[A]n association of Vermont municipalities says if the government is shut down on July 1, there will be a ripple effect across cities and towns across the state.
Property tax bills would not be issued, municipalities would have to borrow money to operate and interest rates for municipal bonds could go up, according to Karen Horn, the director of government relations for the Vermont League of Cities and Towns.
Republican Gov. Phil Scott and Democrats in the state Legislature need to come to an agreement immediately on the budget and taxes, Horn said, to avert a shutdown and a potential crisis for cities and towns.
“It’s just a mess altogether,” Horn said. “I don’t think lawmakers and the administration are really thinking about the impact on municipals. We’re not the fight, we’re just the collateral damage.”
Even if a shutdown is averted, and the Legislature sets education property tax rates by the June 30 deadline, there will be complications for municipalities, including property tax bill delays and taxpayer confusion.
Towns will set municipal property tax rates by the end of this week. The state sets the education property tax rate, but this year, the ongoing gridlock in Montpelier has created uncertainty about what the rate will be, so towns don’t know what to assess local property owners.
Ordinarily, towns would print and issue bills for combined municipal and education property tax rates the first week of July, Horn said. That process would be delayed by at least four weeks, and possibly longer if an agreement isn’t reached until June 30.
The Tax Department needs at least five days to run the tax assessments for each town based on the education formula. From there it typically takes municipalities 30 days to issue tax bills for residents.
Many municipalities allow taxpayers to make quarterly payments, starting in August. Because of the impasse in Montpelier, this year local property tax payments will likely be delayed until in mid-September.
That means some municipalities will have to delay collections and to keep operating will need to borrow money for a longer period time than is typical. In addition, if the Vermont Municipal Bond Bank charges higher rates as a result of a shutdown, towns would be on the hook for the additional interest.
Towns may opt to spend money on two separate tax bills — one for municipal costs and one for schools.
The end result? Lots of headaches for town clerks and city managers at a time when they are also processing overseas military ballots for primaries and preparing for the 2018 general election.
“We just want them to move ahead,” Horn said. “We’re not arguing the Legislature is right or the governor is right, I’m just trying to point out the logistics. We just need to get on with it, really. The town clerks aren’t happy.”
Carol Dawes, the Barre City clerk, says it would cost an additional $4,000 to send out a second property tax bill for schools separate from the municipal tax bill.
“That doesn’t begin to take into consideration the confusion from taxpayers, mortgage companies [that are paying taxes in escrow for homeowners],” Dawes said.
Cash flow would be squeezed by the delay, she said. The city already takes out a short-term loan for about a month to cover periodic shortfalls throughout the year. Barre City would have to borrow for another two to four weeks to cover costs.
“Not to mention the headaches,” Dawes said. “I completely understand it takes time to work things out. I don’t think they really understand the trickle down effect to the towns and the public.
“Everybody’s standing their ground, but there is a point at which someone has to be willing to step forward and talk this out for the good of the state,” Dawes said.
In a letter to the governor and legislative leadership on Monday, Vermont Secretary of State Jim Condos joined the growing chorus calling for both sides to reach a resolution.
Condos said that among other things, a shutdown would stall elections preparations, prevent professional licensing processes from being issued and stop new businesses from being able to set up shop in Vermont.
“Failure is not an option,” he wrote. “The co-equal branches of the Administration and the Legislature must come to an agreement on a responsible, sound budget by July 1st.”
