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S.165

AN ACT RELATING TO ECONOMIC ADVANCEMENT TAX INCENTIVES AND ECONOMIC DEVELOPMENT

The House proposes to the Senate to amend the bill by striking all after the enacting clause and inserting in lieu thereof the following:

* * * Part I.  Legislative Findings and Purpose * * *

Sec. 1.  LEGISLATIVE FINDINGS; ECONOMIC ADVANCEMENT TAX

            INCENTIVE PROGRAM

The general assembly finds:

(1)  The general assembly supports a strong economic development policy for Vermont which is fiscally responsible and targeted for actual development results and should result in well-paying jobs with benefits including health insurance.

(2)  A vibrant economic climate promotes the growth of existing businesses and the attraction of new businesses crucial for the state’s future prosperity.

(3)  A broad consensus on the future direction of Vermont’s economic development is essential for the state’s political and economic well‑being, and achieving this consensus requires the input from a broad spectrum of Vermont’s citizens.

(4)  The general assembly intends to fulfill the state’s pending obligations to businesses which have been granted economic advancement tax incentives.

(5)  The economic advancement tax incentive (EATI) program was enacted by the legislature in 1998 (No. 71 of the Acts of the 1997 Adj. Sess. (1998)) to accomplish general economic policy goals of investment and job growth through economic advancement tax incentive awards.  In 2000, the legislature amended the program to increase accountability and condition EATI awards upon specific performance expectations (No. 159 of the Acts of the 1999 Adj. Sess. (2000)), and in 2003, to further strengthen the performance expectation requirements by establishing clear and quantifiable benchmarks upon which awards shall be allowed or denied (No. 69 of the Acts of 2003).

(6)  Many businesses have participated in the EATI program in good faith and have, in return, contributed and produced significant numbers of additional jobs and capital investment in Vermont.

(7)  The amount of costs, participation, and performance from the EATI Program Summary 1998–2004 are the following:

Total authorizations:                                                           129.7 million

Total credits rescinded or cancelled:                                   26.4 million

Total property tax authorizations:                                       16.4 million

Total rescinded or cancelled:                                              4.7 million

Total reduction in education fund:                      2.7 million

Total credits earned:                                                          32.0 million

Total applied:                                                                15.4 million

Total carried forward:                                                   16.6 million

Total unearned:                                                 54.9 million

Authorizations Prior to July 1, 2000

Total authorizations:                                                           69.9 million

Total credits rescinded or cancelled:                                   13.4 million

Total property tax authorizations:                                       10.3 million

Total rescinded or cancelled:                                              2.8 million

Total credits earned:                                                          27.9 million

Total applied:                                                                13.4 million

Total carried forward                                                    14.5 million

Total unearned:                                                 18.3 million

Authorizations After July 1, 2000

Total authorizations:                                                           59.8 million

Total credits rescinded or cancelled:                                   13.0 million

Total property tax authorizations:                                       6.1 million

Total rescinded or cancelled:                                              1.9 million

Total credits earned:                                                          4.1 million

Total applied:                                                                2.0 million

Total carried forward                                                    2.1 million

Total unearned:                                                 36.6 million

Recapture and Disallowance

Total credits recaptured (amount paid without P&I):        200,000

Total credits in recapture (billed, without P&I):              1.5 million

Total credits disallowed:                                                3.4 million

(8)  Nevertheless, shortcomings in the EATI program have been identified in the areas of performance measurements and controls, program expenditure controls, state fiscal losses, and adequacy and availability of program information.

(9)  The state lacks adequate controls to enforce key performance provisions of the economic advancement tax incentives (EATI) program, and it is incumbent on the legislature to ensure that these and other economic advancement tax incentives achieve the projected economic activity upon which the awards were conditioned.

(10)  There is currently no program expenditure cap on the Vermont economic progress council’s (VEPC’s) ability to grant tax credits on behalf of the state which reduce future state revenues.  These off-budget tax expenditures are not accounted for in the state’s financial statements or budget, and may constitute a large and growing contingent liability to the revenues of the state not specifically approved by the Vermont legislature during the budget process.

(11)  Three audits by two state auditors over a period of six years recommend that there be improved controls and accountability, and that tax incentives be more directly linked to economic performance.  

* * * Termination of EATI; Transition to VEGI * * *

Sec. 2.  REPLACEMENT OF VEPC AUTHORIZATION OF EDUCATION

            FINANCE PROVISIONS

As of July 1, 2006, the Vermont economic progress council shall have no further authority to grant approval for education property tax exemptions in the following provisions of law:

(1)  32 V.S.A. § 5401(10)(E) (tax increment financing district property removed from education grand list); (H) (unfinished business property owned by a business which has obtained a VEPC credit, removed from education grand list for up to two years); and (I) (property on eligible brownfields remediation property removed from education grand list); and

(2)  32 V.S.A. § 5404a(e) (allocation of education tax revenues to the municipality on new economic development); and (f) (expansion of existing tax increment financing district and removal from education grand list).

Sec. 3.  TRANSITIONAL ECONOMIC INCENTIVE PROVISIONS

(a)  On January 1, 2007, the authority of the Vermont economic progress council to grant and the department of taxes to administer new economic advancement tax incentive awards pursuant to the provisions of 32 V.S.A §§ 5930a and 5930b, other than the Vermont employment growth incentive and tax stabilization, is terminated.

(b)  Any unused credits or incentives granted before January 1, 2007 shall remain in effect, including all carry-forwards.

(c)  For the calendar years beginning January 1, 2007 and January 1, 2008, the Vermont economic progress council is authorized to grant payroll-based growth incentives pursuant to the Vermont employment growth incentives (VEGI), established by Sec. 9 of this act.  Unless extended by act of the general assembly, as of January 1, 2009, no new awards under 32 V.S.A. § 5930a(b)(1) and (2) (tax stabilization and Vermont employment growth incentives) may be made, and, as of January 1, 2019, 32 V.S.A. § 5930a(b)(1) and (2) (tax stabilization and Vermont employment growth incentives) are repealed.

(d)  On January 1, 2009, the Vermont economic progress council shall cease to exist, and no new credits or other incentives may be granted under any provisions of 32 V.S.A. § 5930a.

Sec. 4.  REPEAL OF CURRENT EATI PROVISIONS

As of January 1, 2007, no new credits or incentives may be granted under the following provisions, and, as of January 1, 2017, the following provisions are repealed:

(1)  The economic advancement tax incentive program, including: 

(A)  32 V.S.A. § 5930c (economic advancement payroll tax credit).

(B)  32 V.S.A. § 5930d (economic advancement research and development tax credit).

(C)  32 V.S.A. § 5930e (workforce development incentive tax credit).

(D)  32 V.S.A. § 5930f (Vermont export tax incentive).

(E)  32 V.S.A. § 5930g (capital investment tax credit).

(F)  32 V.S.A. § 5930h (carry-forward, carry-back, and recapture for substantial curtailment of business).

(G)  32 V.S.A. § 5930i (credit allocation).

(H)  32 V.S.A. § 5930k (high technology growth incentives).

(I)  32 V.S.A. § 5930w (sustainable technology research and development).

(J)  32 V.S.A. § 5930x (export tax credit).

(2)  Additional incentives under:

(A)  32 V.S.A. § 9741(39)(i) (sales and use on building materials).

(B)  32 V.S.A. § 9741(47) (sales and use of new personal computers and included software).

* * * Vermont Employment Growth Incentives (VEGI) * * *

Sec. 5.  32 V.S.A. § 5930a(b) is amended to read:

(b)  The Vermont economic progress council, within 45 60 days of receipt of a complete application, shall approve or deny the following economic incentives:

(1)  tax stabilization agreements and exemptions under subdivision 5404a(a)(2) of this title;

(2)  the economic advancement tax incentives set forth in section 5930b of this title, the high-tech growth incentives set out in section 5930k of this title, and the sustainable technology incentives set out in sections 5930w and 5930x of this title;

(3)  sales and use tax exemptions provided in section 9741 of this title that require the approval of the Vermont economic progress council;

(4)  property tax exemptions that require the approval of the Vermont economic progress council under subdivision 5404a(c)(1) of this title; and

(5)  applications for allocation to municipalities of a portion of education grand list value and municipal liability from new economic development under subsections 5404a(e) and (f) of this title.

(2)  the Vermont employment growth incentives (VEGI) under section 5930b of this title.

Sec. 6.  32 V.S.A. § 5930a(d) is amended to read:

(d)  In reviewing the application of a business or municipality under subdivision (c)(3) of this section to determine whether the applicant is eligible for the economic incentives under subsection (b) of this section, the council shall apply a cost-benefit model to determine the return on investment to the state, relative to other applicants, and to assist in establishing appropriate award levels for individual applicants.  The council shall apply the cost‑benefit model in reviewing applications under subdivisions (b)(1) and (2) of this section to determine the net fiscal benefit to the state.  The cost-benefit model shall be a uniform and comprehensive methodology for assessing and measuring the projected net fiscal benefit or cost to the state of proposed economic development activities over the five-year award period.  Any modification of the cost‑benefit model shall be subject to the approval of the joint fiscal committee.  The council shall perform cost-benefit analysis in consultation with the commissioner of economic development.  The cost‑benefit analysis may shall include consideration of the effect of the passage of time and inflation on the value of multi-year fiscal benefits and costs.

(1)  In determining the projected net fiscal benefit or cost of the incentives considered under subdivisions (b)(1), (4), and (5) subdivision (b)(1) of this section, the council shall calculate the net present value of the enhanced or forgone statewide education tax revenues, reflecting both direct and indirect economic activity.  If the council approves an incentive pursuant to this section, the net fiscal costs, if any, to the state shall be counted as if all those costs occurred in the year in which the council first approved the incentive and that cost shall reduce the amount of the annual authorization for such approvals established by the legislature for the applicable fiscal calendar year.

(2)  In determining the projected net fiscal benefit or cost of the incentives considered under subdivisions (b)(2) and (3) subdivision (b)(2) of this section, the council shall calculate the net present value of the enhanced or forgone state tax revenues attributable to the incentives, reflecting both direct and indirect economic activity over the five‑year award period.  If the council approves an incentive, the net fiscal costs, if any, to the state shall be counted as if all of those costs occurred in the year in which the council first approved the incentive and that cost shall reduce the amount of the council’s annual authorization for approval of economic incentives as established by the legislature for the applicable fiscal calendar year.

Sec. 7.  32 V.S.A. § 5930a(e) is amended to read:

(e)  A business or municipality may apply to the economic progress council to receive the economic incentives available under subsection (b) of this section, except that only a municipality may apply for approval of a tax stabilization agreement as allowed under subdivision 5404a(a)(2) of this title, education fund revenue sharing under subsection 5404a(e) of this title, and tax increment financing districts under subsection 5404a(f) of this title Only a business may apply for approval under subdivision 5930a(b)(2) of this title.  A municipality and a business must apply jointly for approval of a tax stabilization agreement pursuant to subdivision 5930a(b)(1).

Sec. 8.  32 V.S.A. § 5930h(f) is amended to read:

(f)  Deferral and mitigation of disallowance and recapture.  Within 90 days of receipt of written determination of recapture or disallowance under subsection (e) of this section, a person may apply to the council for a deferral of the disallowance or recapture for a nonrenewable period of 12 36 months.

* * *

Sec. 9.  32 V.S.A. § 5930b is amended to read:

§ 5930b.  ECONOMIC ADVANCEMENT TAX INCENTIVES VERMONT

                EMPLOYMENT GROWTH INCENTIVE

A business may request approval of not more than three of the five economic incentives provided in sections 5930c, 5930d, 5930e, 5930f, and 5930g of this title.  A high-tech business may, in the alternative, request approval of not more than three of the five economic incentives as provided in section 5930k of this title.  A sustainable technology business may, in the alternative, request approval of the sustainable technology research and development tax credit in section 5930w of this title in lieu of the research and development tax credit in section 5930d of this title, or request approval of the sustainable technology export tax credit in section 5930x in lieu of the export tax credit in section 5930f of this title. Approval of the Vermont economic progress council pursuant to this subchapter may be for up to five years.

(a)  Definitions.  For the purposes of this section:

(1)  “Application base number of jobs” means the total number of full‑time Vermont jobs, on an annualized basis, held by nonowners at the time of application, including employees that have been laid off or otherwise terminated within six months of the date of application.

(2)  “Application base payroll” means the total Vermont gross wages and salaries paid to full-time, nonowner employees on an annualized basis at the time of application, including employees who have been laid off or otherwise terminated within six months prior to the date of application.

(3)  “Authorized award amount” means the amount of the incentive award as determined by the Vermont economic progress council pursuant to this section.

(4)  “Award period” means the consecutive five years during which a business may add qualifying jobs and qualifying capital investments eligible for employment growth incentives under this section.

(5)  “Base number of jobs” means the total number of full-time Vermont jobs held by nonowners on an annualized basis.

(6)  “Base payroll” means the total Vermont gross wages and salaries actually paid to full-time, nonowner employees.

(7)  “But-for” means the determination of whether, in the absence of the economic incentive sought, the proposed economic development would not occur or would occur in a significantly different and significantly less desirable manner.

(8)  “Capital investment target” means qualifying capital investment in an award period year as represented on the Vermont employment growth incentive application.

(9)  “Full-time job” means a permanent position filled by an employee who works at least 37 hours each week.

(10)  “Incentive percentage” means the percentage applied to qualifying payroll in order to calculate earned incentives.

(11)  “Incentive ratio,” set at 80 percent, is the percentage applied to the preincentive net fiscal benefit in order to calculate the maximum award that may be authorized under this section.

(12)  “Incremental payroll” means the portion by which the payroll target exceeds the payroll threshold.

(13)  “Jobs target” means the projected number of new qualifying jobs in an award period year as reported on the Vermont employment growth incentive application.

(14)  “Net fiscal benefit” means the excess of the present value benefit to the state over the present value cost to the state as calculated by the cost‑benefit model.

(15)  “Nonowner” means an employee with no more than 10 percent ownership interest, including attribution of ownership interests of the employee’s spouse, parents, spouse’s parents, siblings, and children.

(16)  “Payroll target” means the projected qualifying payroll in an award period year as reported on the Vermont employment growth incentive application.

(17)  “Payroll threshold” means base payroll or application base payroll (if year 1), plus expected average industry payroll growth as determined by the cost-benefit model.

(18)  “Projected average wage” means the total payroll targets divided by the total jobs targets.

(19)  “Qualifying capital investment” means projected investments in Vermont in new facilities, machinery, and equipment, the value of which is an input to the cost‑benefit model in evaluating applications.

(20)  “Qualifying jobs” means new, full-time Vermont jobs held by nonowners that meet the wage threshold.

(21)  “Qualifying payroll” means actual Vermont gross wages and salaries paid for qualifying jobs in a utilization period year, provided incremental payroll in that year equals or exceeds such gross wages.

(22)  “Utilization period” means the period during which incentives can be claimed, and includes each year of the award period plus the four years immediately following each year of the award period.

(23)  “Vermont gross wages and salaries” means Medicare wages as reported on Federal Tax Form W2 to the extent those wages are Vermont wages.

(24)  “Wage threshold” means the minimum annualized Vermont gross wages and salaries paid, as determined by the council, but not less than 60 percent above the minimum wage at the time of application, in order for a new job to be a qualifying job under this section.

(b)  Authorization process.

(1)  A business may apply to the Vermont economic progress council for approval of a performance-based employment growth incentive to be paid out of the business’s withholding account upon approval by the department of taxes pursuant to the conditions set forth in this section.  Businesses shall not be permitted to deduct approved incentives from withholding liability payments otherwise due.  In addition to any other information that the council may require in order to fulfill its obligations under section 5930a of this title, an employment growth incentive application shall include all the following information:

(A)  Application base number of jobs.

(B)  Total jobs at time of application.

(C)  Application base payroll.

(D)  Total payroll at time of application.

(E)  Jobs target for each year in the award period.

(F)  Payroll target for each year in the award period.

(G)  Capital investment target for each year in the award period.

(H)  A statement signed by the president or chief executive officer or equivalent acknowledging that to the extent the applicant fails to meet the minimum capital investment by the end of the award period, any incentives remaining to be earned shall be limited, and any incentives taken shall be subject to complete or partial reversal, pursuant to subdivisions (c)(10) and (11) of this section.

(2)  The council shall review each application in accordance with section 5930a of this title, except that the council may provide for a preliminary approval pursuant to the conditions set forth in subsection 5930a(c), followed by a final approval at a later date, but not before the economic activity commences.

(3)  Except as provided in subdivision (5) of this subsection, the value of the incentives will be dependent upon the net fiscal benefit resulting from projected qualifying payroll and qualifying capital investment.  An incentive ratio shall be applied to the net fiscal benefit generated by the cost-benefit model in order to determine the maximum award the council may authorize for each application it approves.  The council may establish a threshold for wages in excess of, but not less than, the wage threshold, as defined in subsection (a) of this section for individual applications the council wishes to approve.  The council shall calculate an incentive percentage for each approved application as follows:

Authorized award amount ÷ the five‑year sum of all payroll targets

(4)  An approval shall specify:  the application base jobs at the time of the application; total jobs at time of application; the application base payroll; total payroll at time of application; the incentive percentage; the wage threshold; the payroll thresholds; a job target for each year of the award period; a payroll target for each year of the award period; a capital investment target for each year of the award period and description sufficient for application of subdivisions (c)(10) and (11) of this section of the nature of qualifying capital investment over the award period upon which approval shall be conditioned; and the amount of the total award.  The council shall provide a copy of each approval to the department of taxes along with a copy of the application submitted by that applicant.

(5)  Notwithstanding subdivision (3) of this subsection, the council may authorize incentives in excess of net fiscal benefit multiplied by the incentive ratio not to exceed an annual authorization established by law. 

(c)  Claiming an employment growth incentive.

(1)  A business whose application is approved and, in any year during the award period, meets or exceeds its payroll target and either its jobs or capital investment target may file an annual return claiming incentives pursuant to this section.  Upon approval by the department of taxes, incentive payments will be issued by the department of taxes for each of the five award period years in equal annual installments over consecutive five-year periods, beginning with each award period year, provided that the incentive-triggering award period year payroll and job targets are maintained in each utilization period year for which an installment is claimed.

(2)  Incentive installments shall be calculated as follows:  Qualifying payroll for the utilization period year, not to exceed the payroll target or targets for the incentive-triggering award period year or years shall be multiplied by the incentive percentage.

(3)  The department of taxes shall permanently deny claims for incentive installments in any utilization period year in which the award‑year qualifying jobs and qualifying payroll levels are not maintained or have not been reestablished to 100 percent of award‑year levels.

(4)  Qualifying jobs, qualifying capital investment, and qualifying payroll in excess of the jobs, capital investment, and payroll targets for an award year shall be carried forward and counted toward future award period year targets.

(5)  A business whose application is approved and, in the first award period year, fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets shall forfeit all authority to earn and claim incentives under this section.  The department of taxes shall notify the Vermont economic progress council that the first year award period targets have not been met, and the council shall rescind the incentive authorization in its entirety.  A business whose incentive authorization is rescinded for failure to meet first‑year award period targets may reapply to the Vermont economic progress council for a new authorization pursuant to this section.

(6)  A business whose application is approved and, in the second or third year of the award period, fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets may not claim incentives in that year.  To the extent such business reaches its second or third year award period targets within the succeeding two calendar year reporting periods immediately succeeding year two or three of the award period, which ever is applicable, such business may claim incentives in five-year installments as provided in subdivisions (1) through (4) of this subsection.  A business which fails to meet of exceed its payroll target and one of its two jobs and capital investment targets within this time-frame shall forfeit all authority under this section to earn and claim incentives for award period year two or three, as applicable, and any future award period years.  The department of taxes shall notify the Vermont economic progress council that the second or third year award period targets have not been met within the prescribed period, and the council shall rescind authority for the business to earn incentives for the activity in year two or three, as applicable, and any future award period years.

(7)  A business whose application is approved and, in the fourth year of the award period, fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets may not claim incentives in that year.  To the extent such business reaches its fourth year award period targets within the next calendar year reporting period, such business may claim incentives in five-year installments as provided in subdivisions (1) through (4) of this subsection.  A business which fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets within this time-frame shall forfeit all authority under this section to earn and claim incentives for award period years four and five.  The department of taxes shall notify the Vermont economic progress council that fourth year award period targets have not been met within the prescribed period, and the council shall rescind authority for the business to earn incentives for activity in award period years four and five.

(8)  A business whose application is approved and, in the fifth year of the award period, fails to meet or exceed its payroll target and one out of two of its jobs and capital investment targets may not claim year five award period incentives in that year or any subsequent year.

(9)  Incentives must be claimed annually on an incentive return available from the department of taxes filed no later than the last day of February of each year of the utilization period.  Incomplete returns shall not be considered to have been timely filed.  The incentive return shall be subject to all provisions of this chapter governing the filing of tax returns.  No interest shall be paid by the department of taxes for any reason with respect to incentives allowed under this section.

(10)  A business that fails to invest the minimum qualifying capital investment specified by the council by the end of the award period shall be liable for repayment of incentives taken, plus interest, to the extent incentives taken exceed the total award after it is reduced in proportion to the deficiency by which the applicant fails to meet its minimum qualifying capital investment.  The repayment, if any, shall be calculated and remitted with the incentive return for the last year of the award period, and no further incentives may be earned.  The repayment shall be calculated as follows:

Incentives taken minus [qualifying capital investments made ÷

minimum qualifying capital investment] × authorized award amount

(11)  To the extent the minimum qualifying capital investment is not met by the end of the award period but no repayment is triggered, the authorized award amount against which future incentives may be earned shall be reduced in proportion to the level of deficiency by which the applicant fails to meet the minimum qualifying capital investment.

(d)  Recapture.  To the extent a business authorized to earn employment growth incentives under this section experiences a 90 percent or greater drop below application base jobs during any utilization year, all authority to earn and claim incentives pursuant to this section shall be revoked, and such business shall be subject to recapture of all incentives previously claimed, including interest.  Notwithstanding any other statute of limitations provisions, for purposes of recapture under this section, the department of taxes shall issue a recapture bill any time within three years from the receipt date of written notification from the business of the triggering drop in payroll or employment or three years from the last day of the end of the utilization period, whichever occurs first.

(e)  Reporting.  By May 1, 2007, and by May 1 each year thereafter, the council and the department of taxes shall file a joint report on the employment growth incentives authorized by this section with the chairs of the house committee on ways and means, the house committee on commerce, the senate committee on finance, the senate committee on economic development, housing and general affairs, the house and senate committees on appropriations, and the joint fiscal committee of the general assembly and provide notice of the report to the members of those committees.  The joint report shall contain the total authorized award amount of incentives granted during the preceding year, amounts actually earned and paid from inception of the program to the date of the report, including the date and amount of the award, the expected calendar year or years in which the award will be exercised, whether the award is currently available, the date the award will expire, and the amount and date of all incentives exercised.  The joint report shall also include information on recipient performance in the year in which the incentives were applied, including the number of applications for the incentive, the number of approved applicants who complied with all their requirements for the incentive, the aggregate number of new jobs created, the aggregate payroll of those jobs  and the identity of businesses whose applications were approved.  The council and department shall use measures to protect proprietary financial information, such as reporting information in an aggregate form.

Sec. 10.  32 V.S.A. § 3102(e)(11) is amended to read:

(11)  to the joint fiscal office or its agent, provided that the disclosure relates to a successful business applicant under section 5930a of this title and the tax incentive it has claimed and is reasonably necessary for the joint fiscal office or its agent to perform the duties authorized by the joint fiscal committee or a standing committee of the general assembly under subsection 5930a(h); to the auditor of accounts for the performance of duties under section 163 of this title; to the department of economic development for the purposes of subsection 5922(f) of this title; and to the Vermont economic progress council, provided that the disclosure relates to a successful business applicant under section sections 5930a and 5930b of this title and the tax incentive it has claimed and is reasonably necessary for the council to perform its duties under section sections 5930a and 5930b;

Sec. 11.  CALENDAR YEAR 2007 AND 2008 CAPS

(a)  Notwithstanding any other provision of law, in calendar years 2007 and 2008, the annual authorization for the total net fiscal cost of employment growth incentives the council may approve under 32 V.S.A. § 5930b(b)(5) shall not exceed $1,000,000.00 from the general fund.

(b)  Employment growth incentives within the annual authorization amount in subsection (a) of this section shall be granted solely for awards to businesses located in a labor market area of this state in which the rate of unemployment is greater than the average for the state or in which the average annual wage is below the average annual wage for the state.  For the purposes of this section, a “labor market area” shall be as determined by the department of labor.

(c)  Total employment growth incentive and education tax incentive authorizations.  For calendar years 2007 and 2008, the total amount of employment growth incentives the Vermont economic progress council is authorized to approve under 32 V.S.A. § 5930b and property tax stabilizations

under 32 V.S.A. § 5404a(a) shall not exceed $10,000,000.00 from the general fund and education fund combined each year.  This maximum annual amount may be exceeded by the Vermont economic progress council upon application to and approval by the joint fiscal committee of the legislature.

* * * VEPC Board Membership * * *

Sec. 12.  32 V.S.A. § 5930a(a) is amended to read:

(a)  There is created a Vermont economic progress council which shall be attached to the department of economic development for administrative support, including an executive director who shall be appointed by the council, knowledgeable in subject areas of the council’s jurisdiction, and hold the status of an exempt state employee, and administrative staff employed in the state classified service.  The council shall consist of nine 12 citizens of the state, nine of whom shall be appointed by the governor.  The governor shall appoint citizens to the council who are knowledgeable and experienced in the subjects of community development and planning, education funding requirements, economic development, state fiscal affairs, property taxation, or entrepreneurial ventures, and shall make appointments to the council insofar as possible as to provide representation to the various geographical areas of the state and municipalities of various sizes.  One member of the council shall represent labor interests and shall be appointed by the speaker of the house and the president pro tempore of the senate.  Members of the council shall serve initial staggered terms with three members serving three-year terms, three members serving two-year terms, and three members serving one-year terms.  All council members’ terms shall be three-year terms upon the expiration of their initial terms and council members may be reappointed to serve successive terms.  The governor shall select a chair from among the council’s members.  In addition to the nine members appointed by the governor, there the council shall include one member selected by the speaker of the house, who shall be a member of the house; and one member selected by the committee on committees of the senate, who shall be a member of the senate.  Legislative members shall be voting members.  There shall also be two regional members from each region of the state; one shall be designated by the regional development corporation 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 council of applications from their respective regions.  For attendance at meetings and for other official duties all, appointed members shall be entitled to compensation for services and reimbursement of expenses as provided in section 1010 of this title, except that members who are members of the legislature shall be entitled to compensation for services and reimbursement for expenses as provided in section 406 of Title 2.  A regional member who does not otherwise receive compensation and reimbursement for expenses from his or her regional development or planning organization shall also be entitled to compensation and reimbursement of expenses for attendance at meetings and for other official duties as provided in section 1010 of this title.

Sec. 13.  REPEAL AND TRANSITION

As of January 1, 2009, the Vermont economic progress council shall cease to exist, and all remaining functions of the Vermont economic progress council as of that date shall be performed by the department of economic development, and references in Vermont law to the Vermont economic progress council shall be deemed to refer to the department of economic development.

Sec. 14.  21 V.S.A. § 1314(e)(1) is amended to read:

(e)(1)  Subject to such restrictions as the board may by regulation prescribe, information from unemployment insurance records may be made available to any public officer or public agency of this or any other state or the federal government dealing with the administration of relief, public assistance, unemployment compensation, a system of public employment offices, wages and hours of employment, or a public works program for purposes appropriate to the necessary operation of those offices or agencies.  The commissioner may also make information available to colleges, universities, and public agencies of the state, for use in connection with research projects of a public service nature, and to the Vermont economic progress council with regard to the administration of subchapter 11E of chapter 151 of Title 32; but no person associated with those institutions or agencies may disclose that information in any manner which would reveal the identity of any individual or employing unit from or concerning whom the information was obtained by the commissioner.

* * * Auditor of Accounts * * *

Sec. 15.  AUDITOR OF ACCOUNTS

(a)  As required by 32 V.S.A. § 163 (12) the state auditor shall conduct an audit of the economic advancement tax incentives program established under subchapter 11E of chapter 151 of this title to determine compliance with that subchapter and all other applicable statutes and regulations. 

(b)  The audit shall include a review or audit of a report provided for this purpose by the Vermont economic progress council and the department of taxes indicating the amount of economic advancement tax credit awards granted since 2000, the amount of credits or awards outstanding on the effective date of this act, and the amount of any recapture or disallowance of prior awards.  

(c)  The audit shall also include a comparative examination of the economic advancement tax incentive program repealed by this act and the Vermont employment growth incentives program established by this act with respect to performance measurements, program expenditure controls, the adequacy and availability of program information, and recommendations for improved accountability and fiscal controls.

(d)  The auditor shall develop benchmarks, known as “best management practices” that in the judgment of the auditor, and based on issues identified in previous audits, need to be met so that VEPC and the department of taxes perform in the most fiscally sound and well managed manner.  The auditor shall assess conformance of VEPC and the department with such “best management practices.”

(e)  On February 1, 2007, the auditor shall report findings as required under subsections (a) through (d) of this section and shall also provide the report due to the general assembly during the fourth quarter of the second year of this biennium as required by 32 V.S.A. § 163(12).  Upon receipt and review of the auditor’s reports, it is the intention of the general assembly to review, and if it so determines, revise or repeal any provisions of the Vermont employment growth incentive program including annual authorization limits or caps, program termination dates, and the role, functions and termination date of the Vermont economic progress council.

Sec. 16.  Sec. 48a of No. 71 of the Acts of 1997 Adj. Sess. (1998) is amended to read:

10 V.S.A. § 699a (creating the Vermont Economic Progress Council) is repealed effective from date of passage of this act, and all provisions relating to findings and purposes and powers and duties of the Vermont Economic Progress Council set out at 10 V.S.A. §§ 699 and 699b shall apply to the Vermont Economic Progress Council as created in 32 V.S.A. § 5930a(a) as added by Sec. 48 of this act.

Sec. 17.  10 V.S.A. § 1 is added to read:

§ 1.  COMMISSION ON THE FUTURE OF ECONOMIC DEVELOPMENT

(a)  There is established a Commission on the Future of Economic Development.  The commission shall consist of seven members.  The Governor shall appoint five members, including a chair of the commission; the Speaker of the House shall appoint one member, who shall be a member of the House of Representatives; and the Committee on Committees shall appoint one member, who shall be a member of the Senate.  The first commission shall serve a term from the date of appointment through June 30, 2012, and beginning July 1, 2012, commission members shall serve for five-year terms.   Board members shall be entitled to payments per diem and expenses as provided under section 1011 of Title 32.

(b)  On March 15, 2007, and thereafter, every five years beginning December 1, 2011, the commission shall report to the general assembly a proposed five-year economic development plan for the state of Vermont.  The commission may contract with a consultant for purposes of developing the plan, and shall apply to the Emergency Board for any expenses the commission may incur in its official duties.

(c)  The commission shall report to the Joint Fiscal Committee at such times as the committee shall request on the progress of the commission’s economic planning.

(d)  Each commission’s five-year plan shall identify the long-term goals for Vermont economic development and job retention in light of the local and global economic climate and for increasing the well-being of Vermonters and their communities.  In developing the plan, the commission shall consult with representatives of the public and private sectors, including Vermonters from business, education and government.  The plan shall identify prioritized criteria by which to evaluate legislative proposals for economic development incentives in the coming five years which will best serve the goals of the five‑year plan and shall also consider:

(1)  Whether targeted business incentive grants and nonmonetary business aid such as permit and regulatory assistance or other assistance and increased development of infrastructure would be more successful, efficient, and cost‑effective than tax expenditures in encouraging desired economic activity in the state.

(2)  The types of new business Vermonters would like to attract to this state and the kind of business and economic growth Vermonters would find appropriate.

(3)  The specific grants and nonmonetary assistance which would attract those types of business to Vermont.

(4)  The best strategy and long-term goals for Vermont economic development and job retention, particularly in light of both domestic and global business competition.

(5)  Targeting incentives to start‑up and small businesses and whether these kinds of incentives would advance the long-term planning goals.

(6)  Targeting incentives to regions of the state with high unemployment, low wages, or other indications of need for economic development and job creation and whether these kinds of incentives would advance the long-term goals.

(7)  Vermont tax policies which place Vermont businesses at a competitive disadvantage and how best to address these policies and mitigate their effects.

(8)  Specific needs for development or improvement of transportation and telecommunications systems.

(9)  The types of postsecondary institution expansion or development which would attract research and technology firms.

(10)  The advisability of designating a single state official to advise and aid businesses in obtaining all necessary permits and other regulatory compliance.

(11)  The advantages and disadvantages of privatizing all or a portion of economic development functions of the state.

(12)  The advisability of current law limitations on approval for tax increment financing in downtown development projects and recommend any changes necessary to improve the approval process.

(13)  The utility of a “but‑for” test and whether it should be abolished; and whether an annual cap or other limitation is appropriate on the total awards to be made.

(14)  Whether “wage threshold” for the purposes of the Vermont employment growth incentive may be redefined to take account of prevailing regional wage levels for specific job types.

(15)  Whether to develop and link economic advancement tax incentives to municipal awards and incentives to municipalities and whether to account for these.

(16)  How best to achieve economic development without compromising the quality of our environment.

Sec. 18.  EFFECTIVE DATES

This act shall take effect July 1, 2006, except that Sec. 8 (deferral and mitigation for 36 months) shall take effect upon passage, and Secs. 5, 6, 7, 9 and 10 (Vermont employment growth incentive) shall take effect January 1, 2007.

 



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us