Shumlin extends state credit to towns afflicted by Irene; doesn’t rule out gas tax hike

Gov. Peter Shumlin has appointed Neale Lunderville as the state's Irene Czar. VTD/Anne Galloway

Gov. Peter Shumlin has appointed Neale Lunderville as the state's Irene Czar. VTD/Anne Galloway

The Shumlin administration announced on Tuesday a package of financial assistance programs for communities in southern and central Vermont that were devastated by the floodwaters from Tropical Storm Irene.

Gov. Peter Shumlin said he anticipates the total estimates for post-Irene reconstruction will exceed $1 billion. State highways alone sustained $700 million in damage. The impact on the nearly 40 towns that were damaged by Irene’s floodwaters has not yet been tallied, but the state is bracing for several hundred million dollars worth of repairs to municipal roads, bridges and buildings.

Though federal relief programs, including the federal highway emergency relief fund and the Federal Emergency Management Agency, will provide direct financial support for the state and towns, the big question at this point, is just how much federal money will be available. Congress is in the middle of a political battle over FEMA, and it is unclear how much of the cost of reconstruction will be borne by state and local taxpayers.

“We recognize that whatever the local share might be, this is going to put a financial strain on local government at a time when they need it the least,” Shumlin said.

Read related story about extent of state highway damage and details of federal aid programs.

In the meantime, the state is setting up loan programs to ensure that communities aren’t tapped out as they wait for federal reimbursement money.

Vermont banks, the Vermont Municipal Bond Bank and the state Treasurer’s Office announced a financial assistance package to help ease the financial stress on municipalities as they rebuild over the coming year.

The state will advance $24 million in payments that are already slated for town highway aid ($6.2 million), current use ($12.3 million) and payment in lieu of taxes ($5.8 million).

Local banks will “immediately” open lines of credit worth several hundred thousand dollars to millions of dollars to cash-strapped municipalities. In the event that a municipality reaches the lending cap, the originating bank will turn to a “loan pool,” in which other banks offer more capital.

In the short-term, banks that have exhausted other avenues can turn to the Vermont Municipal Bond Bank for cash to meet short-term municipal needs, according to John Valenti, chair of the bond bank board.

The bond bank will also finance long-term debt for towns through bond financing, once the total amount of losses have been determined and reimbursements from the federal government have been distributed.

The loans from banks and the bond market will tide municipalities over, but the long-term costs of rebuilding gutted downtown centers, bridges and backroads, will likely to fall to local property taxpayers –unless the federal government increases aid to the state.

“I don’t know whether we’re getting a 100 percent, a 90 percent or a 75 percent match — when you’re working with $1 billion the details matter,” Shumlin said.

Shumlin says it’s impossible for the state to make concrete budget plans until he knows what the federal match will be for disaster aid. The match rate may vary depending on whether the state can obtain waivers for caps on federal aid and whether Vermont qualifies for the 90 percent match rate for federal emergency highway relief funding.

“There is no question this is going to cost Vermonters money, and it’s coming at a time when we don’t have tax capacity — in a recession, with an economy in tough shape,” Shumlin said. “What we’re trying to do is get the best possible arrangement we can (with the federal government). We’re trying to draw down most ambitious matches we can.”

The governor emphasized that he is loathe to increase taxes, and he acknowledged that local property taxpayers may be hit hard. He didn’t rule out a gas levy, saying it would be “irresponsible” to take anything off the table.

“Vermont was in trouble financially before Irene,” Shumlin said. “We were struggling to balance the budget and Vermonters are struggling to pay property taxes and buy gas. They’re struggling to pay all taxes in a tough economy.”

One prominent lawmaker, however, is already pushing for a gas tax to defray the impact of reconstruction costs on municipalities. Rep. Margaret Cheney, D-Norwich, (who is married to U.S. Rep. Peter Welch) told reporter John Gregg of the Valley News last week that she would sponsor an “Irene gas tax” to support recovery funding. The gas tax is currently about 26.5 cents a gallon, and each penny brings in $3.3 million, Gregg reported.

Motorists currently pay 26.5 cents a gallon in various state taxes at the gas pump in Vermont, and each penny raises $3.3 million in revenue, said Cheney, who noted that the gas tax was raised temporarily to pay for roads and bridges damaged in the Flood of 1927 in Vermont.

“It makes sense because it’s a use tax,” said Cheney, who warned of “crushing increases in property taxes” in some towns otherwise.

Anne Galloway

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