City ponders tax stabilization
MONTPELIER — A revision of Montpelier’s tax stabilization policy has raised concerns about potential conflicts with the city’s newly created Tax Incremental Financing district.
The issue arose at a meeting of City Council Wednesday during discussion about revising the city’s tax stabilization policy.
Review of the tax stabilization policy followed a request by Councilor Ashley Hill some months ago, when she adamantly opposed city taxpayers having to bear the burden of tax breaks for new housing or commercial development because of the tax stabilization program in a city with high property taxes and rents. Hill voted against recent tax stabilization requests for Caledonia Spirits on Barre Street and Timber Homes on Elm Street.
Hill was not present at Wednesday’s discussion.
However, the discussion also raised another issue for the council: Properties within the city’s newly created Tax Incremental Financing, or TIF, district would not be eligible for tax stabilization, according to the revised policy the council is being asked to review and approve at subsequent public hearings yet to be scheduled.
The TIF district, approved in August by the Vermont Economic Progress Council, allows the city to use education property taxes to support infrastructure improvements — such as roads, sidewalks, sewer, water and utilities — to encourage a developer to build in the city because of reduced overheads.
Fraser said he had heard a range of opinions about the conflict between a TIF district and tax stabilization, including that the city could not allow tax stabilization within a TIF district.
“Or, you can do it, but the city has to make up the difference,” Fraser said, meaning that the loss of tax revenue due to tax stabilization in the TIF district would have to be passed on to other property taxpayers in the city.
Fraser said another response he received was that a developer could receive tax stabilization if they were not benefiting from any TIF funds for infrastructure improvements.
Fraser said he had been in touch with VEPC to get clarification about the conflict between the TIF and tax stabilization programs. He said VEPC was consulting with its attorneys to clarify the potential conflict.
VEPC Executive Director Megan Sullivan said TIF rules were currently under review and confirmed that the conflict between TIF and tax stabilization programs would be reviewed.
“We are focused on reviewing this with all governing statutes and TIF Rule to understand the parameters around this question,” Sullivan said in an email Friday. “We will be connecting with the city as soon as practicable to give them an answer.”
The potential conflict between the two programs creates something of dilemma for the council which is anxious to build more housing in a city with a housing shortage and attract new businesses and jobs.
It also undercuts the last month’s approval by the Vermont Downtown Board of the city’s 10-year report card on progress made in properly defining the city’s growth center to concentrate development in the downtown to prevent urban sprawl under “smart growth” policies. The maps for the TIF district and the growth center in the city are virtually identical.
The concern is that the lack of tax stabilization in the TIF district would discourage new housing and commercial development in the city and push it outside the city, adding to urban sprawl and the city’s carbon footprint.
Under the review of the tax stabilization policy, Fraser said that the current policy has multiple benefit levels of stabilization, such as a reduction in property value of one third for up to three years or for seven years, or a reduction in property value of one half for seven years or 10 years.
Under the proposed revised policy, Fraser said the policy would have one base award with possible add-on years for “very specific things.”
The base award would be a reduction in property value of one half for up to five years, with the possibility of an additional five years based on specified criteria, for both industrial and commercial projects.
Under the proposed policy the council is being asked to consider, the criteria for a base award would require the property and/or renovations and/or business personal property – such as equipment and furniture which can be included in the overall estimated value of the property – would have to be assessed at $400,000 or more; or be assessed at $100,000 or more for businesses with 25 or fewer full-time employees or with $2 million or less in annual gross sales; or for the creation or renovation of five or more commercial residential units; or for a project that created significant employment opportunities in the city.
One year, up to a total of five years, could be added to the length of tax stabilization for a number of objectives outlined in the City Master Plan. They include easements for riverfront walkways and parks, pocket parks, recreation trails and conservation easements to protect or create key natural features, open space, greenways and specimen trees.
Other benefits to the city that would accrue additional years of tax stabilization include meeting exceptional or enhanced aesthetic standards, such as burying above-ground power lines; preserving public views or vistas and maintaining or enhancing an historic building or landscape; creating a unique or significant public amenity; a net increase of 15 or more residential units in the city; or the project would create 20 full-time jobs at a pay rate to match or exceed the city’s lowest full-time hourly rate.
Other provisions of the proposed policy would require that new construction or renovation of property must have sprinklers, unless waived through the municipal appeal process. A project could also qualify for tax stabilization if could be shown that it would provide a positive tax benefit for the city, defined to mean it would not require additional city services in excess of the new tax revenues.
The council is also being asked to define other provisions for energy efficiency standards, historic preservation standards and environmental improvements.
The review of the tax stabilization policy is expected to resume at the next council meeting, Oct. 23, at 6:30 p.m.