Keene City Councilor Randy Filiault has proposed taking action against the state after New Hampshire’s meals and rooms tax was lowered, which Filiault said will shift more of the tax burden to property owners.

In a letter Tuesday to the City Council and Mayor George Hansel, Filiault suggests a pair of options. The first is to sue the state, and the second is to discuss potentially having local businesses pay only 60 percent of the tax to the state and send the other 40 percent to the city.

As part of the state’s most recent two-year budget, which the Legislature passed this June, the meals and rooms tax rate — which is applied to room rentals and prepared meals — was decreased from 9 to 8.5 percent. In his letter, Filiault says the decrease may look positive, but it comes with consequences.

“While this may appear as a tax reduction, it actually will result in increased property taxes for Keene residents in addition to an increased need for the State to make up funds owed to the city because of that budget shortfall,” Filiault wrote.

According to state law, all money collected through the meals and rooms tax must be paid to the state treasurer, though 40 percent of that amount is to be directed to municipalities based on their population. However, Filiault noted that this is routinely ignored and said that last year Keene received only 21 percent.

Despite the city’s sending a number of letters and resolutions to the state about this, revenues Filiault said are owed to Keene still have not been paid.

“I put a couple proposals on the table; I’m not going to say if one, or either, will or could happen,” Filiault said. “But it starts the conversation again about what do we do to start enforcing the state RSAs?”

City Manager Elizabeth Dragon said that in the past decade Keene’s share of the meals and rooms tax revenues has been trending down until this year, when the share was increased from approximately 20 to 30 percent. While not the 40 percent the city is supposed to receive, she said, it does help, and this year’s payment will amount to more than $400,000 over the last payment of $1.85 million.

“This is a big step in the right direction,” Dragon said in an email. “We depend on these revenues each year to balance our budget. If for some reason these revenues were not received or were dramatically reduced it would have a detrimental impact to our budget and ultimately the services we provide.”

Had the city been receiving the full 40 percent since 2011, she said Keene would have received more than $8.8 million more in that time frame, adding that the funds have been retained by the state to balance its budget.

When Keene doesn’t receive the funding it expects from the state, Filiault said, it must make up those dollars by either cutting services or raising taxes. He said he’s concerned that the recent 0.5 percent reduction in the meals and rooms tax will cause the state to send municipalities less money. While this might equate to a small savings for consumers, he said, it will hurt property taxpayers.

“We’ve reached an unsustainable level in terms of property taxes — we’ve actually surpassed that,” he said. “It’s certainly unsustainable in the future to raise property taxes. But ... we have a city to run.”

Keene isn’t the only local government to be affected by the lower-than-promised meals and rooms tax payments. Filiault said he’s been working with Cheshire County Administrator Chris Coates on this issue and said the hope is to get all of New Hampshire’s 10 counties involved.

Coates wasn’t immediately reachable for comment Thursday.

However, the matter came up Wednesday morning at a Cheshire County commissioners meeting. County staff and commissioners discussed several issues related to the state’s tendency to downshift costs to the local level and the impact this has on communities.

“When I hear that mantra of ‘no new taxes,’ you’re doing it all the time,” Coates said of state lawmakers during the commissioners’ meeting. “You’re feeing us to death, you’re changing formulas, you’re passing things down to us on a regular basis that then we have to carry as a county, as a school district, as cities and towns, and as a taxpayer. And what does that solve?”

Filiault’s proposal was on the agenda for Thursday’s council meeting, where it was sent to the council’s Finance, Organization and Personnel Committee.

Mia Summerson can be reached at 352-1234, extension 1435, or msummerson@keenesentinel.com. Follow her on Twitter

@MiaSummerson