Joint Fiscal Office briefs Ways & Means on mechanics and fiscal effects of tax increment financing

Tab Barnett, Joint Fiscal Office, briefed the House Ways & Means Committee on April 17 on how tax increment financing (TIF) operates under current Vermont law and on the program—s fiscal implications for municipalities and the statewide education fund.

Barnett said the defining feature of TIF is the incremental taxable value inside a delineated district: "without increment, you don't have TIF. That is really the juice," he told the committee. He illustrated the mechanics using the Killington phase filing and statewide data compiled by JFO and the agency that compiles TIF filings for the state.

The presentation explained three linked steps that determine TIF cash flow: (1) an original taxable value (OTV) is certified for the district at its establishment; (2) future increases in taxable property value inside the district are measured as incremental value above that OTV; and (3) the taxes on that incremental value (the increments) are partially retained to pay district debt and partially remitted to existing funds. Under current Vermont practice, Barnett said, 70% of the education-tax increment is retained to pay district debt for districts created after 2017 (30% remits to the education fund), while the municipal portion typically retains 85% for district debt and remits 15% to municipal general funds. Education increment retention is generally capped at 20 years; municipal retention can continue while…