by Nat Rudarakanchana April 9, 2013 vtdigger.org Lawmakers seeking to curb abuse of a popular property tax break may face an uphill battle in the Senate Agriculture Committee, where Chair Robert Starr, D-Essex-Orleans, is skeptical about proposed changes to the current use program.
Vermont’ s Agricultural and Managed Forest Land Use Value Program, as it’ s officially known, allows landowners to pay taxes based on the productive value, or ‘ use value’ of their land, rather than its market value.
Instituted in the late 1970s, part of the program’ s point is to preserve Vermont’ s open agricultural landscape. If landowners later develop their land to build houses or commercial properties, they face a fine, partly to discourage developers from benefiting unfairly from lower taxes.
Rep. Alison Clarkson, D-Woodstock, told the Senate Agriculture Committee that the current use program faces significant abuse by people who enroll, pay much less in property taxes, and then quickly thereafter develop the land, facing only a minor financial penalty.
Clarkson has sponsored a bill, H.329, which she says ‘ puts the teeth back in the penalty,’ with the aim of deterring ‘ short-term enrollment of land not intended for long-term forestry or agricultural management.’
There’ s enough of a public perception that the current use program faces ‘ misuse and abuse,’ said Clarkson, that lawmakers must tweak it to satisfy questions about fairness and needlessly forgone state revenues.
But committee chair Starr doubted that people were widely upset about others exploiting the program. ‘ The problem I have with that perception is maybe that’ s a Montpelier perception,’ he told Clarkson. ‘ As a matter of fact, I haven’ t even heard one yip about bad perception on current use from anybody.’
Sen. Bobby Starr. File photo by Josh Larkin
‘ So, Bobby, I may not go to as many meetings as you, but I go to 1,847 homes,’ countered Clarkson, who added that town listers had told her of significant abuses. ‘ As I go door to door, it’ s a big issue. ‘¦ It isn’ t just my perception, Bobby. It is, I think, a wide variety of people who have that concern.’
Starr also fears that if penalties were too stiff, landowners would be deterred from rightfully taking advantage of the tax break, which is estimated to create positive economic impacts worth some $4 billion, and preserves some of Vermont’ s most valuable landscapes.
Under Clarkson’ s bill, the penalty for withdrawing land from current use, known technically as the ‘ land use change tax,’ would be 10, eight, or five percent of the fair market value of the specific land lots withdrawn, with lesser penalties if the land is kept undeveloped for many years.
Currently, the penalty is 20 or 10 percent of the land’ s fair market value, but it is pro-rated so all the land is valued at a certain price, with each acre representing an equal division of that value. Prime parcels for development, often those which landowners withdraw and willingly suffer fines for, don’ t cost more to withdraw from the program.
Right now, all the revenue from penalties goes to the state’ s general fund. Under Clarkson’ s proposal, half would go to the general fund, and half would go to the municipality where the land is located.
Starr fears that this points to another problem with the bill. Since some of the money would flow to town listers, he said, taking testimony from them on the extent of the problem is tantamount to letting the proverbial fox guard the chicken coop.
Clarkson said, however, that listers would be in the field valuing these specific parcels, which they don’ t do now, the money would simply compensate them for their work.
About $500,000 is raised through penalties currently, with 3,000 to 5,000 acres withdrawn each year, of a total 2.3 million acres enrolled in the program. Just over a third of all Vermont land is enrolled.
The legislation could raise $2.7 million to $3 million in new revenues through penalties: the total tax break now represents about $52.5 million in forgone revenue to the state.
Clarkson said people could be paying thousands or tens of thousands more in penalties, with her change, but said those using the program for the right purposes wouldn’ t suffer. There’ s a mechanism to allow people to opt out of the program with far lesser penalties before the legislation would take effect on Oct. 1.
She said those who wanted to exploit the program needed only to enroll for less than a year before they could face the penalty, develop land, and still profit.
House Ways and Means, which Clarkson sits on, has been concerned about this particular tax expenditure for a while, she said. Former Gov. Jim Douglas, however, vetoed a legislative reform of the current use program in 2010.
It’ s also an issue that strikes at some senators personally. Sen. David Zuckerman, D-Chittenden, who owns a farm in Hinesburg, has land enrolled in the program, and has also withdrawn land.
Sen. Eldred French, D-Rutland, too, has also had land enrolled in the program; he raised questions about how the legislation might change the value of specific lots, which people didn’ t enroll in anticipation of development, an affair which happened to him.
Both Zuckerman and French sit on the Senate Agriculture Committee.
The program costs almost $76 per Vermonter annually, said Clarkson, after the committee meeting, and is absolutely indispensable to maintaining Vermont’ s working agricultural landscape.
She said many taxpayers felt frustration that the program is being exploited.