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Ways & Means hears briefing on tax-increment financing, background growth rates and reappraisal effects on education revenue
Summary
A Joint Fiscal Office presenter and Tax Department staff briefed the committee on TIF background growth-rate methods, housing-permit trends, and how reappraisals interact with TIF increments; staff said TIF reduces education fund revenue by an estimated $6–8 million annually and that 2,500 housing units were permitted statewide in 2024.
Montpelier — Members of the House Ways & Means committee on May 1 received a technical briefing on tax-increment financing (TIF) districts, focusing on how background growth rates are measured, recent housing-permitting trends, and how municipal reappraisals affect TIF increments and education-fund revenue.
A presenter identified as Ted (Joint Fiscal Office) walked through three approaches to measuring “background” growth rates for grand lists: long-term growth in total grand-list value (new construction and renovation), CLA-adjusted growth within parcels that later become TIF districts, and housing-unit creation measured through U.S. Census permitting data. The presenter credited analysis by Jake Feldman and earlier JFO work by Grant Campbell as sources for the numbers shown.
The briefing emphasized that background growth estimates are inherently a counterfactual — what values would have been without a TIF — and that those estimates can vary widely by place and period. Using grand-list growth that strips out pure appraisal appreciation, the presenter said most Vermont jurisdictions analyzed showed long-term annual listed-value growth roughly between 0.5% and 1% per year; a smaller group sat between 1% and 1.5% per year. The presenter cautioned that small tax parcels or single large property changes can materially alter percentage calculations in small districts.
On housing, presenters said the Census permitting series shows about 2,500 new housing units permitted statewide in 2024 and roughly $650 million in private construction value permitted that year. Of that construction value, reporting showed about $184 million associated with structures containing three or more units. The presenters noted most recent increases in housing permits were concentrated in the Burlington metropolitan statistical area, which accounted for about 43.5% of statewide permitted units in 2024 and a larger share of multi-unit construction.
Tax Department staff from the Division of Property Valuation and Review (PVR) — Director Jill Remick and analyst Chloe Wexler — explained the department’s administrative role with TIF. PVR provides the statewide grand-list software used to record parcels, apply the TIF exemption, and calculate increments. Remick and Wexler said PVR does not administer the TIF program itself; that role and rulemaking rest with the Vermont Economic Progress Council (VEPC). PVR’s responsibilities include certifying parcels identified as inside a TIF district, ensuring parcels and values match the municipal grand list, recording parcels in the statewide system, and applying the statutory property-tax exemption that creates the TIF retention.
Wexler walked committee members through a South Burlington example: the city established its TIF district in 2012 (base values set 04/01/2012) and reappraised in grand-list year 2021; the reappraisal produced a “reappraisal CLA” of about 112% for the year. PVR staff explained that while reappraisals can raise current taxable values (and therefore the increment amount in the year of reappraisal), the education-tax calculation also adjusts tax rates using the reappraisal CLA; in the South Burlington example the net education-fund receipts attributed to the TIF district remained comparatively stable across the reappraisal because rates adjusted alongside the grand-list change.
Committee members asked follow-up questions about counterfactuals and distributional effects. Representative Wilkins, Representative Odey and others pressed on whether TIFs shift costs onto other school districts or tax sources; PVR staff noted the education fund draws on multiple revenue streams (property tax, sales tax, parts of purchase-and-use tax and federal funds) and that TIF exemptions represent foregone education-fund revenue. JFO and the tax department staff told the committee the reported annual magnitude of foregone education-fund revenue from TIFs has been on the order of $6 million to $8 million in recent fiscal years.
Members also pressed whether permitting counts are a reliable measure of units that actually come online; presenters said permitting data include a lag between permit issuance and completion and that the Census permitting series does not itself ‘‘true up’’ all permits to final construction completions in the same dataset. Presenters said additional analysis (for example, parcel-level case studies or cross‑jurisdictional comparisons) is possible but would require a larger data effort.
PVR staff said they would provide the slides and noted that VEPC’s annual TIF reports contain parcel-level information, including the number of housing units reported by each TIF district. The committee paused after the briefing for a scheduled recess.
