Vermont Expands Use of State Education Property Tax for TIF Projects

Vermont Governor Peter Shumlin is considering an expansion to the State’s TIF program by allowing seven municipalities to use state education property taxes to stimulate local economic development instead of six as is currently allowed under Vermont’s TIF law.

The Vermont legislature approved the use of TIF for economic development in 1985. Since then, TIF statutes in Vermont have undergone considerable changes, most notably when Vermont created a state education property tax in 1997, replacing local school district property taxes. After this change, the Vermont TIF statutes were amended to allow both municipal property tax increment and state education property tax increment to be pledged for TIF projects.

In order to be eligible for TIF assistance in Vermont, a project must be located in an existing industrial area, approved growth center, or economically distressed area. In addition, a project must meet at least three of the following criteria:

  • Requires significant public investment in amounts substantially greater than normal municipal expenditures;
  • Includes affordable housing;
  • Impacts the remediation and redevelopment of a brownfield;
  • Stimulates business creation and expansion; and
  • Improves public transportation

If a project is eligible for TIF assistance, a municipality can pledge up to 75% of both the municipal property tax increment and the state education property tax increment generated within that TIF district to the project. Both types of property tax increment must be pledged in equal percentages.

A 2008 amendment to the TIF statutes provides that between July 1, 2008 and June 30, 2013, only six TIF districts can use the state education property tax. Further, the 2008 amendment limits each municipality to the creation of only one TIF district during this period.

In order to establish a TIF district and use the state education property tax, a municipality must receive approval from the Vermont Economic Progress Council (VEPC). So far, the VEPC has approved the requests of five municipalities (Burlington, Colchester, Hartford, Milton and St. Albans). Because there is only one slot remaining but there are two applicants (Barre and South Burlington), the Governor is considering an expansion of the TIF program by making seven slots available. This proposal will be considered during the 2013 legislative session.

It is unclear whether a municipality has the authority to establish a TIF district and pledge only municipal property taxes, and therefore not be subject to the TIF cap. The VEPC has requested that the Vermont legislature clarify this issue during the 2013 legislative session.

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