The Shumlin administration proposed a three-year moratorium on new enrollment in the state’s current use tax program Tuesday.
The moratorium and other changes would generate $1.6 million in savings for fiscal year 2016, according to the tax department.
The current use program provides property tax breaks to owners who preserve their land for forestry or agriculture rather than sell it for development. Towns are reimbursed by the state for the forgone revenue, and no money is paid into the state education fund on property in the program.
But the state is facing a $93 million budget shortfall for fiscal year 2016, as well as rising property taxes, an issue voters have expressed as a major concern in last year’s election and town meetings.
Secretary of Administration Justin Johnson said the proposed moratorium on enrollment for three years is to help slow budget growth in fiscal year 2017 through 2019. He said the state had a further downgrade of $18.6 million in general fund growth for fiscal year 2016, and $8 million for 2017.
“It can’t be used to help in ’16 because of the timing of the enrollments. We would not realize any savings in the upcoming fiscal year,” Johnson said. “The reason for a sunset on the freeze is to ensure we don’t create a situation where our important working lands initiatives are not unduly hampered.”
Jim Knapp of the state Department of Taxes said the decision to adjust the current use program was one of economics.
“I believe that this is an element of the shared responsibility to work on the state’s finances,” Knapp told the House Ways and Means Committee on Tuesday. “This is one contribution going toward the gap and everyone is being touched by this and the current use program is going to contribute its share.”
Last year, landowners saved $14 million by enrolling their land in the program for fiscal year 2015, according to the tax department. As a result, the education fund did not receive $45 million in potential property tax revenue. There are currently 466 applications for enrollment in the program.
In addition to the freeze on new applications, the administration is proposing to tax barnyards 30 percent fair market value. Barnyards — which include barns, greenhouses, sheds and certain housing — pay zero property taxes when enrolled in current use.
Proponents of the popular conservation program have other ideas, including increasing penalties for landowners who take their land out of current use, a change to the so-called “easy out” provision lawmakers have taken up in previous years. Lawmakers say $1.2 million could be raised by raising the penalty.
The administration did not analyze whether increasing penalties could raise a similar amount of money, Knapp said.
Jamie Fidel of the Vermont Natural Resources Council was among those calling for stiffer penalties. He said between 2003 and 2009, the state lost 42,000 acres of land greater than 50 acres in size. He said as the state loses these large tracts of land, it loses its working landscape and ecological foundations.
The current use program, he said, can put a stop to that. About half of the state’s forest land is enrolled in current use, he said, and the rest is still threatened by landowners selling off parcels for development to pay property taxes.
Bill Moore, a lobbyist for the Vermont Farm Bureau, a trade group that supports current use as a uniform tax policy across all of Vermont, said the proposal will dampen the state’s working lands economy.
“This is a way to look for revenue in a program that is designed to bolster and foster the growth in our working land economy, which has all sorts of other implications for other revenue streams,” Moore said. “I think it is pennywise and pound foolish to staunch the flow of capital that is being put into that economy.”
The moratorium will not affect the transfer of property, Knapp said.
