An Act authorizing an increase in the limit of a local excise tax that the city of Salem may impose for the purpose of funding school and municipal facilities

194th Legislature (2025-2026) Introduced by Manny Cruz

Salem can raise its local room occupancy tax to 8.75% and dedicate the incremental 2.75% to a special fund for planning, constructing, maintaining, and improving school and municip

Summary of Bill: HD 6239 (194th Massachusetts General Court)

Purpose

authorizes the City of Salem to increase its local excise tax on the transfer of occupancy for rooms in lodging establishments (e.g., hotels, motels, B&Bs) to fund school and municipal facilities. The act sets a higher maximum tax rate and designates how the additional revenue is to be used and managed.

Key Provisions

Increased local excise tax rate (Section 1):

Current six percent local excise tax limit on room occupancy transfers (under General Laws, ch. 64G, §3A and related provisions) is overridden for Salem.
Salem is authorized to impose a local excise tax at a rate not to exceed 8.75 percent on such transactions.

Creation of a dedicated revenue fund and use of proceeds (Section 2):

The revenue gained from the portion increasing from 6% to up to 8.75% (i.e., the 2.75 percentage point increase) must be deposited into a separate special revenue fund established by the City of Salem.
Funds in this special revenue account must be used exclusively for planning, design, acquisition, construction, reconstruction, renovation, repair, improvement, furnishing, equipping, maintenance, and extraordinary maintenance of Salem’s school and municipal buildings and facilities.
The fund may also be used to pay debt service on bonds or notes issued for these purposes.
The bill explicitly preserves the city’s eligibility to apply for and use grants or other state/federal/local financial assistance (e.g., from the Massachusetts School Building Authority) for these purposes.
Any fiscal year end balance remains in the special fund (not reverting to the general fund) and remains available for the described purposes.

Effective date (Section 3):

The act takes effect upon passage.

Who Is Affected

Primary impact:

The City of Salem and its lodging establishments subject to the local occupancy excise tax.

Beneficiaries/uses:

Salem’s school and municipal facilities, including related planning, construction, maintenance, and debt service.

Potential broader impact:

Visitors and guests paying higher room taxes in Salem (up to 8.75% local rate) could see higher accommodation costs.
City finances related to school and municipal infrastructure may gain enhanced funding flexibility and a dedicated funding stream.

Procedural/Timeline Notes

The proposal is a statute that, if enacted, would immediately authorize Salem to impose the higher rate, with the incremental revenue placed into the dedicated fund.

The bill does not specify a sunset date or cap on total debt; it directs revenue use and fund management but does not alter other sources of funding or grant eligibility beyond preserving access to external assistance.

Observations

The bill provides a targeted mechanism to fund capital and maintenance needs for Salem’s educational and municipal facilities via a dedicated portion of the local hotel/room occupancy tax.

It creates fiscal discipline by ring-fencing the incremental revenue and requiring that it be used for stated capital and maintenance purposes, including debt service, while allowing continued access to external funding streams.