The Senate Finance Committee voted 5-1-1 to back Gov. Peter Shumlin’s push to forgive four tax increment financing (TIF) districts a collective $6 million which they allegedly owe to the state’s Education Fund, according to a series of audits.
Support from senators comes despite state Auditor Doug Hoffer’s resistance to a “blanket amnesty” for these towns – Milton, Burlington, Winooski and Newport. Otherwise, Hoffer told VTDigger, he’s fine with the legislation, calling statutory changes “much needed and overdue.”
In recent weeks, Hoffer backed more limited forgiveness, whereby errors committed but made acceptable by later laws, applied retroactively, could be forgiven. But he maintained that clear violations of TIF law shouldn’t be forgiven.
Hoffer told VTDigger on Tuesday morning that he still stands by the accuracy of those audits, done under his predecessor, Tom Salmon. All four towns bitterly dispute the findings, often hiring legal counsel to help them make their case and interpret notoriously complex TIF laws.
As it stands, though, there’s no mechanism in state law for any state authority to collect money supposedly owed by these special tax districts. Notably, the new legislation allows for further “rulemaking” by some state bodies to identify certain amounts as owed to the state, even if the supposed underpayments happened in the past.
Tax increment financing districts are state-approved zones where municipalities use statewide property taxes to pay for public infrastructure, to stimulate downtown development. As downtown property values rise, the town or city keeps those extra tax dollars instead of remitting them back to the state.
This legislation, originally drafted by the Shumlin administration, proposes that in future, the state’s economic development chief, who leads the Agency of Commerce and Community Development, can adjudicate if a town has complied with TIF law and has underpaid the state’s Education Fund.
That decision only comes after a recommendation from the Vermont Economic Progress Council (VEPC), the body which approves TIF districts, in consultation with the Tax Department, the attorney general, and the state treasurer.
If a town hasn’t paid enough into the Education Fund, then the state treasurer can bill the town for the underpayment. If the town doesn’t pay within 60 days, the state can start withholding certain state funds from the town. The Attorney General’s Office is also authorized to conduct civil investigations, if necessary.
The state auditor can now also make the towns foot the bill for any TIF audits he undertakes. That move was unsuccessfully resisted by Sen. Ginny Lyons, D-Chittenden, whose proposed amendment failed.
Hoffer told the committee that in the past TIF audits took substantial time and effort, but he now expects such audits to be easier in the future. H estimated that the four audits from 2011 and 2012 cost about $500,000 all told.
Thanks to an amendment from Sen. Mark MacDonald, D-Orange, those four towns will pay the Auditor’s Office $15,000 each towards the cost of those past audits, a payment which Hoffer welcomed.
The new legislation requires slightly fewer TIF audits than the statutory requirement of one per district, every four years. It also requires that TIFs report more extensively to the state and to lawmakers, on topics like job creation in TIF districts and the share of infrastructure built by Vermont firms.
According to the legislation, there are nine TIF zones, which include Burlington, Milton, Newport, Winooski, Hartford, Barre and St. Albans City, among others. At least two are inactive.
Sen. Peter Galbraith, D-Windham, called for the state to block South Burlington’s application for a TIF district, arguing that the TIF program had obviously faced major failures. His proposal was voted down.
The legislation stipulates that the state shall not approve any TIF districts in the future, though the ban can be overturned by future lawmakers. VEPC executive director Fred Kenney said he supports that move, because it allows parties two to three years to evaluate how the new laws are working, before potentially lobbying for more TIFs.
Kenney added that the end of TIFs, for now, raises the question of how municipal infrastructure and downtown development will be funded in the future.
