Municipal leaders press for finance tools, caution on detailed planning language in H.397 flood bill

Representatives of the Vermont League of Cities and Towns and the Vermont Bond Bank told the Senate Government Operations Committee on Friday that H.397, a miscellaneous package tied to emergency and flood response, should include expanded municipal finance authorities and technical assistance to help towns recover from recent floods.

Josh Henford, director of intergovernmental affairs for the Vermont League of Cities and Towns (VLCT), and a co‑presenter described three principal municipal finance proposals in the bill: (1) allow municipal legislative bodies greater authority to retain and reassign unassigned fund balances (commonly called rainy‑day or reserve funds) without returning to a town vote when funds are already reserved or obligated; (2) lengthen the term for emergency borrowing from the current one‑year maximum to either five years or to match the useful life of the asset being financed in declared all‑hazard emergencies; and (3) add a level‑debt‑service option (a flat annual payment over the life of a bond) in addition to the current amortization method.

Henford said these tools would make municipal budgets more resilient in the face of delayed FEMA reimbursements and expensive short‑term borrowing, and that the Vermont Bond Bank sees level debt service as a common national practice that helps voters understand long‑term costs. “These provisions will improve emergency response for municipalities, create stabilizing factors for local property taxes, and improve grant readiness for towns and cities,” he said.

VLCT and the bond bank noted that many communities remain owed FEMA reimbursements from the recent floods, that a small share of impacted municipalities account for the majority of damage and that most flood‑affected towns have populations under 2,000. VLCT reported its municipal technical assistance program has reached more than 200 attendees in workshops and one‑on‑one help to towns on borrowing, grant readiness and reimbursement processes.

The bill also intersects with a debate over a growing surplus in the state’s local‑option‑tax (LOT) pilot reserve. VLCT briefed the committee that 34 municipalities that have adopted the LOT have created a state‑held pilot reserve that is projected to reach about $14.3 million (VLCT presented a conservative estimate using Joint Fiscal Office figures and recent town votes). That same briefing said the governor’s budget would use $1 million of that surplus for a pilot buyout program; VLCT members argued the surplus largely represents local revenue and should be returned to the contributing towns or be deployed to a municipal resilience fund rather than be reallocated without local input.

Committee members and witnesses discussed options: return the current accumulated surplus to the towns under the existing formula, hold a defined reserve for pilot payments, or repurpose some funds into a state municipal recovery/resiliency pool. Senators repeatedly noted federal funding uncertainty — including the recent end to BRIC competitive funds for resiliency projects — and the lengthy timeline for FEMA project closeouts, which in past disasters has extended a decade.

Eric (last name not provided), director of Vermont Emergency Management (VEM), cautioned lawmakers about codifying overly specific municipal emergency‑planning requirements in H.397 (portions of the bill labeled section 2, 7 and 8 in committee handouts). He recommended first performing a needs assessment to identify gaps and resource needs before imposing statutory, detailed checklists on local emergency plans. “Then after we do the assessment, we can figure out what it is we want and then write the statute,” he said. VEM staff emphasized that many tools already exist — National Weather Service river‑gauge forecasts, statewide alert systems (BT Alert), regional coordinators — and that the key barrier in some towns is capacity and resources to use those systems, not absence of the systems themselves.

Legislative counsel Tucker Anderson told the committee that a buyout directive in the bill would stand up a statutorily mandated buyout program distinct from the Community Resilience and Disaster Mitigation (CRDM) fund and that the statute would mandate a buyout program even if no dedicated funding stream were appropriated. Counsel noted the CRDM received one‑time funds in prior years but currently lacks an ongoing funding source; committee members asked whether this new language duplicates existing authorities.

Committee members did not take votes on H.397 during the session. Lawmakers requested further cost and drafting details, asked VLCT and VEM to return with clarifications and said they would continue discussions about the LOT surplus, the scope of a buyout program and the best sequencing of assessments versus codifying operational requirements.

No formal actions or appropriations were adopted at the hearing.