BERLIN – When a vacancy opened up in the Donaway building on Main Street in February, there was a waiting list of interested merchants.
When Burley Oak’s Bryan Brushmiller purchased the Downtown Video building, he started fielding inquiries from businesses wanting the space before its existing tenant left.
When the Maryland Wine Bar moved into Sisters, On What Grounds eagerly expanded into the small adjacent shop.
“Over the years, we’ve shown how much pride locals have in our town and have been able to bring in a lot of new and exciting events that draw tourists by the thousands, and of course any merchant would want to be a part of that,” said Cate Nellans, president of the Berlin Chamber of Commerce. “We are welcoming to new ventures and I have seen firsthand how every business owner in this town goes above and beyond to support each other.”
As Berlin’s economic prosperity appears poised to continue into the future, Mayor Gee Williams believes there’s one key change that needs to occur. He says those burgeoning businesses need to help pay for the town’s infrastructure — things like the streets, sidewalks and parking lots consumers use each time they visit a downtown shop.
“I don’t agree that the investments that are necessary for economic growth, that current residents should have to underwrite that,” Williams said.
Throughout the country, many cities and municipalities use a local sales tax to ensure that local commerce helps fund local improvements. While 38 states allow a local sales tax, Maryland does not.
“As a result, all benefit from the economic vitality in the Town of Berlin, along with the other 156 municipalities in our state, go solely to the coffers of the state of Maryland,” Williams said.
In that way, the town is not able to benefit from its economic success. Williams says that when a town is stagnant, not growing commerce, that disadvantage is not noticed. In Berlin’s case, however, Williams believes it’s a measurable drawback.
“In most states in America, when a community makes the investments necessary to support economic growth, the municipalities receive a return on these investments through a local sales tax,” Williams said. “As the local economy grows, so too does revenues to the town.”
Those additional revenues can help offset the costs of increased responsibilities that come with a growing number of visitors — things like public safety, wastewater treatment and street repairs. In Maryland, however, there is only a statewide sales tax.
Town Administrator Laura Allen, who previously worked in California, considers Maryland’s practice unusual.
“I came from a state where cities had much more independence and so I do think it’s problematic that this state has a structure that keep its cities so beholden,” she said.
Because the sales tax revenue goes to the state, municipalities from throughout Maryland compete against each other for grants and loans administered by the various state departments.
“The agencies are doing a good job but they have a responsibility to support communities that are struggling but they’re also trying to help those that are down the road a bit,” Williams said. “It’s a catch 22.”
The lack of a local sales tax didn’t matter to Berlin for a long time, but Williams said the forward-thinking decisions made by town leaders in the later part of the 20th century changed that.
“I think it is reasonable to say the cumulation of many decisions followed up with municipal government investments has put us on a course of economic stability and prosperity for the rest of the 21st century if we do not lose our commitment or direction,” he said.
The town’s current economic vitality is what led Williams to begin thinking about a way to deal with the lack of local sales tax.
“The reasoning is that general taxes in Berlin should go to support general services,” Williams said. “If projects enhance or support commerce for an economic benefit, they should be primarily paid for by a fee or assessment paid for by the commercial sector, not all property owners.”
Allen says the town is at the point that it needs additional revenue to maintain the current level of service it provides.
“If you have more people coming into town there’s more demand on the infrastructure and services,” she said.
While theoretically something could change at the state level to allow for a tax, Williams doesn’t believe it would happen soon enough to help Berlin.
“Small cities have not been looked at as engines of economic growth,” he said. “The 20th century attitude that small towns were dead little places, we went through that but we didn’t accept it.”
Williams has begun exploring potential solutions to the problem. One option could be targeted municipal fees. Something like parking fees, he explained, could be used to address the town’s plans to expand parking capacity. Another option could be creation of some sort of business improvement district. In that case, establishment of a district assessment would set aside funds to pay for town projects.
Allen said an obvious way for the town to raise more revenue would be to increase property taxes. That, however, would put the burden on residents and not visitors.
“You’d have local residents paying for the impacts of the guests that we have come to our town,” she said.
Williams said the town already had some programs in place to help ensure residents weren’t footing all the bills associated with commerce and development. Building permits, for example, help the town recover the cost of site plan reviews and inspections.
As the town continues to see a strong stream of tourists visiting local shops and restaurants and attending Berlin’s array of special events, demands on infrastructure will increase. By beginning the conversation on how to fund the necessary improvements — things like more police, new water pipes, etc. —now, Williams believes the town will be well prepared. He and Allen are currently in the brainstorming stage.
“It’s seeing a problem down the road and trying to take some action now,” he said. “We want to make it look a lot like magic, a lot like it happens naturally, but actually it takes a lot of work, a lot of planning, a lot of real dollar investments.”
