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 hotel tax from 6% to up to 8.75%, with the extra revenue placed in a dedicated fund for planning, building, maintaining, and debt service for schools and munici

Senate concurred

Overview

Bill H.5537 (Session 194th, Massachusetts) would authorize the city of Salem to increase its local rooms-occupancy excise tax (a local hotel tax) from the current 6% rate to up to 8.75%. The incremental revenue (the difference between 6% and the new rate) would be deposited into a separate special revenue fund dedicated to planning, designing, acquiring, constructing, renovating, maintaining, and equipping school and municipal buildings and facilities in Salem, including debt service on related bonds or notes. The bill explicitly preserves Salem’s ability to obtain grants or other assistance from state, federal, or other sources, and it ensures any remaining fund balance at the end of a fiscal year remains available for purposes described in the act.

Key Provisions

Section 1: Authority to raise the local excise tax on transient occupancy (hotels, lodging houses, motels, bed-and-breakfast establishments) within Salem from the current 6% cap to a rate not exceeding 8.75%.

Section 2: Establishment of a separate Special Revenue Fund in Salem funded by the incremental revenue (the 2.75 percentage point difference between 6% and up to 8.75%).

The fund must be used solely for:
Planning, design, acquisition, construction, reconstruction, renovation, repair, improvement, furnishing, and equipping of school or municipal buildings and facilities.
Maintenance and extraordinary maintenance of such facilities.
Payment of debt service on bonds or notes issued for these purposes.
The bill allows continued eligibility for grants or other financial assistance from MA School Building Authority and other sources.
End-of-year fund balances do not revert to the general fund and remain available for the described purposes.

Section 3: Effective date—this act would take effect upon passage.

Who Is Affected

Primary: City of Salem, including its schools and municipal facilities planning and maintenance programs.

Beneficiaries:

Salem taxpayers via enhanced funding for public facilities.
Stakeholders involved in school and municipal facility projects (students, residents, employees, and library/administrative staff) who may benefit from improved facilities.

Broader fiscal context: Salem could leverage state and federal grants in addition to the new local revenue stream.

Timelines and Process

The bill is presented by Rep. Manny Cruz and requires passage by both chambers and the governor to take effect.

Action history indicates: Senate concurred on 2026-07-01; referred to the Committee on Revenue on 2026-06-25.

Upon enactment, the incremental revenue would be deposited into the new special revenue fund starting in the fiscal year the act takes effect.

Potential Impacts and Considerations

Revenue impact: A local rate increase from 6% to 8.75% could raise substantially more funds for Salem facilities, depending on occupancy and tourism activity.

Fiscal governance: Creation of a dedicated fund with restricted usage may improve planning and project accountability for school and municipal facilities.

Debt service: The act explicitly contemplates using a portion of the funds for debt service related to facility projects.

Grants and partnerships: The act does not preclude pursuing outside funding, potentially augmenting the program with external resources.

Availability of funds: Unspent funds remain in the dedicated fund, ensuring ongoing capacity for facility-related expenditures.