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Introduced by Representatives Kupersmith of S. Burlington, Audette of S. Burlington, Head of S. Burlington and Pugh of S. Burlington

Referred to Committee on


Subject:  Economic development; tax incentive financing districts; reappraisal; improvements; financing; reporting requirements

Statement of purpose:  This bill proposes to make changes to the tax incentive financing law to solve problems with reappraisal, to provide more flexibility in financing improvements with tax increments, and to clarify what improvements are eligible for tax increment financing.


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

Sec. 1.  24 V.S.A. § 1891(6) is amended to read:

(6)  “Related costs” means expenses, exclusive of the actual cost of constructing and financing improvements, as defined in subdivision 1751(3) of this title, that are directly related to creation of the tax increment financing district and reimbursement of sums previously advanced by the municipality for those purposes, and attaining necessary to attain the purposes and goals for which the tax increment financing district was created, as approved by the Vermont economic progress council.  As used in this subdivision, related costs are “improvements” as defined in subdivision 1751(3) of this title.

Sec. 2.  24 V.S.A. § 1893 is amended to read:

§ 1893.  PURPOSE

The purpose of tax increment financing districts is to provide revenues for improvements, located wholly or partly within that serve the district and related costs, which will stimulate development or redevelopment within the district, provide for employment opportunities, improve and broaden the tax base, or enhance the general economic vitality of the municipality, the region, or and the state.

Sec. 3.  24 V.S.A. § 1896 is amended to read:


(a)  In each subsequent year, the listers or assessor shall include no more than the original taxable value of such real property in the assessed valuation upon which the listers or assessor computes the rates of all taxes levied by the municipality, the school district, and every other taxing district in which the tax increment financing district is situated; but the listers or assessor shall extend all rates so determined against the entire assessed valuation of such real property for that year.  In each year for which the assessed valuation exceeds the original taxable value, the municipality treasurer shall hold apart, rather than remit to the taxing districts, that proportion of all taxes paid that year on the real property in the district which such excess valuation bears to the total assessed valuation.  The amount so held apart each year is referred to in this act as the “tax increment” for that year.  So much of the tax increments received with respect to the district and pledged and appropriated under section 1897 of this title for the payment of debt service on bonds issued to pay for financing for improvements and related costs shall be segregated by the municipality in a special account on its official books and records until all capital indebtedness of the district has been fully paid.  The final payment shall be reported to the lister or assessor, who shall thereafter include the entire assessed valuation of the district in the assessed valuations upon which tax rates are computed and extended and taxes are remitted to all taxing districts.

(b)  Adjustment upon reappraisal.  In the event of a reappraisal of 20 percent or more of all parcels in the municipality, the value of the original taxable property in the district shall be changed by a multiplier, the denominator of which is the municipality’s education property tax grand list for the property within the district in the year prior to the reappraisal or partial reappraisal and the numerator of which shall be the municipality’s reappraised or partially reappraised education property tax grand list for the property within the districtIn such a district, the The state education property tax revenues in the first year following a townwide reappraisal or partial town-wide reappraisal shall not be less than the dollar amount of the state education property tax revenues in the prior year.

Sec. 4.  24 V.S.A. § 1897 is amended to read:


(a)  The legislative body may pledge and appropriate any part or all of the tax increments received from properties contained within the tax increment financing district for the payment of the principal of and interest on bonds issued financing for improvements contained wholly or partly within that serve the district and for related costs; provided, that if any tax increment utilization is approved pursuant to 32 V.S.A. § 5404a(g), no more than 75 percent of the state property tax increment and no less than 75 percent of the municipal tax increment may be used to service this debt.  Bonds shall only be issued if the legal voters of the municipality, by a majority vote of all voters present and voting on the question at a special or annual municipal meeting duly warned for the purpose, shall give authority to the legislative body to pledge the credit of the municipality for these purposes.

(b)  Prior to the requesting approval for financing pursuant to subsection (a) of this section, the municipality shall provide VEPC with the amount of proposed financing in order to demonstrate that the financing is consistent with the plan approved pursuant to 32 V.S.A. § 5404a(h).

(c)  A municipality’s pledge of credit for the purpose of issuing a bond financing improvements under this subchapter shall include notice that if the tax increment received by the municipality from any property tax source is insufficient to pay the principal and interest on the debt in any year, for whatever reason, including a decrease in property value or repeal of a state property tax source, unless determined otherwise at the time of such repeal, the municipality shall remain liable for full payment of the bond principal and interest for the term of indebtedness.

Sec. 5.  24 V.S.A. § 1898(e) is amended to read:

(e)  Prior to the resolution or ordinance of the local governing body authorizing the bonds issued under this section, the legislative body of the municipality shall hold one or more public hearings, after public notice, on a financial plan for the proposed improvements and related costs to be funded, including a statement of costs and sources of revenue, the estimates of assessed values within the district, the portion of those assessed values to be applied to the proposed improvements, the resulting tax increments in each year of the financial plan, the amount of bonded indebtedness to be incurred, other sources of financing and anticipated revenues, and the duration of financial plan.  A municipality that has approved the creation of a district under this chapter may designate a coordinating agency to administer the district to ensure compliance with this chapter and any other statutory or other requirements.

Sec. 6.  24 V.S.A. § 1900 is amended to read:


In addition to all other provisions of this chapter, with respect to any tax increment financing district, any municipal tax increment received in any tax year that exceeds the amounts pledged for the payment on principal and interest on the bonds issued any financing for improvements and related costs in the district shall be distributed to the city, town, or village budget in proportion that each budget bears to the combined total of the budgets unless otherwise negotiated by the city, town, or village.  Any state education tax increment received in any tax year that exceeds the amount pledged for the payment on principal and interest on the bonds issued on any financing for improvements and related costs in the district shall not be remitted to the municipality but shall be used only for prepayment of principal and interest on the bonds issued, debt or placed in escrow for bond debt payment, or otherwise used for defeasance of the bonds debt retirement.

Sec. 7.  32 V.S.A. § 5404a(h) is amended to read:

(h)  Criteria for approval.  To approve utilization of incremental revenues pursuant to subsection (f) of this section, the Vermont economic progress council shall do all the following:

(1)  Review each application to determine that the new real property development would not have occurred or would have occurred in a significantly different and less desirable manner but for the proposed utilization of the incremental tax revenues.  A district created in a designated growth center under 24 V.S.A. § 2793c shall be deemed to have complied with this subdivision.  The review shall take into account:

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(C)  The amount of additional revenue expected to be generated as a result of the proposed development; the percentage of that revenue that shall be paid to the education fund; the percentage that shall be paid to the municipality; and the percentage of the revenue paid to the municipality that shall be used to pay the municipal tax increment bonds debt.

(2)  Process requirements.  Determine that each application meets all of the following four requirements:

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(B)  The municipality has developed a tax increment financing district plan, including: a project description; a development financing plan; a pro forma projection of expected costs; a projection of revenues; a statement and demonstration that the project would not proceed without the allocation of a tax increment; a projection of the amount of expected indebtedness; evidence that the municipality is actively seeking or has obtained other sources of funding and investment; and a development schedule that includes a list, a cost estimate, and a schedule for public improvements and projected private development to occur as a result of the improvements.

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(4)  Project criteria.  Determine that the proposed development within a tax incentive financing district will accomplish at least three of the following five criteria:

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(C)  The project will affect the mitigation remediation and redevelopment of a brownfield located within the district.  For the purposes of this section, “brownfield” means an area in which a hazardous substance, pollutant, or contaminant is or may be present, and that situation is likely to complicate the expansion, development, redevelopment, or reuse of the property.

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(j)  A municipality with an active tax incentive financing district shall:

(1)  Provide VEPC and the tax department with all information required for VEPC and the tax department to issue the report required by subsection (i) of this section on or before December 1 each year.

(2)  Report actual investment, bond activity, escrow status, and “related costs” accounting to VEPC according to the current law municipal audit cycle.

(k)  The state auditor of accounts shall review and audit all active TIFs every three years.


This act shall take effect on July 1, 2007, except for 24 V.S.A. § 1896(b) in Sec. 3 which shall be retroactively effective to July 1, 2006.

Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont