Legislative Counsel walked through H.492 on Thursday with the Senate Finance Committee, noting the modest (3.84%) increase in expected tax bills on Vermonters. There was a debate about what the purpose the December letter from the Tax Commissioner was (this is a letter that estimates the state yield amount that is sent to the legislature and school districts at the end of each year). Chairwoman Cummings clarified that it was meant to be a tool for school boards and voters to understand the tax rate impacts of their school budgets. A new thing this year is that $22M was set aside in a reserve fund in case a property tax buy-down is needed next year.
Another member of Legislative Counsel joined the Committee to talk about H.486 and its potential impact on the Education Fund, which may influence the yield rate (which would impact local tax rates). The bill would pause the testing of PCBs until the Construction Aid Task Force has completed their work. There were also grants included in the bill that would “make schools whole” for PCB remediation, including a $16M payment to the Burlington School District. These grants may come out of the Education Fund which would increase spending and, consequently, property taxes.
The Joint Fiscal Office shared an updated Education Fund Outlook for FY2024 which shows an average increase of 3.84%. There was a back and forth over the growth in spending, which was 8% this year. Senator Brock pointed out that our student populations are falling again and spending is going the opposite direction. The Common Level of Appraisal (a mechanism to equalize changes in appraisal values between towns) also came up as an issue given the rapid increase in property values, particularly in vacation towns. The Joint Fiscal Office (JFO) noted that there was an issue they have heard about with property values pushing people out of the income sensitivity cap.
Senator Chittenden was interested in non-homestead property tax rates. Cummings noted that there is a bill, H.480, potentially coming out of the House that would look at multiple categories within the current non-homestead category. She believes that “in many places now” the non-homestead rates are lower than the local homestead rates. She contemplated whether or not they should break second homes out from business and commercial properties (current both in the non-homestead category). JFO noted that you cannot just compare the rates because homestead properties are subject to income sensitivity whereas non-homestead tax rates are not.
JFO has been asked to look at different aspects of Grand List values, but these categories are not uniform across all municipalities so parsing out vacant or second homes “is a real challenge in the current data we have available.”