A bill that will relieve municipalities of paying state property taxes for certain properties damaged in last year’s floods is expected to be among the first new laws enacted in 2024.
On Wednesday, the Vermont House approved S.160, which legislators hope will ease some of the financial burden of flood-impacted municipalities facing dozens of potential property tax abatements.
Already passed by the Senate, the bill will reduce the amount owed to the education fund, or reimburse municipalities for money already sent, from properties that are granted flood-related tax abatements. The measure is similar to legislation passed after Tropical Storm Irene swept through the state in 2011.
Gov. Phil Scott has indicated his support for the measure and is expected to sign the bill as early as next week. But how much will it help?
Sen. Ann Cummings, D-Washington, told VTDigger in January that she sponsored the bill because it “doesn’t seem quite fair” for communities struggling to recover from July flooding to also bear the burden of sending uncollected property taxes to the state.
In Vermont, a large portion of the property taxes that towns collect from local property owners is owed to the statewide education fund, a pot of money which is in turn distributed back to school districts based on their approved annual budgets and a funding formula set by the state.
“Regardless of whether we collect those taxes or not, we have to pay them to the school,” said Barre City Clerk Carol Dawes. “In this instance, there’s a potential that we’ll have to write checks up to $200,000 or $250,000 to the school for money we didn’t collect.”
Those numbers are only a ballpark figure, because Barre City has technically only granted a handful of requests for property tax abatements, Dawes said. But about 59 people have requested abatements so far for flood-related damage, and she expects another 20 to 30 property owners to come forward based on the city’s estimates of how many homes suffered damage in July.
Vermont statute allows property owners to request an abatement on property taxes, water and sewer charges, and other fees for “real or personal property lost or destroyed during the tax year,” according to the Vermont League of Cities and Towns.
Those requests are heard by the board of abatement in each town, composed of a variety of municipal officials. There’s no deadline for property owners to ask a municipality for an abatement, Dawes said, and the decision to abate and for how long is left to the local body. It can apply to only part of a year, a full year, or multiple years, depending on the amount of damage.
Barre’s board of abatement has only granted abatements so far on five properties that were destroyed in the floods. But Dawes said the board is planning to take a more streamlined approach and make decisions on far more requests in the coming months.
If all the properties Dawes expects to apply received full abatement, the maximum exposure to the city would be about $500,000, she said. Part of that would have gone to the city for municipal expenses, but roughly $200,000 to $250,000 of it has to go to the education fund — regardless of whether Barre actually collects it.
In Montpelier, City Clerk John Odum said via email that the city has received about 28 abatement requests and is “just getting started” on hearing them. “We do expect many more,” he wrote.
In total, for abatements in municipalities across the state, the Joint Fiscal Office estimates the total cost of the bill to the education fund in fiscal year 2024 would be $1.1 million.
S.160 would reduce the loss to municipalities by reducing the amount of the money they have to send to the statewide fund. It’s not clear what percentage of all abatements the state will reimburse, since the bill has eligibility requirements that don’t align perfectly with Barre’s, Dawes said.
Still, she appreciates the bill’s intent.
“The state obviously can’t just be a bottomless pocketbook,” she said. “And so we really appreciate the fact that they’ve been willing to say, ‘yes, we want to have skin in this game.’”
Dawes said that Barre might still have a cash flow issue in the coming months if it has to front the money to the education fund. The bill includes a provision to reimburse municipalities for interest paid on loans taken out to pay the education fund if that becomes necessary.
Even if the state reimburses Barre for most of its abatements, the city expects to face a huge fiscal crisis for years to come, Dawes said. Not only has it lost revenue from its own portion of the property tax abatements, it incurred about $1 million in flood-related expenses from damaged municipal property and personnel costs that aren’t reimbursable from state or federal sources.
“Many of these impacted properties are either not coming back ever, or are coming back slowly, and their value for tax purposes in the new year will be substantially lower,” she said.
