Vermont Lieutenant Governor Molly Gray is hosting a series of conversations on key issues affecting the state. Her most recent “Seat at the Table” looked at how Tax Increment Financing can help downtown development efforts.
Tax Increment Financing, referred to as TIF, was initially approved for use in Vermont’s largest cities and is now a funding option across the state.
First-term Democrat Molly Gray noted the state will receive about $1.35 billion from the American Rescue Plan with about $197 million dedicated to local governments and infrastructure projects. “Simply put Vermont has a lot of funding coming to our small but mighty state for our communities. And as a state that continues to struggle with a demographics crisis and I’d say divide between rural Vermont and some of our bigger towns and cities this is a really exciting moment.”
The Vermont Economic Progress Council is an independent board that authorizes Tax Increment Financing. It works through the Vermont Agency of Commerce and Community Development. Executive Director Megan Sullivan explained how the TIF program works. “Generally speaking TIF is a tool that’s used to finance improvements to public infrastructure, so think streets, sidewalks, brownfields, storm water management systems, in order to develop or allow for private development in specific areas and the use of the incremental revenues that come from that new development for repayment of debt service. And this is different because in incurring the debt you are pledging your incremental revenues to repay that debt rather than raising tax rates. It has to be noted that the municipality is on the hook if the increment doesn’t eventually come in.”
White and Burke Real Estate Advisors works with TIF investors across Vermont. Vice President Stephanie Clark says there are a number of factors that should be considered when contemplating using Tax Increment Financing. “It’s a public-private partnership. The municipality has their obligation to the taxpayer and the private side has their obligations as well so they need timely cooperation and good faith. Number two it is a lot of process. Number three TIF is just one tool, usually, in a project deal. One financing tool. Number four TIF is a program that has some limits. You have to have development agreements in place. There has to be a sustainable financing plan in place. And lastly it also comes with risk.”
Officials from two Vermont communities discussed their experiences using the TIF program.
St. Albans City Manager Dominic Cloud said communities must make a philosophical shift in how they approach development. “The first is the recognition that economic development is a public good. Economic development needs to be on par with drinking water, roads, education. It deserves public investment. Second is that local government leaders have the tools to transform their economy. You can do so by participating directly in the development process. We’ve spent 20 million in TIF. It’s generated 60 million in increment.”
Town of Hartford Planning Director Lori Hirshfield said the TIF program highlights the critical need for public-private partnerships in local development efforts. “By the town having the TIF district in place it enables us to have the financial resources and the developers see that there is a demonstrated commitment on the part of the town to make the necessary investments and take the necessary risks that go along with that.”