ACT NO. 184
Economic development; employment growth incentives; tax increment financing; film production incentive grants
This act revises the scope, authority, and formation of tax increment financing (TIF) districts on July 1, 2006; replaces the economic advancement tax incentives (EATI) program on January 1, 2007 with a single Vermont employment growth incentive (VEGI) program based on projected employment, payroll, and capital growth; establishes a new Economic Incentives Review Board (EIRB) to replace the Vermont Economic Progress Council (VEPC) on April 1, 2009; and creates a new Commission on the Future of Economic Development (CFED) to conduct long-range economic planning on July 1, 2006. The act also amends the capitalization requirements of the Vermont Seed Capital Fund and creates a Vermont film production incentive program to provide grants for film production in Vermont.
Specifically, the act does the following:
Part I ( Section 1) Legislative Findings and Purposes. Sets out findings and statistics relating to the performance of the existing economic advancement tax incentive program, including reasons for revising the program to provide greater controls, enforcement, and performance requirements.
Part II (Sections 2 - 2j) Tax increment financing program. Revises the requirements for establishing and administering TIF districts to be available to all municipalities, including the following: removes the cost-benefit analysis which was unworkable for infrastructure financing; clarifies but retains the "but for" test; clarifies process requirements such as municipal hearings, planning requirements, and municipal bonding procedures; creates location criteria and provides that new "growth centers" would comply with these criteria; establishes other project criteria or public benefits tests; extends the borrowing period of TIF districts from 10 to 20 years; allows no more than 75% of the TIF "increment" to be used for TIF financing, retaining 25% of the increment for the education fund; permits the use of TIF revenues for broader purposes, such as transportation infrastructure, brownfields remediation, and costs related to administration and creation of the TIF district; provides that state approval of TIF applications be done by VEPC for calendar years 2007 and 2008, after that by a new Economic Incentives Review Board; caps the number of new TIF districts to be no more than 10 in the next five years, with no more than one new district in any municipality. Also, allows Milton to extend its existing TIF districts by another ten years.
Part III (Sections 3 - 5) Termination of current economic advancement tax incentives. Allows current credits to be awarded by VEPC until January 1, 2007; allows carryover of prior credit awards until used, and repeals authority for existing credits after carryover period expires; assigns to VEPC authority to monitor carryover of prior awards until April 1, 2009 when transferred to new EIRB; provides definitions pertinent to the existing EATI program, for use in administering any carryover credits after program is discontinued.
Part IV (Sections 5 - 11) Vermont employment growth incentive program. Creates VEGI, a new program to replace EATI on January 1, 2007, to be a single incentive based on projected company employment, payroll, and capital growth. The VEGI incentive is calculated annually using current and prior year employment data for real-time performance against background growth. No more than one-fifth of the incentive may be claimed each year for five years. This avoids the need for subjective and unpredictable recapture procedures if targets are not met. VEGI will be administered by VEPC in 2007 and 2008, thereafter by EIRB. An annual cap imposed on VEGI awards of $1 million net negative and $10 million overall gross award limit in any year. Sunset date established on VEGI program, five years, January 1, 2012.
Part V (Sections 12 - 14) Creation of the Economic Incentives Review Board. VEPC will continue as constituted until April 1, 2009, when it will be replaced by the new EIRB. EIRB will have the following membership: 11 members; nine appointed by the Governor with Senate confirmation; two legislators, one from each house; an executive director, also appointed by the governor with Senate confirmation. Members will have four-year terms, with initial terms staggered. EIRB responsible for administering the VEGI program and the TIF program.
Part VI (Section 15) Audits and Reports. The auditor of accounts will continue biennial audits of the EATI program until all existing credits are used and will report to legislative committees of jurisdiction. The auditor will also begin biennial audit of the VEGI program, with report to the new EIRB with the EIRB then reporting its response and recommendations to the legislative committees. Also (in Section 9) the VEGI program requires annual performance reports to the legislature.
Part VII (Sections 16 and 17) Economic Planning. VEPC's responsibility for long-term economic planning is terminated July 1, 2006. Funding in H.881 to VEPC for economic planning is transferred to new Commission on the Future of Economic Development. The Commission is to be established July 1, 2006 to be composed of the following 12 members for four-year terms: five appointed by the governor; two legislators, one from each house; 1 labor representative appointed by labor council; one non-profit representative appointed by VANPO; one self-employed person appointed by the governor; and the secretary of commerce and the executive director of EIRB, ex officio members. Commission to produce a five-year economic plan on September 15, 2007, developed through a public engagement planning process, with list of general and specific issues to be addressed.
Part VIII (Sections 17a - 17g) Miscellaneous Tax Amendments. Vermont Seed Capital Fund. Permits Vermont Economic Development Authority (VEDA) to contract for the formation of the Seed Capital Fund; provides for the election of all directors by the shareholders. Increases from $2 million to $5 million the amount of initial capitalization that may be eligible for partial tax credits under 32 V.S.A. § 5830b. Amends § 5830b so that the aggregate credit allowable does not exceed previous limits.
* Vermont Film Production Incentive Program. Creates a Vermont Film Production Incentive Program under which the Vermont Film Corporation may provide grants for production expenses for films made in the state. The aggregate amount of the grants awarded in any fiscal year may not exceed $1,000,000, and for fiscal year 2007 that amount is transferred from general fund surplus in fiscal year 2006 contingent on its availability.
Effective Date: Various, as indicated.
The Vermont General Assembly
115 State Street