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.
“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MacDonald has championed a return to the original penalty: 10 percent of the withdrawn land’s fair market value at the time the land is withdrawn.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.”