Members of the Vermont Legislature’s Joint Fiscal Committee, whose normal function is to keep track of budgetary matters while the Legislature is not in session, have found themselves drawn into a long-running quarrel this summer sparked by the construction of a St. Albans parking garage.
The financing mechanism behind the city-owned parking garage, tax increment financing, has emerged in the last several months as the object of broad philosophical differences concerning the use of the state property tax funds for municipal projects.
The office of state Auditor Doug Hoffer, which is required by statute to examine TIF projects, says the city handled the project money improperly and therefore owes money to the state education fund.
St. Albans officials say the 2014 parking garage and the private development that followed have added $52 million to the city’s grand list. City Manager Dominic Cloud says the auditor’s criticism stems from his philosophical opposition to TIF as an economic development instrument.
The body that regulates tax increment financing, Vermont Economic Progress Council, sides with St. Albans on the handling of the money. The commerce agency’s lawyer, John Kessler, supports the way the city used TIF funds. The state Attorney General’s Office says the rules are unclear and has called for the Legislature to clarify what funds can be spent on.
“Becky and John are talking,” said Sen. Ann Cummings, chair of the Joint Finance Committee, of lawyer Rebecca Wasserman, who works at the Office of Legislative Council, and Kessler, the lawyer for the Agency of Commerce and Community Development, which includes VEPC. “We’ve got lawyers with different opinions.”
Hoffer alleges St. Albans improperly used TIF bond funds to pay down debt service and was not authorized to use TIF funds to pay a developer for real estate acquisition costs.
Now the matter has landed before Joint Fiscal, a committee made up of the leaders of the House and Senate money committees. State lawmakers do have general oversight over TIF, but Joint Fiscal got more deeply involved in late July when Hoffer came before the group to talk about clean water funding and used that opportunity to tell lawmakers that VEPC was ignoring the rules that govern TIF.
“He said, ‘It’s urgent, it’s time-sensitive,’” said Cummings, who also chairs the Senate Finance Committee. “The auditor put some hysteria into this, like they’re about to violate the law, and they’re choosing to ignore the attorney general, and you need to do something.”
Cummings, D-Washington, said she didn’t see the reason for the urgency. However, Joint Fiscal decided to get involved, asking VEPC Executive Director Megan Sullivan on Aug. 1 not to take action on two disputed sections of the rule and statute.
“The auditor made it seem as though they were going to promulgate this rule and tell everybody it was OK to do it, so we asked them not to promulgate any rule that there was disagreement about,” Cummings said.
The panel then invited Sullivan to speak on Sept. 16 meeting about the two disputed areas of the law, which all parties have agreed are unclear and need to be clarified in statute. Meanwhile, Cummings said she advised Sullivan to go ahead and continue regulating TIF according to the existing rules of the program.
Cummings said she hopes Joint Fiscal will be able to help the lawyers for VEPC and for the state come to agreement on the interpretation of the statute, so that it can be clarified in rulemaking next year.
VEPC is housed under the state Agency of Commerce and Community Development. If there’s a disagreement over the appropriate use of TIF money, statute calls for the head of that agency to render an opinion in writing.
Commerce Secretary Michael Schirling called Cummings last week “to assure me that they weren’t trying to circumvent the law,” and also to let her know the governor was about to announce he was leaving the position to become public safety commissioner on Sept. 3. Labor Commissioner Lindsay Kurrle will step into the economic development job that day.
There are a lot of moving parts.
“During the legislative session I think this would all be worked out in a couple days,” Cummings said.
TIF is controversial in Vermont in part because it involves the statewide education property tax. Under TIF, voters authorize bonds to pay for public infrastructure improvements within a designated district, with the idea of prompting private investment that will raise overall property values in the district over 20 years. The TIF district uses the taxes generated by the incremental increase in the grand list to pay for the bond, with at least 30% of the increased value sent to the statewide education fund.
The funding mechanism has also come under fire in Vermont as corporate welfare, particularly in the case of a proposed Montpelier parking garage that voters approved last fall.
Cummings said she knows her counterpart in the House, Rep. Janet Ancel, D-Calais, who is chair of the House Ways and Means committee, isn’t a fan of TIF. Hoffer isn’t either, she added. Cummings, on the other hand, supports the use of TIF as an economic development tool.
“There are definitely two sides to the story,” said Cummings, who recently wrote a thesis on downtown development for a master’s degree in administration from St. Michael’s College.
“We do a lot of talk about our town and our village and our city centers; this to me is putting our money where our mouth is,” Cummings said. “A tax increment financing district helps offset the cost of downtown development.”
Meanwhile, at Hoffer’s behest, Joint Fiscal issued a Aug. 1 letter to VEPC urging the commerce agency to put the brakes on TIFs for now.
Hoffer has called for the oversight of TIF to be shifted away from VEPC.
“It is appropriate for the Legislature to take a closer look at this situation to ensure that the Education Fund and taxpayers around the state are adequately protected,” Hoffer said this week.
As Cloud describes it, the letter from Joint Fiscal “says from one branch of government to another: Slow down, you’re moving too fast.”
For his part, Cloud thinks the problem is the auditor, not the rules.
“This letter calls into question the independence of the state auditor,” said Cloud of Hoffer, whose position is elected, about Joint Fiscal’s Aug. 1 letter to VEPC. “Who can walk into a meeting of the Joint Fiscal Committee and get a spontaneous letter issued like this?”
Sullivan, the VEPC chief said she didn’t think the committee had received a full accounting in July of the issues at hand.
“I look forward to discussing these matters and VEPC’s work with the Joint Fiscal Committee in greater detail at its next meeting,” she said.
As for the long-completed St. Albans project, Cloud said the garage has nothing to do with the new wave of TIF scrutiny; that was brought on by a need for some clarification of the rules. The city, meanwhile, is now at work on another TIF district project.
Correction: This article originally misidentified Rebecca Wasserman as an attorney for the Attorney General’s Office. In fact, she works for the Office of Legislative Council.
