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BILL AS INTRODUCED 2007-2008

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S.325

Introduced by Senator Miller of Chittenden District and Senator Carris of Rutland District

Referred to Committee on

Date:

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

Statement of purpose:  This bill proposes to clarify the time frames for the life of a tax increment financing district and for incurring debt; to expand financing options to pay for development in a (TIF); to redesign the reappraisal formula for property within a TIF; to clarify what improvements may be paid with tax increments; to add reporting requirements; and to make other technical changes to the TIF laws.

AN ACT RELATING TO TAX INCENTIVE FINANCED DEVELOPMENT

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

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

§ 1891.  DEFINITIONS

When used in this subchapter:

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(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.

(7)  “Financing” means any type of indebtedness incurred or financial vehicles used by a municipality to pay for improvements in a tax increment financing district.

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 and enhance the general economic vitality of the municipality, the region, or and the state.

Sec. 3.  24 V.S.A. § 1894 is amended to read:

§ 1894.  POWER AND LIFE OF DISTRICT

(a)  The municipality may incur indebtedness against revenues of the tax increment financing districts for a period of up to 20 years following the creation of the district.  The 20‑year borrowing period of the district shall commence at 12:01 a.m. on April 1 of the year so voted.  Any indebtedness incurred during the borrowing period may be retired over any period authorized by the legislative body of the municipality under section 1898 of this title.  The district shall continue until the date and hour the indebtedness is retired.

(b)  Notwithstanding subsection (a) of this section, any district created to use education tax increment financing  A municipality that has created a tax increment financing district approved under 32 V.S.A. § 5404a(f) may:

(1)  Incur indebtedness for improvements for the district for a period of up to 20 years, provided that the first indebtedness is incurred within five years following approval of the district pursuant to 32 V.S.A. § 5404a(f), and such that the 20 years for incurring indebtedness begins at the time of initial indebtedness.  Prior to requesting municipal approval to secure financing, the municipality shall provide the council with the proposed financing for approval to assure its consistency with the plan approved pursuant to 32 V.S.A. § 5404a(h).  The council shall also assure the viability and reasonableness of any proposed financing other than bonding and least‑cost financing.  A municipality that has not incurred indebtedness within five years following the creation of the district, shall request reapproval from the Vermont economic progress council in order to utilize education tax increment financing following that period.

(2)  Retain the education tax increment for a 20‑year period provided that the 20‑year period commences within five years following approval of the district pursuant to 32 V.S.A. § 5404a(f).  The retention period shall commence at 12:01 a.m. April 1 of the year following the municipality’s notice to the tax department and the Vermont economic progress council.  If a municipality fails to incur debt within the five‑year period but retains the education tax increment, the municipality shall repay the increment in accordance with section 1900 of this title.

Sec. 4.  24 V.S.A. § 1896(a) is amended to read:

(a)  In each subsequent year, the listers or assessor shall include no more than the original taxable value of such the 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 the 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 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.

Sec. 5.  24 V.S.A. § 1897 is amended to read:

§ 1897.  TAX INCREMENT FINANCING

(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 for financing of improvements contained wholly or partly within the district and for related costs in the same proportion by which the infrastructure or related costs directly serve the district at the time of approval of the project financing by the council, and in the case of infrastructure essential to the development of the district that does not reasonably lend itself to a proportionality formula, the council shall apply a rough proportionality and rational nexus test; provided, that if any tax increment utilization is approved pursuant to 32 V.S.A. § 5404a(g) 32 V.S.A. § 5404a(f), 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.  Except as otherwise provided by the municipal charter, the legal voters of a municipality, by a single vote, shall authorize the legislative body to pledge the credit of the municipality up to a specified maximum dollar amount for all debt obligations to be financed with state property tax increment pursuant to approval by the Vermont economic progress council and subject to the provisions of this section and 32 V.S.A. § 5404a.

(b)  A municipality’s pledge of credit for the purpose of issuing a bond financing improvements under this subchapter and 32 V.S.A. § 5404a 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. 6.  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 financing 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 or other financing to be incurred, other sources of financing and anticipated revenues, and the duration of the 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. 7.  24 V.S.A. § 1900 is amended to read:

§ 1900.  DISTRIBUTION

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 used to prepay financing, placed in escrow for payment of financing, or distributed to the state education fund, 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 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, placed in escrow for bond payment, or otherwise used for defeasance of the bonds.

Sec. 8.  32 V.S.A. § 5404a(f), (g), and (h) are amended and (j) and (k) are added to read:

(f)  A municipality that establishes a tax increment financing district under subchapter 5 of chapter 53 of Title 24 shall collect all property taxes on properties contained within the district and apply up to 75 percent of the tax increment as defined in 24 V.S.A. § 1896 to repayment of debt issued to finance financing of the improvements and related costs for up to 20 years pursuant to 24 V.S.A. § 1894, if approved by the Vermont economic progress council pursuant to this section.

(g)  Any allocation approved pursuant to subsection (e) of this section or utilization of tax increment approved under subsection (f) of this section shall be in addition to any other payments to the municipality under chapter 133 of Title 16.  Allocations Except as otherwise provided in this section or chapter 53 of Title 24, allocations and tax increment utilizations approved pursuant to subsections (e) and (f) of this section shall affect the education property tax grand list and the municipal grand list of the municipality under this chapter beginning April 1 of the year following approval and shall remain available to the municipality for the full period authorized and restricted only to the extent that the real property development giving rise to the increased value to the grand list fails to occur within the authorized period.

(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 financing incurred for development of the tax increment financing district.

(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 and a list of previously advanced related costs to be reimbursed; a projection of revenues; a statement and demonstration that the project would not proceed without the allocation of a tax increment; a projection of types and amount of expected financing; 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 increment 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 increment 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, financing activity, escrow status, and “related costs” accounting to VEPC according to the current law municipal audit cycle in 24 V.S.A. § 1681.

(k)  The state auditor of accounts shall review and audit all active tax increment financing districts every three years.

Sec. 9.  Sec. 2i of No. 184 of the Acts of the 2005 Adj. Sess. (2006) is amended to read:

Sec. 2i.  TAX INCREMENT FINANCING DISTRICTS; CAP

Notwithstanding any other provision of law, the Vermont economic progress council may not approve the use of education tax increment financing for more than ten tax increment financing districts and no more than one newly created tax increment financing district in any municipality within the period of five state fiscal years beginning July 1, 2006 2008.  Thereafter, no tax increment financing districts may be approved without further authorization by the General Assembly general assembly.

Sec. 10.  EFFECTIVE DATE

This act shall take effect on July 1, 2008, except 24 V.S.A. § 1896(b) which shall be effective retroactively to July 1, 2006.



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us