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 VTDigger.org 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.

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Anne Galloway

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  • Dan Vull

    Each penny of the gas tax raises 3.3 million? That means it would take almost three cents worth to do the project in Danville that don’t need. It would take a huge hike in gas taxes to make even a slight dent in the damage meanwhile the middle class and the poor get smacked on the forehead harder. Nice idea Mrs. Peter.

  • Will Patten

    Most of the $1 billion damage in the state is to highway infrastructure. A hefty, but temporary, hike in the gas tax makes a lot of sense.

  • Nicole LeBlanc

    The state should raise 300 million in taxes and the federal governemnt should raise taxes by 57% or 4 trillion. Also eliminate the war in Iraq/Afganistan by 4.9 trillion. We can reduce the pentagon by 4 trillion and fully fund FEMA AND make the military’s primary mission to combat the war on global warming, secure the border. The wealthy need to share more of the burden. Invest in the public sector

  • Pingback: Vermont rebuilds while Congress fights | MuniLand()

  • Hiking gas taxes in this economic climate is shameful for Democrats, such as Cheney and Shumlin, etc., to even consider; it is something Republicans would do.

    Gas tax hikes are highly regressive, as they low-income households in double-wides and single-wides in low-lying areas much harder because they usually do not drive Prius-type vehicles.

    A progressive surtax on households with higher incomes, i.e., greater than $100,000, would be much more appropriate.

  • Elaine Pettegrow

    Raising the tax on gas only means that less of it will be purchased in Vermont. Note that I did not say that less of it would be used in Vermont. Traveling from Vermont, to Canada several weeks ago, I had the oportunity to stop at a gas station/market on the border of Vermont, New York and Canada. There was a line at that gas station just in side the Vermont border with quite a few cars filling up. Most of the cars were from Canada or New York, not Vermont. This was because the gas in Vermont is several cents cheaper than in New York and quite alot cheaper than in Canada. I am sure that these “out of staters” purchased more than just the gas at that gas station. They probably bought a soda or coffee, possibly a news paper or maybe a sandwich. These sales, as well as the sale of gas, would stop for those “out of staters” if the gas tax was raised and Vermont gas became more expensive than the surrounding area. In addition, you would see Vermonters who live close to our borders, buy gas out of state if the price changes due to an increase in the gas tax. The difference between Vermont’s gas prices and New York’s prices are only a few cents at our northern border. Gov.Shumlin needs to tread with care because instead of raking in the riches from the gas tax he could be killing the goose that lays the golden egg.