution concern and a precedent concern. He has said he thinks money generated through local option taxes should be spread more broadly. But he has also warned: “If you open that door for Stowe, you open that door for every town across the state.” His proposal would have sent surplus LOT revenue to every town in the state, not just those that collect it.

That creates a direct tension with Stowe’s argument for local control. Town Manager Safford has pushed back: “When Stowe invests in itself, it rises the economic opportunity for the community, the region, and the state.”

Stowe officials have made the broader fiscal case before. At a joint selectboard-legislative delegation meeting in 2025, Carlson presented selectboard data showing that of the roughly $71 million in taxes collected in Stowe in FY24, approximately $41.6 million went to the Vermont Education Fund for redistribution around the state, while only about $11.6 million went to the municipality. By the selectboard’s account, no other town in Vermont sends more education property tax money to Montpelier.

The Vermont League of Cities and Towns has been a consistent advocate for returning more LOT revenue to municipalities, successfully pushing the split from 70/30 to 75/25 last year and formally opposing the Ways and Means proposal to raid the PILOT surplus. But the 2% question is different from the fight over how much of the existing 1% towns get to keep. Whether VLCT will actively back Stowe’s charter amendment or stay neutral on the precedent of exceeding the statutory rate is an open question the organization has not publicly addressed.

What the Committee Didn’t Have

The committee pressed Stowe’s witnesses for basic data that should have been in front of them before the hearing started. They asked for exact vote tallies and turnout from the March 3 Town Meeting. Witnesses described strong support but could not produce the numbers. “We can get you those,” one witness told the committee.

The tallies, published by the Stowe Reporter: 532-246 for the rooms, meals, and alcohol increase; 467-310 for the sales tax increase. Only 784 residents cast ballots — 19% of Stowe’s 4,177 registered voters. Those figures were not in the hearing packet — the committee had to ask for them, and witnesses promised to provide them afterward.

The turnout number may matter more than the margins. A 68% supermajority sounds commanding until you realize it represents 532 votes in a town of more than 4,000 registered voters. Whether that constitutes a mandate is a question the committee will likely revisit.

What Happens Next

The committee chair said the panel “plans on poking at this a little bit more.” Staff and witnesses agreed to provide voter-count and budget-comparison data before the committee resumes consideration. No timeline was set.

H.954 must clear the House Government Operations and Military Affairs Committee to reach the House floor. If it passes the House, it moves to the Senate. Crossover deadline has passed, but charter amendments tied to Town Meeting votes have historically received procedural accommodations in the legislative calendar — though those precedents typically involve uncontested procedural changes, not first-in-state policy questions with active opposition.

The question is no longer whether Stowe wants this. Voters answered that on March 3. The question is whether the Legislature is willing to let one town set a precedent that every other town in Vermont could follow.

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This is Part 3 of Compass Vermont’s series on local option taxes and the PILOT Special Fund. [Part 1: If Your Town Voted to Tax Itself an Extra 1%, Why Is $15 Million of That Money Sitting in a State Fund?] [Part 2: Lawmakers Had a Plan to Use Your Town’s Tax Surplus to Fix Your Roads. It Lasted Less Than 24 Hours.]

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