Vermont Business Magazine The general reaction to Treasurer Beth Pearce’s suggestion that the state cover about a quarter of the massive costs of cleaning up Vermont’s waterways with a de facto increase in the property tax was met with a collective WHAT???
In a report released January 15, 2017, Pearce noted that the 20-year total clean water compliance costs are $2.3 billion. Revenues during that time period are projected at $1.06 billion, leaving a 20-year total gap of $1.25 billion. Annual compliance costs are estimated at $115.6 million, revenues are estimated at $53.2 million, thus leaving a gap of $62.4 million per year, she said. Other revenues bring the annual cost down to $48.5 million.
Assuming about half of that would come from other required revenue sources, that leaves a tidy $25 million or so a year for 20 years.
Pearce did the deep dive and determined that the state had a two-year window of opportunity if it used, for the most part, general and transportation-related bonding authority of $50 million.
This two-year breather would give the state time to come up with a permanent plan to fund the $25 million a year for the following 18 years. Of course, other state infrastructure projects that $50 million could have financed would have to be put off, but Pearce said they aren’t shovel-ready yet anyway.
Acknowledging that the Legislature likely will pick a more a la carte funding formula by using several revenue sources to fill the $25 million gap, the treasurer took a more global view and offered up large, single sources of revenue. Call them fees or call them taxes, collectively it’s going to be a lot of money. But maybe not so much individually.
First of all, eschew the “fairness,” as Pearce describes in her report, of using formulae which includes impervious surfaces (driveways, roofs, parking lots). It seems to make sense until you look at the practical side of it.
Towns that are charging stormwater fees, like Burlington, South Burlington and Williston, are having big fights with landowners over this very subject. What if you have a dirt driveway, swales in your neighborhood instead of curbing, flat property versus pitched, a large buffer versus a postage stamp of a lot? Whose is going to arbitrate that on a statewide level? The cost and time and consternation such a plan would cause would make it a disaster. The time alone would mean that the revenue flow would be delayed and uncertain. It would require more overhead to administer.
Some people will be taxed for clean water three or more times anyway. Also, farmers and other businesses have compliance regulations to reduce pollutants. The word “unfair” will be thrown around like a schoolyard argument over kickball rules.
Simplicity will be much fairer than fairness.
Let’s also discard the idea of raising the personal income tax (1 percent of current revenues would raise $13.3 million). As a candidate, the governor vowed not to raise taxes. Even if drowning in red ink we doubt he would reach for the PI tax to save his life.
That leaves using property.
This sounds like more of a natural consequence anyway. It’s somewhat similar to using impervious surfaces without the bureaucratic trouble. Very generally, the more property you have the more you’re contributing to the problem. Someone in the Northeast Kingdom might balk at this, as much of the focus is on Lake Champlain, but they also will be contributing much less on a relative basis.
One suggestion is using a $3 per acre per parcel fee to raise $15 million. This is both easy and relatively fair, but could result in property owner blowback, because it would involve calculations to correctly bill the landowner, which could lead to opportunities for errors and for landowner challenges.
Simpler still would be a flat $50 per parcel fee ($16.7 million total). On the one hand, it’s not very fair considering someone might have 1,000 acres and someone else a one-quarter acre lot. But 50 bucks a year tacked onto your property tax bill is only 50 bucks.
But the best way, we feel, is to make it simpler and less onerous to those who can afford it the least, which would be to add a small amount to everyone’s property tax bill. Everyone would be all in. Everyone would share in the cost of cleaning up the shared benefit of having cleaner water.
The report states that adding one penny to the statewide property tax rate would raise $8 million. Raising it 2 cents would get you to about that $50 per year per parcel average, except it would be based more on actual property value.
Adding it to the tax would also make it tax deductible, so the federal government would be helping out a little bit too.
And Governor Scott’s reaction to using property?
“Everything has to be on the table.”
Indeed it does.