State throws property tax lifeline to flood-ravaged Vermont towns

Gov. Peter Shumlin. VTD/Josh Larkin

The state Monday threw a financial lifeline to Vermont towns hard hit by tropical storm Irene and spring flooding with a novel property tax abatement plan.

Gov. Peter Shumlin announced Monday that he and legislative leaders have agreed to push through a bill to ease the pain for property owners who took major losses. The bill will also ease the financial hit towns will take from a loss of property taxes from damaged homes and businesses.

The proposal will authorize the state Tax Department to reimburse lost education taxes to towns under an “extraordinary abatement” plan that will cost an estimated $2 million to $4 million. The money will come from the state education fund.

Under the proposed eligibility criteria, a home or business must have lost use of the structure for 90 days and the structure must have suffered at least a 50 percent loss in value. Shumlin said towns that abate municipal taxes for affected property owners will now also be reimbursed for the education portion of the taxes.

The abatement is not for an entire year but applies to the period of time property was lost to service.

Boards of Abatement in local towns comprise an array of town officials, such as selectboard members and justices of the peace, who sit and hear abatement requests on taxes.

In the last few weeks, numerous towns, especially hard-hit ones such as Wilmington and Waterbury whose grand lists have been staggered by property damage, have worried about property losses and how taxes would have to be spread out among other property owners to make up the difference.

Gov. Shumlin said it was only fair to help property owners “kicked so hard in the teeth by the storm.”

“We want to set up a system that ensures that we don’t ask them to pay taxes on property that is not in use right now, houses they can’t live in, businesses they can’t use,” Shumlin said.

He also said the plan was important in light of “tremendous concern” among towns worried about how they would pay education property taxes after the storm.

We are in uncharted territory dealing with Irene.”
- Steve Jeffrey

While municipalies can abate town or city taxes, education taxes, which are far greater than taxes levied to pay for town budgets, fall under the state’s aegis under Act 68.

Steve Jeffrey, who heads the Vermont League of Cities and Towns and attended the announcement, said Vermont municipalities collect around $1.4 billion in property taxes, and three-quarters of that is for education taxes.

Considering the woes facing many Vermont communities, the plan will help ease at least one area of concern, and he said he was “very pleased” with the proposal.

“We are in uncharted territory dealing with Irene,” he said.

Members of the Legislature’s key tax-writing panels promised to quickly move the bill when the session convenes in January, and Shumlin praised them for their cooperation.

Janet Ancel, D-Calais, who heads the House Ways and Means Committee, said delegating authority to the tax commissioner was a creative way to resolve a problem that requires involving the Legislature.

Tax Commissioner Mary Peterson said the property tax system simply isn’t designed to deal with such extraordinary circumstances as damage from Irene. She noted property taxes are designed as a “snapshot” on April 1 of each year and any changes to a property are normally captured the next year for tax purposes.

“In a normal year, it sort of evens out over time,” she said. “That just doesn’t work in a year like these when we’ve seen so much catastrophic damage.”

For towns facing an already difficult financial picture from all the damage and repairs, the proposal “gives clarity” to the system, she said.

Asked about how the 50 percent loss in value criteria was reached, Shumlin and Jeffrey both suggested that 50 percent was a reasonable threshold. Jeffrey said that may exclude some homeowners, but the line had to be drawn somewhere.