Current Use in Senate tug-of-war

A cornfield along the Winooski River in Berlin. Photo by Roger Crowley for VTDigger.org

A cornfield along the Winooski River in Berlin. Photo by Roger Crowley/for VTDigger.org

If long-awaited Current Use reforms are going to make it to a conference committee between the House and Senate, they’ll have to survive a showdown in the Senate first.

Opposing versions of H.329 would levy very different penalties for withdrawing land from the state’s leading conservation program. Both versions change the current penalty, but in different ways.

There is a difference of opinion about the Current Use program’s biggest problem: withdrawing land after a short period of time, or taking it out after decades.

Current use is a special tax structure used by many states. It encourages conservation by lowering property tax rates for active agricultural or forest land. Municipalities don’t see a reduction in their revenues because the state makes up the difference to keep them whole.

More than 2.3 million acres in Vermont were enrolled as of April 1. Between forgone revenues and municipal reimbursements, Current Use is estimated to cost the state about $57 million per year.

But Current Use has a revenue stream, too. When a landowner takes property out of the program, he or she is charged a tax for changing the land’s use. The penalty is intended to discourage withdrawing land from Current Use, because the program was conceived to preserve working lands in perpetuity.

That penalty has been at the heart of debate over Current Use for about a decade, when administrative changes effectively lowered it significantly.

In 2010, Gov. Jim Douglas vetoed a return to the original penalty. This biennium, four versions of Current Use legislation have emerged, three of which address the land-use change tax in very different ways.

A special Senate committee Tuesday night held the first of four fall public hearings on Current Use. Pictured left to right are Senators Tim Ashe, Mark MacDonald, Christopher Bray, Bobby Star, Richard Westman and Robert Hartwell. Photo by Hilary Niles/VTDigger

A special Senate committee held the first of four fall public hearings on Current Use in September 2013. Pictured left to right are Sens. Tim Ashe, Mark MacDonald, Christopher Bray, Bobby Starr, Richard Westman and Robert Hartwell. Photo by Hilary Niles/VTDigger

“The problem is not people who put their land in Current Use for the short-term, like five or seven years, or even 12 years,” said Sen. Mark MacDonald, D-Orange. “It’s 20 or 30 or 40 years, when the taxpayers have invested a lot.”

MacDonald has championed a return to the original penalty: 10 percent of the withdrawn land’s fair market value at the time the land is withdrawn. He sits on both the Senate Finance and Natural Resources committees, both of which passed nearly identical penalty provisions to that effect.

In order to return to the original penalty, the state would have to conduct appraisals to determine the fair market values of some 400 to 500 properties, according to Deb Brighton, who has analyzed Current Use for the Joint Fiscal Office since the early 1980s. The cost would be about $100,000 a year and could be problematic to administer, in her view.

Sen. Bobby Starr, D-Essex-Orleans, on the other hand, is concerned about the Current Use program’s public image.

In particular, he thinks the perception of “parking” is a problem — the perception that people are gaming Current Use to save on taxes while they wait to develop their land.

“The long-termers are not part of the parking problem,” Starr said. “If they’ve held up their end of the contract for all those years … why would you want to hit them over the head with a hammer?”

Starr chairs the Senate Agriculture Committee and sits on the Appropriations Committee, where the bill is awaiting its final review before going to the full chamber for debate. The Agriculture committee’s version would leave the current law largely intact. Only the penalty for portions of withdrawn parcels would be increased, and then only if they’re taken out after being in Current Use for less than a decade.

Starr said he’ll advocate for his position on the penalty when Appropriations picks up the Finance committee’s version, likely Monday. He’s expecting the fiscal note now being drafted will show a steep decline in penalty revenue for the coming year, because the Senate version also includes an “easy-out” provision for penalty-free withdrawals until Feb. 1.

MacDonald said it’s only fair to hold participants harmless if the terms of the program are to be changed. But Starr hinted that the revenue loss may be too much for the rest of the state budget to absorb.

“It wouldn’t bother me if I didn’t see any bill at all,” Starr said. He would regret his committee’s work and the testimony of a number of witnesses not coming to fruition, he said, but the lost effort would not be enough to spur him to sign onto a penalty structure he disagrees with.

The prospect of the bill not surviving — much less not making it the full Senate for debate — troubles some stakeholders.

Put Blodgett chairs the Current Use Tax Coalition (CUTC), a group of 18 organizations with different perspectives, who spent four years hashing out their own compromise position on Current Use penalties.

The coalition prefers a tiered approach, Blodgett said, in which there would be a lowered penalty lower for land that is enrolled for a longer period of time. That’s close to what the House passed in 2013, though the House penalties are slightly higher than where the coalition landed. Neither Senate version includes lower penalties for participants who have been in the program for certain time periods.

Blodgett said the CUTC already agreed to let go of several ancillary provisions they liked from the Senate Agriculture version, with the hope of getting the bill through this year. He noted Friday that, with the legislative session set to end in a week, lawmakers are running out of time to make decisions.

“It would be a shame not to have the debate,” said Jamey Fidel, general counsel for the Vermont Natural Resources Council, one of the members of the coalition. “Doing nothing doesn’t create stability in the program.”

Follow Hilary on Twitter @nilesmedia

Comments

  1. Jacob Miller :

    Other agencies, departments and programs have had their funding cut, but it’s a green light on expenditures for the Current Use program.

    Instead of considering withdrawal penalties, the discussion should be, to stop accepting applications, especially for non-agricultural parcels into the program and sun setting the law for the long term.

  2. David Brynn :

    The statement that “It’s 20 or 30 or 40 years, when the taxpayers have invested a lot” misses the point so completely that it is baffling. Taxing healthy forests based on their Current Use does not cost taxpayers anything whether it is for 1 year or for 40 years! The fact is that Current Use taxation of healthy forests is NOT a landowner bailout or subsidy. It simply recognizes that healthy forests provide clean water, superb habitat, and superior carbon sequestration without placing burdens on schools or municipal services. Taxing healthy forests at their Use Value is the fair and right thing to do. It is NOT a subsidy! Can someone – anyone — please explain why this reality is so hard to grasp?

    • Jacob Miller :

      David it all depends on how one defines “subsidy”. In the real world it works like this in our imaginary town of 10 residents. Each resident pays $100.00 per year for their property taxes. Bob and Fred decide to enroll their property in the “Current Use” program and by doing so their tax bill is reduced to $20.00 each. The “Current Use” program (the State of Vermont) sends a check to Bob and Fred’s town in the amount of $160.00 so there is no deficit in the town’s budget.

      Where does the $160.00 the State sends to the town come from David? Even though the Vermont Tax Department refers to this payment to the towns as “revenue forbearance” or “tax savings”, it still consists of monies collected by Tax Department in the form of sales taxes, income taxes or automobile registration and licensing fees.

      Nonetheless, the payments to the towns to reimburse property tax revenue are a property tax subsidy for the owners of property enrolled in the “Current Use” program and a “tax expenditure” to everyone else.

  3. Wayne Andrews :

    Excuse me but when I subsidize some rich landowner’s large parcel, via any type of tax or fee, it is a subsidy. Wake up David!

  4. When land or forest is allowed to run wild wood and you call that management or use, you are not getting the point. Our ancestors managed. We could not after getting lawyered and taxed to death. Once we had our piece, Then we got tangled in the tiered approach, pay 10% of current value ( per appraisal according to one of hundreds of town listers) or risk paying 20% of new value if we re-enrolled and then needed to develop. The new value was more per acre because the original farm was over 200 acres. Even our lawyer questioned us until we did the math ten times. I question the actual management and purpose.

  5. Michael Gardner :

    Apparently my persistent letters to our representatives have gone unread. The largest “ABUSER” of Vermont’s Land Use Program are the actual towns. They inflate the value of land in the program in order to receive a larger check back from the State (which comes from our income taxes). I’ll bet dinner that an independent audit of the Land Use Program would cut the cost by $5 million per year.

    If Vermont wants to start a reform how about taxing all land at its current use rather than its highest and best use. The system as designed is absurd, we are paying taxes on an imaginary, and often impractical use of land. This value is upheld by a Board of Civil Authority that has absolutely no idea how land should be valued. In Shaftsbury our BCA declared that my wife and I had a building lot….in a class III wetland, a lot we paid taxes on for the two years it took to fight the insanity until we gave up and sold our house.

    The system is corrupt, the nepitism runs deep, and rather than focus on the real problem our elected leaders continue to dance around the issues in fear that they’ll lose the next election and not have their ego stroked.

    • David Zuckerman :

      We included in the Senate Ag version a provision for the tax department to audit 5towns assessments of enrolled land and to levy a penalty if they were inflating the values. The goal of this provision was to address the issue that you raise.

  6. Steve Allen :

    With a price tag of $57 million, Vermont taxpayers should demand evidence that Current Use achieves the intended goal of “conservation and preservation” of agricultural and forest land. How have development patterns been changed because of Current Use? Has there been less development? “Smarter” development? How exactly are lands protected? How do we measure the success of this program?

    Without a requirement for a permanent conservation easement, any property enrolled in Current Use can be developed, typically paying a nominal penalty which is far less than the subsidy received. This is not protection … it is a gift. I support conservation and preservation of our farm and forest resources, but would like the assurance that, in exchange for my financial support, property owners will permanently restrict their land from development. As it stands, they have their cake and …..

  7. Phyllis North :

    Sen. MacDonald has it backwards, the problem is people who are in a short time and take out portions of parcels to develop with a low penalty, not the long-time owners who have been managing their land for years.

    The truth is that hardly anyone is getting out of current use, and 400 or 500 new landowners join each year because they can’t afford their property taxes. The problem is this shifts the property tax burden to the rest of us, because enrolled owners – who save up to 90% of their taxes – are not paying very much into the education fund. Current use is a good policy but it is getting expensive for those of us not in the program.

    • Moshe Braner :

      If and when we switch education funding from the (obsolete, in my view) concept of “property taxes” to income taxes, this perceived “problem” will be mostly solved.

      That still leaves non-education municipal taxes, there too one may debate what it really “fair”, and whether property taxes make sense. Just because we’ve been doing something one way for 200 years does not make it right for today’s realities.

  8. Kathy Nelson :

    Here’s a question that I would love to have an answer for: How can an out-of-state resident, who owns 9,000 acres of VT forest, claim the current use benefit when he has leased that entire 9,000 acres to an out-of-state industrial wind developer? Shouldn’t that current use benefit be nullified when such a lease is signed?
    I suspect more than a few “loopholes” in the current use system.

  9. Wayne Andrews :

    For once I agree with Kathy Nelson concerning her comment above.

  10. David Brynn :

    The UVA program certainly can and should be improved. But an average acre of Vermont forestland grows about 100 board feet per acre per year — plus or minus. That might gross a landowner $25 per acre per year over time from the sale of timber stumpage. If the landowner is expected to pay taxes based on what the land could be if developed, then it will likely no longer be forest. The ecological benefits of a healthy forest — clean water, stored carbon, diverse habitat — will be lost. It IS essential that forests enrolled in the Current use Program actually be HEALTHY. A Timber Harvesting Impact Study conducted two years ago at the cost of $168,000 to the taxpayers might help answer that question. It has still not been officially released.

  11. Dave Bellini :

    We should abolish the Current Abuse Program. It’s mostly a perk for wealthy land owners. Vermont could put the 57 million dollars to much better use.

  12. David Brynn :

    If Current Use is abolished then only the wealthy will be able to own forests in Vermont. And lots of forests will be stripped and slaughtered in the transition.

    Taxing land based on what it could be used for is not a good or fair approach. Current Use helps to address this.

    Vermont needs healthy forests now more than ever. Current Use helps keep forests as forests. It could focus more on forest health.

    Work is ALWAYS needed to increase benefits and to address abuses.

Comments

*

Comment policy Privacy policy
Thanks for reporting an error with the story, "Current Use in Senate tug-of-war"