Lawmakers will search for alternative tools to promote municipal infrastructure, as the administration requests to slightly exceed the legal limit on the number of permitted tax increment financing (TIF) districts.
A TIF district is a special zone approved by the state, which allows towns to use statewide property taxes to help pay for public infrastructure geared to further economic development.
Raising the value of downtown property through public infrastructure, the town then keeps some extra tax revenue which otherwise would not have been created, to pay for its infrastructure debts, instead of remitting the tax revenue to the state.
Rep. Bill Botzow, D-Bennington, who chairs the House Commerce and Economic Development Committee, told the state’s economic development chief, Lawrence Miller, that he wants to hear about “tools or opportunities for our municipalities, other than TIFs, considering that they were limited, cumbersome, and – let’s see – controversial.”
Miller, who heads the Agency of Commerce and Community Development, replied: “We don’t think the question is to TIF or not TIF. We think the question for the Legislature is: What do we want to do about municipal infrastructure financing? And the issues are frankly massive.”
Miller cited needed repairs and upgrades for water and waste management systems, as well as storm water drainage systems, systems worth hundreds of millions but largely funded by the federal government in the past.
Although Miller characterized these repairs as simply necessary for communities to function, he said TIFs are primarily used to grow the local economies of municipalities, and is chiefly a financing tool. TIFs are typically also used to improve street and sidewalk construction, street lighting, and park improvements.
It’s time for legislators to revisit the whole question of TIFs, given that the state recently reaching its statutory limit of six TIF districts approved between July 2008 and June 2013, said Miller after a Statehouse committee briefing.
“I think the conversation, rather than being a question of whether or not there should be more TIFs, they [lawmakers] should go back to the more fundamental question of how do we deal with municipal infrastructure,” he said. “I think it’s clearly a conversation that the Legislature’s got to have.”
One issue is the need for lawmakers to finally resolve a series of critical audits by the state auditor between 2011 and 2012, which claim that the four TIF districts of Newport, Milton, Burlington and Winooski together owe just under $6 million to the state’s education fund.
Those audit findings have been disputed by the towns. State law currently requires that the state auditor review active TIF districts every four years, but ambiguous and confusing statute allows for these disputes to arise in the first place, according to Rep. Michael Marcotte, R/D-Newport, House Commerce vice chair.
The latest state auditor’s TIF report from early January recommends clarifying state statute regarding TIFs and increasing limited state oversight, to prevent alleged miscalculations by towns as what they owe in property tax revenue.
House Commerce Committee member Rep. George Cross, D-Winooski, blasted that report as “riddled with factual errors,” a mark of how controversial these TIF audits have become among lawmakers in recent years.
Marcotte supports TIFs, describing them as attracting jobs and economic development to downtowns, besides solving the serious problem of towns simply not being able to afford infrastructure upgrades.
“As we try to draw businesses or manufacturing businesses into our municipalities, there’s going have to be upgrades to systems: to transportation road systems, water and sewer systems, telecommunications systems, electrical systems,” said Marcotte after the committee meeting.
“So there’s got to be a way for municipalities to be able to afford to do them, somehow. … Or, if there’s a benefit for the state, the state has to be a partner in that too,” he said.
Marcotte and Miller said that they don’t have concrete alternatives to TIFs in mind yet, but will debate the topic further in coming months.
