State auditor urges rules, AG sign-off before expanding TIF; flags education‑fund risks

State Auditor Doug Hoffer told the House Ways & Means Committee that lawmakers should delay implementation of changes to the state's Tax Increment Financing (TIF) program until administrative rules are adopted and clarified.

Hoffer said ambiguity in statute and uneven definitions -- notably of what counts as an "improvement" -- leave critical decisions to agency staff and can amount to delegating authority to unelected officials. He urged requiring formal Attorney General review for statutory interpretation and said his office has repeatedly had to seek AG opinions to complete audits.

Why it matters: Hoffer said TIF's interactions with Vermont's Education Fund ("Ed Fund") already reduce revenue flows that would otherwise support education, and that growth assumed to be created by TIF districts often reflects background, preexisting growth. That combination, he said, makes it important to set clearer program edges before expanding eligibility.

Hoffer described the workload TIF creates for his office: "It takes 15 to 20% of our entire audit capacity," and said his audit team includes the state's most experienced TIF auditors. He told committee members his chief auditor recommended waiting to let new rules be adopted and affirmed if S.127 or similar legislation moves forward.

Hoffer also noted prior audit work and outside reviews showing that some towns' reported gains after creating TIF districts included substantial non‑TIF funding. He pointed to Winooski, which received roughly $16 million from other state and nonstate sources for downtown redevelopment, and to examples where towns borrowed heavily up front and then used bond proceeds in ways the statute did not clearly allow.

On the Education Fund, Hoffer said the program effectively has been used as a bank: withholding TIF increments has, in recent years, meant "5 to 7 million dollars a year" that otherwise would flow to the Ed Fund. He warned that proposed changes in S.127 could eliminate current limits on which communities qualify and said a fiscal note is difficult because of many uncertainties.

Hoffer suggested alternatives for financing infrastructure that would not rely on the Ed Fund as a permanent backstop: one‑time capital to buy down interest costs, a revolving loan fund, or targeted appropriations. He also urged lawmakers to require that appellate or statutory interpretations come from the Attorney General's office so auditors and other reviewers have a definitive legal basis.

Discussion, not action: The hearing contained questions from multiple representatives (including Representative Ode) and discussion about how to measure TIF's net fiscal effect. Hoffer emphasized the difficulty of disaggregating revenue gains caused by TIF from growth that would have occurred anyway.

Ending: Hoffer said the Legislature has an opportunity to design clearer rules and guardrails and offered to provide brief technical recommendations and past audit findings to staff.