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NO. 120. AN ACT RELATING TO DOWNTOWN COMMUNITY DEVELOPMENT.

(H.278)

It is hereby enacted by the General Assembly of the State of Vermont:

Sec. 1. 24 V.S.A. chapter 76A is added to read:

CHAPTER 76A. HISTORIC DOWNTOWN DEVELOPMENT

§ 2790. LEGISLATIVE POLICY AND PURPOSE

(a) The general assembly finds that economically strong downtowns are critical to the health and well-being of Vermont's communities; that downtowns are the natural location for both small businesses, which represent the largest growth sector in Vermont's economy, and other uses that together constitute the diverse fabric of communities that define Vermont's quality of life; that downtowns enable residents and visitors to access services and business with minimal transportation needs, and thus benefit the environment. The general assembly further finds that downtowns represent a long-term investment of public and private infrastructure, and that our scenic and historic downtowns are a natural attraction for tourists and contribute greatly to Vermont's overall quality of life. The general assembly further finds that a major factor inhibiting the vitality of downtown areas is lack of reasonable access to them by workers, residents and visitors, and that by this act it is the specific intent of the general assembly to improve access to downtown areas by providing assistance to municipalities for downtown transportation infrastructure, particularly parking facilities.

(b) It is therefore the intent of the general assembly, by this act, to preserve and encourage the development of downtown areas of municipalities of the state; to encourage public and private investment in infrastructure, housing, historic preservation, transportation including parking facilities, and human services in downtown areas; and to reflect Vermont's traditional settlement patterns, and to minimize or avoid strip development or other unplanned development throughout the countryside on quality farmland or important natural and cultural landscapes.

(c) While it is the intent of the general assembly by this act to rehabilitate and preserve the vitality of historic downtown areas of the state, the general assembly also recognizes the equal importance of providing incentives to communities with no historic downtownareas in order to assist those communities to plan and develop their emerging downtowns. Accordingly, the commissioner of housing and community affairs is directed to consult with municipal officials in such communities and recommend to the general assembly on or before January 1, 1999 appropriate means and incentives to encourage the development and planning of emerging downtown centers which serve the purpose of a central district of the community and the center for socio-economic interaction, with a cohesive core of commercial and mixed use buildings, with appropriate density to minimize or avoid strip development.

§ 2791. DEFINITIONS

As used in this chapter:

(1) "Community reinvestment agreement" means an agreement among municipal government officials, business leaders, and community groups pursuant to subdivision 2793(b)(2) of this title.

(2) "Design control district" means a district created pursuant to subdivision 4407(6) of this title.

(3) "Downtown" means the traditional central business district of a community, that has served as the center for socio-economic interaction in the community, characterized by a cohesive core of commercial and mixed use buildings, often interspersed with civic, religious, and residential buildings and public spaces, typically arranged along a main street and intersecting side streets and served by public infrastructure.

(4) "Downtown development district" or "downtown district" means a district delineated by the municipality and designated by the downtown development board under section 2793 of this title.

(5) "Downtown development nonprofit corporation" means a nonprofit corporation that is designated to implement the community reinvestment agreement under subdivision 2793(b)(2) of this title. A nonprofit corporation established by the Vermont economic development authority shall be considered qualified for purposes of this chapter.

(6) "Historic district" means a district created pursuant to subdivision 4407(15) of this title.

(7) "Certified historic structure" means a certified historic structure as defined in the Internal Revenue Code, 26 U.S.C. § 47(c).

(8) "Special assessment" means a tax assessment pursuant to chapter 87 of this title or a municipal charter, among all commercial owners, or a significant portion thereof, within a downtown development district to impose an incremental tax assessment above the amount otherwise assessed, for the purposes of supporting downtown interests.

(9) "Tax stabilization agreement" means a contract executed pursuant to either section 2741 of this title or section 5404a of Title 32 to provide a stable and predictable tax rate or assessment on properties in a downtown development district.

(10) "Local board" means a board, council, commission or organization selected or appointed by the legislative body of a municipality which is empowered by law with the primary administration, oversight, regulation or adjudication of matters of a district listed in subdivision 2793(b)(1) of Title 32.

§ 2792. VERMONT DOWNTOWN DEVELOPMENT BOARD

(a) A "Vermont downtown development board", also referred to as the "state board", is created to administer the provisions of this chapter. The state board members shall be the following permanent members, or their designees:

(1) The secretary of commerce and community development;

(2) The secretary of transportation;

(3) The secretary of natural resources;

(4) The secretary of human services;

(5) The commissioner of labor and industry;

(6) The commissioner of housing and community affairs; and

(7) Three public members representative of local government, one of whom shall be designated by the Vermont league of cities and towns, and two shall be appointed by the governor.

(b) In addition to the permanent members appointed pursuant to subsection (a) of this section, there shall also be two regional members from each region of the state on the downtown development board; one shall be designated by the regional developmentcorporation of the region and one shall be designated by the regional planning commission of the region. Regional members shall be nonvoting members and shall serve during consideration by the board of applications from their respective regions. Regional members designated to serve on the downtown development board under this section, may also serve as regional members of the Vermont economic progress council established under 32 V.S.A. § 5930a.

(c) The state board shall elect its chair from among its membership.

(d) The department of housing and community affairs shall provide staff and administrative support to the state board.

(e) On or before January 1, 1999, the state board shall report to the general assembly on the progress of the downtown development program.

§ 2793. DESIGNATION OF DOWNTOWN DEVELOPMENT DISTRICTS

(a) A municipality, by its legislative body, may apply to the state board for designation of a downtown area within that municipality as a downtown development district. An application by a municipality shall contain a map delineating the district, evidence that the regional planning commission and the regional development corporation have been notified of the municipality's intent to apply and information showing that the district meets the standards for designation established in subsection (b) of this section.

(b) Within 45 days of receipt of a completed application, the state board shall designate a downtown development district if the state board finds, with respect to that district, that the municipality has:

(1) demonstrated a planning commitment through the adoption of a design control district, an historic district, an urban renewal district, or through the creation of a development review board authorized to undertake local Act 250 reviews pursuant to section 4449 of this title; and

(2) provided a community reinvestment agreement that has been executed by the authorized representatives of the municipal government, business and property owners within the district, and community groups with an articulated purpose of supporting downtown interests, and that contains the following provisions:

(A) a delineation of the area that meets the requirements set forth in subdivision 2791(3) of this title and that is part of or contains a district that is listed or eligible for listing on the National Register of Historic Places pursuant to 16 U.S.C. § 470a;

(B) a capital improvement plan to improve or preserve public infrastructure within the district, including facilities for public transit, parking, pedestrian amenities, lighting and public space;

(C) a source of funding and resources necessary to fulfill the community reinvestment agreement, demonstrated by a commitment by the legislative body of the municipality to implement at least one of the following:

(i) a special assessment district created to provide funding to the downtown district;

(ii) authority to enter into a tax stabilization agreement for the purposes of economic development in a downtown district;

(iii) a commitment to implement a tax incremental financing district pursuant to subchapter 5 of chapter 53 of this title; or

(iv) other multiple-year financial commitments among the parties subject to the approval of the state board;

(D) an organizational structure necessary to sustain a comprehensive long-term downtown revitalization effort, including local board or designation of the entity that will qualify as the downtown development nonprofit corporation under subdivision 2791(5) of this title;

(E) evidence that any private or municipal sewage system and private or public water supply serving the proposed downtown district is in compliance with the requirements of chapters 47 and 56 of Title 10, and that the municipality has dedicated a portion of any unallocated reserve capacity of the sewage and public water supply for growth within the proposed downtown district. Any municipality proposing a municipal sewage system and public water supply to serve the proposed downtown district shall provide evidence to the state board of a commitment to construct or maintain such a system and supply in compliance with requirements of chapters 47 and 56 of Title 10, or acommitment to construct, as applicable, a permittable potable water supply, wastewater system, indirect discharge or public water supply within no more than ten years. A commitment to construct does not relieve the property owners in the district from meeting the applicable regulations of the agency of natural resources regarding wastewater systems, potable water supplies, public water supplies, indirect discharges, and the subdivision of land. In the event that a municipality fails in its commitment to construct a municipal sewage system and public water supply, the state board shall revoke designation and the incentives that accrue pursuant to 24 V.S.A. § 2794 from that date forward, unless the municipality demonstrates to the state board that all good faith efforts were made and continue to be made to obtain the required approvals and permits from the agency of natural resources, and failure to construct was due to unavailability of state or federal matching loan funds.

(c) The state board shall review a community's designation every three years. If the state board determines that the downtown development district no longer meets the standards for designation established in subsection (b) of this section, it may take any of the following actions:

(1) require corrective action;

(2) provide technical assistance through the Vermont downtown program; or

(3) remove the district's designation, with such removal not affecting any of the district's previously awarded benefits.

§ 2794. INCENTIVES FOR PROGRAM DESIGNEES

(a) Upon designation by the Vermont downtown development board under section 2793 of this title, a downtown development district and projects in a downtown development district shall be eligible for the following:

(1) priority consideration by any agency of the state administering any state or federal assistance program providing funding or other aid to a municipal downtown area with consideration given to such factors as the costs and benefits provided and the immediacy of those benefits;

(2) a state tax credit of five percent under subchapter 11F of chapter 151 ofTitle 32 to owners or long-term lessees of certified historic structures located in downtown development districts that meet the requirements for the federal rehabilitation tax credit;

(3) a state tax credit of 25 percent under subchapter 11G of chapter 151 of Title 32 to owners or lessees of older and historic buildings located in downtown development districts for qualified expenditures;

(4) a planning grant, in an amount not to exceed $8,000.00 per site, for an initial site assessment of a suspected contaminated site, if the site otherwise qualifies under the community development block grant program in chapter 29 of Title 10;

(5) eligibility for financing of transportation projects under the state infrastructure bank, created under chapter 12 of Title 10;

(6) eligibility for current owners and prospective purchasers who otherwise qualify under the redevelopment of contaminated sites program under subsection 6615a(f) of Title 10, or in the case of current owners, who are innocent owners. For the purposes of this subsection, an "innocent owner" is an owner who did not:

(A) hold an ownership interest in the property or in any related fixtures or appurtenances, excluding a secured lender's holding indicia of ownership in the property primarily to assure the repayment of a financial obligation at the time of any disposal of hazardous materials on the property;

(B) directly or indirectly cause or contribute to any releases or threatened releases of hazardous materials at the property;

(C) operate, or control the operation, at the property of a facility for the storage, treatment, or disposal of hazardous materials at the time of the disposal of hazardous materials at the property;

(D) dispose of, or arrange for the disposal of hazardous materials at the property; or

(E) generate the hazardous materials that were disposed of at the property.

(7) technical assistance by the department of housing and community affairs with regard to planning and coordination issues, including but not limited to, adaptive reuse ofbuildings within the district, development of a marketing plan for the downtown district that includes a heritage tourism component, development of a program to encourage merchants and building owners to rehabilitate, restore and improve building facades, and, in coordination with the agency of transportation, planning for multi-modal transportation needs of the community.

(8) hospitality training to be arranged by the department of tourism and marketing;

(9) promotion of the downtown development district by the department of tourism and marketing as part of the department's integrated marketing and promotion program;

(10) consistent with the department's available resources and subject to the department's priority for ensuring public safety, technical support from the department of labor and industry for the rehabilitation of older and historic buildings;

(11) enabling building owners within the district to be eligible for a rebate of the cost of a qualified sprinkler system in an amount not to exceed $2,000.00. Rebates shall be paid by the department of labor and industry. To be qualified, a sprinkler system must be a complete automatic fire sprinkler system installed in accord with department of labor and industry rules in an older or historic building that is certified for a state tax credit under either subchapter 11F or subchapter 11G of chapter 151 of Title 32 and is located in a downtown development district. A total of no more than $40,000.00 of rebates shall be granted in any calendar year by the department. If in any year applications for rebates exceed this amount, the department shall grant rebates for qualified systems according to the date the building was certified for a state tax credit under subchapter 11F or subchapter 11G of chapter 151 of Title 32 with the earlier date receiving priority.

(12) eligibility to participate in the downtown transportation and related capital improvement fund program established by section 2796 of this title.

(b) Prior to designation of a downtown as a downtown development district by the Vermont downtown development board under section 2793 of this title, the board may deem eligible any otherwise qualified owners or lessees of buildings within a downtown for the tax credits under subchapter 11F and subchapter 11G of chapter 151 of Title 32 if the board finds that the legislative body of the municipality in which the property is locatedis intending to seek designation of the downtown as a downtown development district and has taken substantial actions and made substantial commitments in furtherance of that intent.

§ 2795. CONSIDERATIONS FOR COMPETITIVE-BASED INCENTIVES

In awarding competitive-based financial incentives under section 2794 of this title, including but not limited to a rebate and tax incentives, or in awarding grants or other assistance from the downtown transportation and related capital improvement fund under section 2796 of this title, the Vermont downtown development board shall give consideration to the following factors:

(1) the vacancy rate for existing buildings in the downtown district;

(2) the current or projected unemployment rate for the labor market area in which the municipality is located;

(3) ordinances or bylaws adopted by the municipality that support the preservation of the downtown's vitality, including, but not limited to:

(A) an ordinance or bylaw requiring that new construction in the downtown development district shall be compatible with the buildings that contribute to the integrity of the district, in terms of materials, features, size, scale and proportion, and massing of buildings, and that exterior rehabilitation shall respect the historic and architectural significance and its exterior features; and

(B) a conditional use provision in a town zoning ordinance that supports adaptive reuse of historic properties;

(4) the integration of the proposed improvements with any coordinated plan for the downtown district and surrounding area;

(5) the degree of any deficiency in the downtown district of transportation infrastructure including parking facilities;

(6) the vulnerability of the downtown district to economic decline due to competing development in adjacent areas;

(7) the immediacy of the benefits provided and the desirability of prompt action to secure those benefits for a downtown district.

§ 2796. DOWNTOWN TRANSPORTATION AND RELATED CAPITAL

IMPROVEMENT FUND

(a) There is created a downtown transportation and related capital improvement fund, to be also known as the fund, which shall be a special fund created under subchapter 5 of chapter 7 of Title 32, to be administered by the Vermont downtown development board in accordance with this chapter to aid municipalities with designated downtown districts in financing capital transportation and related improvement projects to support economic development.

(b) The fund shall be comprised of the following:

(1) such state or federal funds as may be appropriated by the general assembly;

(2) any gifts, grants or other contributions to the fund;

(3) proceeds from the issuance of general obligation bonds.

(c) Any municipality with a designated downtown development district may apply to the Vermont downtown development board for financial assistance from the fund for capital transportation and related improvement projects within or serving the district. The board may award to any municipality grants in amounts not to exceed $250,000.00 annually, loans, or loan guarantees for financing capital transportation projects, including but not limited to construction or alteration of roads and highways, parking facilities, and rail or bus facilities or equipment, or for the underground relocation of electric utility, cable and telecommunications lines, but shall not include assistance for operating costs. Grants awarded by the board shall not exceed twenty-five percent of the overall cost of the project. The approval of the board may be conditioned upon the repayment to the fund of some or all of the amount of a loan or other financial benefits and such repayment may be from local taxes, fees or other local revenues sources. The board shall consider geographical distribution in awarding the resources of the fund.

Sec. 1a. 10 V.S.A. § 280e(a) is amended to read:

(a) There is created a state infrastructure bank program, to be a program to assist the improvement, rehabilitation, expansion and construction of transportation projects within the state to contribute to the economic welfare of the state by providing jobs and othereconomic opportunities for the people of the state and enhancing economic development, particularly in downtown areas.

Sec. 1b. 32 V.S.A. § 9819 is amended to read:

§ 9819. REALLOCATION OF RECEIPTS

(a) Receipts from the tax imposed by this chapter on sales of construction materials used in qualified projects under chapter 76A of Title 24 shall be allocated by the commissioner of taxes and paid to the municipality in which the project is located in the following amounts:

(1) In a municipality in which the population is 7,500 residents or less, all receipts from sales in excess of $100,000.00 of construction materials used in each separate qualified project located in that municipality, provided that a total of no more than $600,000.00 may be allocated under this section to all municipalities of 7,500 residents or less.

(2) In a municipality in which the population is greater than 7,500 residents but less than 30,000 residents, all receipts from sales in excess of $200,000.00 of construction materials used in each separate qualified project located in that municipality, provided that a total of no more than $600,000.00 may be allocated under this section to all municipalities of more than 7,500 but less than 30,000 residents.

(3) In a municipality in which the population is more than 30,000 residents, all receipts from sales in excess of $1,000,000.00 of construction materials used in each separate qualified project located in that municipality, provided that no more than $800,000.00 may be allocated under this section to all municipalities of more than 30,000residents.

(b) For the purposes of this section:

(1) "Construction materials" means all materials purchased by the owner or owner's representative, project manager, construction manager, general contractor, or subcontractor to be incorporated into a qualified project.

(2) "Qualified project" means expansion or rehabilitation of contiguous real property that is or will be used at the completion of the expansion or rehabilitation as a structure in a downtown development district designated under chapter 76A of Title 24, but only to the extent that the expansion or rehabilitation becomes an integral component of the real property and the project does not seek qualification for either tax credit authorized under subchapter 11F or subchapter 11G of chapter 151 of Title 32.

"Qualified project" also means new construction of contiguous real property that will be used at the completion of the construction as a structure in a downtown development district designated under chapter 76A of Title 24 but only to the extent that the new construction is compatible with the buildings that contribute to the integrity of the district in terms of materials, features, size, scale and proportion, and massing of buildings.

(c) The owner or owner's representative of a qualified project shall report all sales taxes paid on purchases of qualified construction materials to the treasurer of the municipality in which the project is located. The treasurer of the municipality shall submit requests for allocation of revenues under this section to the Vermont downtown development board established under section 2792 of Title 24 and the board shall certify the qualified projects and sales taxes paid thereon to the commissioner of taxes, who shall allocate the appropriate amounts of sales tax revenues due under this section to the municipalities. Revenues allocated to a municipality under this section shall be used by the municipality only for expenditures related to the support of the qualified project located in that municipality which generated those revenues.

Sec. 2. IMPLEMENTATION RESOURCES

In furtherance of the purpose of obtaining designation as a downtown development district under chapter 76A of Title 24, a municipality may apply under the communitydevelopment block grant program in chapter 29 of Title 10 for a planning grant in an amount up to $40,000.00.

Sec. 3. 32 V.S.A. chapter 151, subchapter 11F is added to read:

Subchapter 11F. Tax Credit for Rehabilitation of Historic Buildings

§ 5930n. TAX CREDIT FOR SUBSTANTIAL REHABILITATION OF HISTORIC

BUILDINGS ALSO CLAIMING FEDERAL REHABILITATION TAX

CREDIT

(a) Definitions.

(1) "Adjusted basis" means the original cost of the property plus the cost of capital improvements minus any depreciation allowed or allowable under the federal Internal Revenue Code, minus the value of the land.

(2) "Affordable housing" means housing for households whose income is at or below 80 percent of median income, as established by a U.S. Department of Housing and Urban Development median that is identified by the applicant for a tax credit under this section.

(3) "Certified rehabilitation" means a certified rehabilitation as defined in the federal Internal Revenue Code at 26 U.S.C. § 47(c)(2). This definition does not apply to subchapter 11G of chapter 151 of this title.

(4) "Commissioner" means the commissioner of taxes.

(5) "Division" means the division for historic preservation.

(6) "Qualified rehabilitation expenditure" means a qualified rehabilitation expenditure as defined in the Internal Revenue Code, 26 U.S.C. § 47(c) properly chargeable to the certified rehabilitation after July 1, 1998. This definition does not apply to subchapter 11G of chapter 151 of this title.

(7) "Qualified rehabilitation project" means a rehabilitation project, located within a downtown community development district designated under the provisions of chapter 76A of Title 24, that is a certified rehabilitation with respect to this subchapter and meets the requirements of subdivisions (b)(2) and (3) of section 5930p of this title.

(8) "State board" means the Vermont downtown development board establishedpursuant to chapter 76A of Title 24.

(9) "Substantial rehabilitation" means that qualified rehabilitation expenditures exceed $5,000.00 or the adjusted basis of the building and its structural components, whichever is greater.

(b) State board credit allocation.

(1) Prior to the commencement of any rehabilitation work, an owner or long-term lessee of a building in a downtown development district designated under the provisions of chapter 76A of Title 24 may apply to the state board for an historic building tax credit allocation under this section. The board shall grant approval for an historic building tax credit allocation, and issue a letter of approval, if it finds that the applicant meets the provisions of subdivision (2) of this subsection. The burden of proof shall be on the applicant.

(2) The state board, within 45 days of receipt of a completed application, shall decide, based on the availability of credit, whether or not to grant a tax credit allocation under this section. In granting a tax credit allocation, the state board must first find that:

(A) the building is a certified historic structure and the proposed rehabilitation is a certified rehabilitation; and

(B) the proposed improvements will maintain existing jobs, create additional jobs, or in the case of housing provide that ten percent of the units rehabilitated qualify as affordable housing.

(c) Amount of credit. Except as limited by subsection (f) of this section, the owner of a qualified building shall be entitled to claim against the taxpayer's individual income tax or corporate income tax a credit in an amount equal to five percent of the qualified rehabilitation expenditures pursuant to 26 U.S.C. § 47(c).

(d) Claim for credit. A taxpayer claiming a credit under this subchapter shall submit with the first return on which a credit is claimed a copy of the state board tax credit allocation and a copy of the federal income tax return claiming the federal tax credit.

(e) Availability of credit. A credit under this section shall be available for the first tax year in which the qualified building is placed in service after the qualified expenditureswere made. Any unused credit may be carried forward to reduce the taxpayer's tax liability for no more than 14 succeeding tax years following the first year the tax credit is claimed.

(f) Limitations and recapture.

(1) In any calendar year after 1998 the state board shall not award a total amount of tax credits to all applicants under this subchapter and subchapter 11G of this chapter that exceeds $300,000.00.

(2) No credit shall be allowed under this section for the cost of acquiring any building or interest therein.

(3) No credit shall be allowed under this section for any expenditure with respect to which the taxpayer does not use the straight line method of depreciation over a recovery period allowed under 26 U.S.C. § 168(c) or (g).

(4) If within five years after the building is placed in service upon completion of the certified rehabilitation project any of the following events occur, the taxpayer shall be liable for a recapture penalty:

(A) the owner of the building for which a tax credit has been awarded under this subchapter disposes of the building; or

(B) the division finds that the taxpayer performed any work on the building not contained in the application for certified rehabilitation as defined in subdivision (a)(3) of this section or not otherwise certified by the National Park Service, or knowingly failed to supply information, or knowingly failed to supply true information required by the division or the state board for certification under this section; or

(C) the taxpayer failed to satisfy any requirement of certification imposed by the state board in the tax credit allocation; or

(D) the taxpayer performed any subsequent work during the five-year period that resulted in loss of status as a certified rehabilitation.

(5) If the department of taxes is notified of any determination under subdivision (4) of this subsection, the department shall assess the amount of the recapture penalty against the taxpayer in the following amounts:

(A) in the event of a disposition under subdivision (4)(A) of this subsection:

(i) in the first year, 100 percent of the credit;

(ii) in the second year, 80 percent of the credit;

(iii) in the third year, 60 percent of the credit;

(iv) in the fourth year, 40 percent of the credit;

(v) in the fifth year, 20 percent of the credit;

(B) in the event of a determination under subdivisions (4)(B), (C) or (D) of this subsection, any unused credit shall be disallowed and the recapture penalty shall be in an amount equal to the total state tax credit used.

Sec. 4. 32 V.S.A. chapter 151, subchapter 11G is added to read:

Subchapter 11G. Rehabilitation Tax Credit

§ 5930p. REHABILITATION TAX CREDIT FOR OLDER OR HISTORIC

BUILDINGS

(a) Definitions. In addition to the following, the definitions found in subchapter 11F of this chapter apply to this subchapter unless otherwise indicated.

(1) "Local board" means a board, council, commission or organization selected or appointed by the legislative body of the municipality and which is empowered by law with the primary administration, oversight, regulation or adjudication of matters of a district listed in subdivision 2793(b)(1) of Title 24.

(2) "Local board certification" means a written statement by the local board that the proposed rehabilitation meets the criteria of subdivisions (b)(2) and (3) of this section.

(3) "Older building" means any building which has been constructed prior to January 1, 1983.

(4) "Qualified expenditures" means construction related expenses, excluding any expenses of an owner or lessee of a private residence, incurred to achieve one or more of the objectives of subsection (b)(2) of this section.

(b) Local board certification and state board rehabilitation tax credit allocation.

(1) Prior to the commencement of any rehabilitation work, a property owner or lessee may apply to the state board for a rehabilitation tax credit allocation under thissection. The state board, within 45 days of receipt of a completed application, shall decide, based on the availability of credit, whether or not to grant a rehabilitation tax credit allocation. In granting such tax credits, the board shall issue a letter of approval after receiving certification by the local board of the district in which the project is located that the project meets the requirements of subdivisions (2) and (3) of this subsection. In all instances the burden of proof shall be upon the applicant.

(2) A local board shall review a full project description submitted by the applicant, showing the adjusted basis of the structure, all work to be performed and all proposed expenditures, and proof that the applicant's building plan has been approved by the department of labor and industry, and determine whether the project will accomplish one or more of the following primary objectives:

(A) it will bring the building into compliance with the Vermont accessibility law (chapter 4 of Title 21) and the Americans with Disabilities Act;

(B) it will bring the building into compliance with building, electrical, plumbing or life safety codes adopted by the department of labor and industry;

(C) it will abate or make safe lead paint conditions;

(D) it will abate any other substances hazardous to human health or safety;

(E) it will involve participation in the redevelopment of contaminated sites program;

(F) it will rehabilitate a building facade that contributes to the integrity of the downtown development district; or

(G) it will create additional area able to be occupied within the existing building that also accomplishes the objectives of subdivisions (A) through (D) of this subsection.

(3) The local board shall also find all of the following:

(A) the qualified expenditures for a 24-month period selected by the taxpayer and ending within the taxable year exceed $5,000.00; and

(B) the total qualified expenditures of the project do not exceed the adjusted basis of the structure if the structure is listed or eligible for listing in the National Register of Historic Places as determined by the local board in consultation with the division, or theapplication is solely for the expenses of an exterior elevator access in addition to a structure otherwise undergoing a rehabilitation that applies for the state tax credit under subchapter 11F of this chapter and for which the costs of such an addition is not a qualified expenditure; and

(C) with respect to buildings listed on the state or national register, the proposed work conforms with or meets the standards adopted by the local board in consultation with the division for historic preservation.

(4) If the local board finds that the project meets one of the purposes of subdivision (2) and all the requirements of subdivision (3) of this subsection, it shall issue a certification to that effect to the state board and recommend approval of a rehabilitation tax credit allocation.

(c) Amount of credit. Except as limited by subsection (f) of this section, the owner of a qualified building shall be entitled to claim against the taxpayer's state individual income, state corporate income, or state franchise tax liability a credit in an amount equal to 25 percent of an amount not to exceed $100,000.00 of qualified expenditures certified by the local board. An applicant who spends more than $100,000.00 will be eligible for no tax credit under this subchapter for expenditures greater than $100,000.00.

(d) Claim for credit. A taxpayer claiming credit under this subchapter shall submit to the department of taxes with the first return on which a credit is claimed a copy of the state board rehabilitation tax credit allocation and a copy of the local board tax credit certification.

(e) Availability of credit. A credit under this section shall be available for the first tax year in which that part of the qualified building for which the qualified expenditures were made is placed back in service. Any unused credit may be carried forward to reduce the taxpayer's tax liability for no more than nine succeeding tax years following the first year the tax credit is claimed.

(f) Limitations and recapture.

(1) In any calendar year after 1998 the state board shall not award a total amount of tax credits to all applicants under this subchapter and subchapter 11F of this chapter thatexceeds $300,000.00.

(2) The owner or long-term lessee of a building that is listed in the National Register of Historic Places, or is determined to be eligible by the division as part of the local board's review of the application for the tax credit allocation, whose proposed rehabilitation expenses equal or exceed the adjusted basis of the building, shall be eligible for a tax credit under subchapter 11F of this chapter, but shall not be eligible for a tax credit under this subchapter.

(3) No credit shall be allowed under this subchapter for the cost of acquiring any building or interest therein.

(4) No credit shall be allowed under this subchapter for any expenditure with respect to which the taxpayer does not use the straight line method of depreciation over a recovery period determined under 26 U.S.C. § 168(c) or (g).

(5) No credit shall be allowed under this subchapter to both an owner and a lessee on the same leasable unit for which either the owner or the lessee has claimed a tax credit under this subchapter.

(6) If within five years after the building is placed in service upon completion of the qualified rehabilitation project any of the following events occur, the taxpayer shall be liable for a recapture penalty:

(A) the owner of a building for which a tax credit has been awarded under this subchapter disposes of the building; or

(B) the local board finds that the taxpayer performed any remedial work on the building not contained in the application, knowingly failed to supply any information or true information required by the local board for certification under this section, or failed to satisfy any requirement of certification imposed by the local board; or

(C) the taxpayer performed any subsequent work during the five-year period that causes the building to no longer meet at least one objective of subdivision (b)(2) of this section or all requirements of subdivision (b)(3) of this section.

(7) If the department of taxes is notified of any determination under subdivision (6) of this subsection, the department shall assess the recapture penalty against the taxpayer inthe following amounts:

(A) in the event of a disposition under subdivision (6)(A) of this subsection:

(i) in the first year, 100 percent of the credit;

(ii) in the second year, 80 percent of the credit;

(iii) in the third year, 60 percent of the credit;

(iv) in the fourth year, 40 percent of the credit;

(v) in the fifth year, 20 percent of the credit.

(B) in the event of a determination under subdivisions (6)(B), (C) or (D) of this subsection, any unused credit shall be disallowed and the recapture penalty shall be in an amount equal to the total rehabilitation tax credit used.

(g) In lieu of using its tax credit allocation to reduce its own tax liability, an applicant may request the allocation in the form of a mortgage credit certificate which a bank may accept in return for adjusting the rate or term of the applicant's mortgage or loan related to a leasehold interest on the qualified building. The amount of the mortgage credit certificate shall equal the unused portion of 25 percent of an amount not to exceed $100,000.00 of qualified expenditures certified by the local board. An applicant requesting a mortgage credit certificate subsequent to receiving a tax credit allocation shall provide to the state board a copy of all returns on which a credit under this section was taken. A bank which purchases a mortgage credit certificate may use it to reduce its franchise tax liability under 32 V.S.A. § 5836 for the first tax year in which the qualified building is placed back in service after qualified expenditures were made or in a subsequent year.

Sec. 5. DELETED

Sec. 5a. 32 V.S.A. chapter 151, subchapter 11H is added to read:

Subchapter 11H. Training Tax Credit

§ 5930t. TAX CREDIT FOR TRAINING EMPLOYEES

(a) As used in this section,

(1) "Qualified employee" means an employee (as defined under the laws of the United States) who is:

(A) hired by a qualified employer or whose job site is transferred into the downtown area during the taxable year and who devotes at least ninety percent of the time he or she is employed by such an employer in the performance of services directly related to the conduct of the employer's trade or business in the downtown area; and

(B) who is paid annualized wages of at least $14,000.00 plus benefits including health insurance, pension plan, and paid holiday and vacation time; and

(C) who during the six months prior to being hired by a qualified employer was receiving Aid to Needy Families with Children (ANFC) or Temporary Assistance to Needy Families (TANF).

(2) "Qualified employer" means, for any taxable year, an individual, partnership, corporation or other business entity doing business in a downtown area, as defined in section 2791 of Title 24, with the intent of providing permanent employment, rather than transient employment, within a downtown area.

(3) "Training expense" means costs of tuition, books, or instruction not provided by another employee designed to provide basic and remedial education or job specific skills.

(b) For each taxable year, any qualified employer shall be entitled to claim against the income tax liability imposed against such employer under this subchapter equal to the sum of up to $400.00 of the amount of training expense associated with providing training to a qualified employee in that taxable year.

(c) A credit for training expenses associated with providing training to any individual employee may be claimed under this section only once by an employer in one taxable year. In any taxable year the total amount of training tax credits granted to all employers under this section shall not exceed $50,000.00. If in any taxable year claims for credits exceed $50,000.00, the commissioner shall first grant credits based upon the earliest date of application, and any credit not granted to an employer in any taxable year may be claimed by the employer in the immediately following taxable year.

Sec. 6. 10 V.S.A. § 6615a(f) is amended to read:

(f) Eligibility.

* * *

(3) Notwithstanding the requirements of this section regarding the ineligibility of current owners, current owners shall be eligible if the property is contained within a downtown development district designated under the provisions of chapter 76A of Title 24, and as long as the owners and the property are otherwise eligible under the provisions of this section.

Sec. 7. 23 V.S.A. § 1007(g) is added to read:

(g) Notwithstanding any requirements of section 1025 of this title, downtown development districts designated under chapter 76A of Title 24 may have posted speed limits of less than 25 miles per hour.

Sec. 8. 10 V.S.A. § 494(17) is added to read:

§ 494. EXEMPT SIGNS

The following signs are exempt from the requirements of this chapter except as indicated in section 495 of this title:

* * *

(17) Within a downtown district designated under the provisions of 24 V.S.A. chapter 76A, municipal information and guidance signs. A municipality may erect alternative signs to provide guidance or information to assist persons in reaching destinations that are transportation centers, geographic districts, and significant or unique educational, recreational, historic or cultural landmarks. A proposal to provide alternative signs shall contain color, shape and sign placement requirements that shall be uniform within the municipality. The surface area of alternative signs shall not exceed 12 square feet, and the highest point of such signs shall not exceed 12 feet above the ground, road surface or sidewalk. The proposal shall be approved by the municipal planning commission for submission to and adoption by the local legislative body. The sign proposal then shall be submitted to the travel information council for final approval.

Denial may be based only on safety considerations. Reasons for denial shall be stated in writing. Alternative signs shall be responsive to the particular needs of the municipality and to the values expressed in this chapter. These proposals shall be subject to and consistent with any municipal plan duly adopted pursuant to chapter 117 of Title 24, shallbe enforced under the provisions of 24 V.S.A. §§ 4444 and 4445 and may emphasize each municipality's special characteristics. No fees shall be assessed against a municipality that provides signs under this section and upon issuance of permits under section 1111 of Title 19, such signs may be placed in any public right-of-way other than an interstate highway. Notwithstanding subdivision 495(a)(7) or any other provision of this title or of section 1029 of Title 23, alternative signs permitted under this subsection shall not be required to comply with any nationally recognized standard.

Sec. 8a. 19 V.S.A. § 1111(b) and (f) are amended, and (k) is added to read:

(b) Driveway entrances, highway grades; drainage. It shall be unlawful to develop, construct, regrade or resurface any driveway, entrance, or approach, or build a fence or building, or deposit material of any kind within, or to in any way affect the grade of a highway right-of-way, or obstruct a ditch, culvert or drainage course that drains a highway, or fill or grade the land adjacent to a highway so as to divert the flow of water onto the highway right-of-way, without a written permit from the agency, in the case of state highways, or the legislative body of a municipality, *[as the case may be]* in the case of town highways. As a condition of any such permit, compliance with all local ordinances and regulations relating to highways and land use shall be required. The agency or legislative body, within their respective jurisdictions, may make such rules to carry out the provisions of this section as will adequately protect and promote the safety of the traveling public, *[and]* maintain reasonable levels of service on the existing highway system, and protect the public investment in the existing highway infrastructure, but shall in no case deny reasonable entrance and exit to or from property abutting the highways, except on limited access highways, using safety, maintenance of reasonable levels of service on the existing highways, and protection of the public investment in the existing highway infrastructure as the test for reasonableness, and except as necessary to be consistent with the planning goals of 24 V.S.A. § 4302 and to be compatible with any regional plan, state agency plan or approved municipal plan. However, in any case involving an access permit for a development contributing 75 or more peak hour trips to state highways or class 1 town highways, the permit may include reasonable conditions and requirements to protectservice levels on such highways.

(f) Revoking access; frontage road. The agency, in the case of state highways, or the selectboard, in the case of town highways, may, as development occurs on land abutting the highway, provide as a condition of any permit for the elimination of access previously permitted and require the construction of a common frontage road or other access improvements which may serve more than one property or lot.

(k) No deed purporting to subdivide land abutting a state highway or a class 1 town highway can be recorded unless all the abutting lots so created are in accord with the standards of this section, including but not limited to the requirement to provide a frontage road or roads.

Sec. 9. 10 V.S.A. § 495(d) is amended to read:

(d) Notwithstanding any other provisions of this title, a person, firm or corporation shall not erect or maintain any outdoor advertising structure, device or display within the limits of the highway right-of-way; however, this limitation shall not apply to the signs and devices referred to in subdivision 494(1), (2), (3), (6), (7), (10), *[and]* (14) and (17) of this title.

Sec. 9a. 23 V.S.A. § 1391a(b)(3) is amended to read:

(3) In the calculation of gross overweight, the weight allowed by registration or permit, whichever is greater, shall be the basis. The tolerances allowed by sections 1391, 1392, 1408 and 1410 shall not be considered in the calculation of gross overweight.

Sec. 9b. 23 V.S.A. § 1401 is amended to read:

§ 1401. --CONTENTS OF PERMIT

(a) The commissioner of motor vehicles *[may]* shall incorporate in the permit such descriptive matter as to the highways to be traveled over, his or her restrictions, as to width and character of the wheels of such tractor, trailer, motor truck or other motor vehicle and such other regulations as in his or her judgment seem most conducive to a proper use of the highways.

(b) The commissioner shall adopt rules under chapter 25 of Title 3 governing the conditions to be incorporated in the permit. These rules shall also assign each condition toone of three categories, depending on the seriousness of a violation of the condition.

(c) Violation of a rule adopted under this section shall constitute a traffic violation.

(d) A person who violates a rule adopted under this section shall be subject to the following penalties: $100.00 for a Category I violation; $200.00 for a Category II violation; and $300.00 for a Category III violation.

Sec. 9c. 23 V.S.A. § 1432(f) is added to read:

(f) The commissioner shall prepare a list of each highway that has been approved for travel by trailers or semi-trailers of fifty-three feet in length. The list shall be furnished, without charge, to each permitting service, electronic dispatching service or other similar service authorized to do business in this state and, upon request, to any interested person.

Sec. 9d. SIGNS RELATING TO PROHIBITED VEHICLES

The agency of transportation shall study the feasibility of erecting appropriate signs on highways from which the operation of trailers or semi-trailers of fifty-three feet in length is prohibited, and shall erect signs where they deem appropriate by August 1, 1998.

Sec. 9e. 23 V.S.A. § 1434 is amended to read:

§ 1434. PENALTIES

(a) The operation of a vehicle on a public highway in excess of the height, width or length limits as prescribed in section 1431 or 1432 of this title without first obtaining a permit to operate the vehicle, whether or not a permit is available, shall be a traffic violation as defined in section 2302 of this title and the violation shall be punishable by a fine of $300.00 for the first offense and by a fine of $600.00 for a second *[or subsequent]* offense and by a fine of $800.00 for a third or subsequent offense occurring within *[12 months]* a two-year period, which shall also be considered a traffic violation, notwithstanding the provisions of section 2302 of this title.

(b) The operation of a vehicle on a public highway in excess of the legal height, width or length as prescribed in section 1431 or 1432 of this title, designated by permit issued in conformance with section 1400 of this title shall be a traffic violation as defined in section 2302 of this title and shall be punishable by a fine of *[$150.00]* $300.00 for the first offense *[and]*, by a fine of *[$300.00]* $600.00 for any second *[or subsequent]* offense and by a fine of$800.00 for a third or subsequent offense occurring within *[12 months]* a two-year period, which shall also be considered a traffic violation notwithstanding the provisions of section 2302 of this title.

(c) In the case of a violation under subsection (a) of this section, the commissioner may refuse to issue a permit to the violator under section 1400 of this title for a period not to exceed three months, if the owner or lessee commits four or more violations within a two-year period. If the holder of a permit commits four or more violations under subsection (b) of this section within a two-year period, the commissioner may suspend, for a period not to exceed three months, any permit issued to the violator under section 1400 of this title. For the purposes of this section, the owner or lessee of the vehicle shall be considered the holder of, or applicant for, the permit.

Sec. 9f. FINE REVERSIONS; REPORT TO TRANSPORTATION COMMITTEES

(a) On and after July 1, 2000 the penalty for a third or subsequent offence for height, width or length violations under 23 V.S.A. § 1434(a) or (b) shall be $600.00.

(b) On or before March 15, 1999, the Secretary of Transportation or designee shall provide a report to the Committees on Transportation of the House and Senate containing a compilation and summary of the information reported quarterly under 32 V.S.A. § 1402(f) for the period from July 1, 1998 through March 1, 1999 on applications submitted and processed and a list of permittees who have been fined for third offenses under 23 V.S.A. § 1434(a) and (b).

Sec. 9g. 23 V.S.A. § 1435 is amended to read:

§ 1435. ENFORCEMENT PLAN

It is the intention of the general assembly that the departments of motor vehicles and public safety, in conjunction with other law enforcement entities throughout the state, produce a coordinated statewide truck enforcement, safety and training plan. The plan shall provide for a common philosophy and approach to commercial vehicle enforcement, while recognizing the different focus and responsibilities of each entity. The plan shall also provide for training *[and for certification]* of commercial vehicle enforcement officers as well as a process to ensure effective communication of information between enforcementpersonnel, the over dimension permitting unit, and members of the trucking industry. In addition, the plan shall provide for periodic informational meetings with municipalities, groups of municipalities, regional entities and the general public.

Sec. 9h. 23 V.S.A. § 1436 is added to read:

§ 1436. REGIONAL COMMERCIAL MOTOR VEHICLE ENFORCEMENT FUND.

A regional commercial motor vehicle enforcement fund is created for the purpose of supporting a regional commercial vehicle law enforcement initiative in Windsor County. The fund shall be administered by the commissioner of motor vehicles who shall distribute the funds to municipalities within Windsor County. Funds distributed under this section shall be used for commercial motor vehicle enforcement purposes and in the manner agreed to by the commissioner and the municipality. The commissioner shall insure that the activities of the regional commercial motor vehicle law enforcement initiative are consistent with those of the enforcement plan produced pursuant to section 1435 of this title. The commissioner shall report to the general assembly on or before January 15, 1999 on the expenditures from and activities of the regional commercial motor vehicles enforcement fund.

Sec. 9i. RULEMAKING

After passage but prior to August 1, 1998, the commissioner may commence the rulemaking process authorized under 23 V.S.A. § 1401(b) as added by Sec. 9b of this act, provided that final proposed rules shall not be filed with the legislative committee on administrative rules prior to August 1, 1998.

Sec. 10. APPROPRIATIONS

(a) There is appropriated from the general fund for fiscal year 1999 to the department of housing and community development the amount of $60,000.00 for personnel costs and operating expenses incurred in the administration of this act. The agency of administration is authorized to convert one position from state government to the department of housing and community affairs for the implementation of this act.

(b) The amount of $25,000.00 is appropriated in FY 1999 from the transportation fund to the regional commercial motor vehicle enforcement fund established by 23 V.S.A.§ 1436 to accomplish the purposes of section 9h of this act.

(c) The amount of $400,000.00 is appropriated from the Transportation Fund in fiscal year 1999 to the Downtown Transportation and Related Capital Improvement Fund established by 24 V.S.A. § 2796 to be used by the Vermont Downtown Development Board for the purposes of the fund. It is the also the intention of the General Assembly to continue to provide funding in at least this amount to the Downtown Transportation and Related Capital Improvement Fund on an annual basis.

Sec. 11. EFFECTIVE DATES

(a) Sec. 1 (downtown redevelopment program), Sec. 1a (state infrastructure bank program), and Sec. 2 (implementation of resources) shall take effect July 1, 1998.

(b) Sec. 3 (Tax credit for rehabilitation of historic buildings) and Sec. 4 (Rehabilitation Tax Credit) shall take effect January 1, 1999.

(c) Secs. 6 (redevelopment of contaminated properties), Sec. 7 (speed limits), Secs. 8 and 9 (exempt signs) shall take effect July 1, 1998

(d) Secs. 9a, 9c, 9d, 9e, 9f, 9g and 9h (trailer and semi-trailer height, width and length limits) shall take effect July 1, 1998. Sec. 9b (penalties) shall take effect August 1, 1998. Sec 9i (rulemaking) shall take effect from passage.

(e) Sec 10 (appropriation) shall take effect July 1, 1998. This section (effective dates) shall take effect from passage.

Approved: April 28, 1998