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Higher fees likely in store for Current Use

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Posted on April 15, 2010 |
By Kathryn Flagg



ADDISON COUNTY — Changes are afoot for Vermont’s so-called “Current Use” program in an effort to trim $1.6 million from the popular tax abatement program.

A committee bill that would charge every landowner in the program a $128 fee passed the Senate finance committee last week, and was on notice for a second reading early this week. As the Addison Independent went to press on Wednesday, the schedule tentatively called for the bill to be discussed on the Senate floor on Wednesday or Thursday.

In addition to the “per participant” fee, the proposed changes include stronger penalties for withdrawing land from the Current Use program for development, as well as higher property transfer taxes more in line with other property transactions.

Sen. Claire Ayer, D-Weybridge, said the proposed changes to the Use Value Appraisal Program, as Current Use is officially known, were far from final: The bill needs to pass through the Senate appropriations committee, and then will head to the House to be reconciled with the House’s earlier version of the bill.

For now, though, a proposed one-year moratorium on new enrollments in the land use program has been left on the cutting room floor as legislators brainstorm ways to save money in the popular, but expensive, program. (The moratorium was included in the House version of the bill, but not the Senate version.)

A third of the land in Vermont is enrolled in the $49 million tax abatement program, which is designed to protect Vermont’s farm- and forestland. Property owners who enroll their land enjoy tax breaks, because their land is taxed at the value of its “current use,” instead of its developable value. The tax incentive encourages property owners to protect working landscapes.

Meanwhile, the state reimburses individual towns for the tax revenue they lose because of the program. Right now, reimbursements total roughly $11 million each year.

Landowners who have land currently enrolled in the program will have a window to withdraw land for development under the current penalties until November, at which point the proposed higher penalty would go into effect.

The higher proposed penalty hasn’t been popular among landowners, but Ayer said that’s to be expected.

“No one would make the choice to pay more if they could pay less,” Ayer said.

The proposed penalties would actually revert to the original intent of the 32-year-old Current Use program, Ayer added. Currently, the penalty is so low for withdrawing land from Current Use for development that a landowner, on average, saves enough money in taxes to “break even” on the penalty after just 290 days in the program.

The higher penalty would move that “break even” point back to somewhere between five and seven years.

“For people who want to park their land so they don’t have to pay taxes on it, they’re the ones that we’re going to catch, and that’s OK,” Ayer said.

In addition to the higher penalty, the proposed changes also include bumping the property transfer tax on the sale of land enrolled in the Current Use program. Currently, that rate stands at 0.5 percent; the bump would raise the rate to 1.25 percent, or the rate applied to all other property transactions.

The higher rate is anticipated to raise $300,000 annually, which will go toward funding changes in the way the program is administered. Current Use is still a “pencil and paper” operation, and legislators think it will be important to digitize maps and bring the program online to make it more efficient in the long run.

In another proposal, the Senate bill would establish a study committee to investigate some of the persistent questions about Current Use that Ayer said have been “nagging” at legislators.

One of those is over assessment: the rumor that some towns inflate the value of land in Current Use to receive larger reimbursements from the state. There’s also interest in determining if incentives could be used to convince landowners enrolled in Current Use to open land for public recreation.

On the whole, Ayer said, “People are happy about this bill.”

That includes Darby Bradley, the special assistant for donor and government relations at the Vermont Land Trust.

The VLT joined groups like Rural Vermont, the Vermont Farm Bureau, and the Vermont National Resources Council last fall to draft some recommendations for the Legislature to consider when changing Current Use. Their goal, Bradley explained, was to change the program within the context of strengthening it.

Darby said that the two principal changes the working group put together — strengthening penalties through the land use change tax, and funding the electronic conversion of the program’s administration — were included in both the Senate and House versions of the bill.

Bradley said that, in general, the working group is pleased with where the Senate bill stands.

Meanwhile, Ayer said that the feedback from foresters, natural resource experts and the Vermont Farm Bureau has also been largely positive.

“The enthusiasm for it has been remarkable,” Ayer said. “It was because people all of a sudden saw that their program was in danger.”

Reporter Kathryn Flagg is at kathrynf@addisonindependent.com.

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