Ways & Means hearing maps how Vermont calculates PILOT payments and flags CLA effects

Montpelier — Officials from the Department of Taxes and the Agency of Natural Resources on Wednesday detailed how Vermont’s two payment-in-lieu-of-taxes (PILOT) programs are calculated, and why the common-level adjustment (CLA) and differing valuation methods have produced notable shifts in town payments.

"The payment is based on the total assessed value of state owned property in a municipality multiplied by the CLA ... multiplied by 1% ... and multiplied by the adjusted municipal tax rate for the municipality in which the property is located," said Ted Rowan, a staff member presenting PILOT calculations to the Ways & Means Committee. Rowan and tax department staff explained that the state operates two distinct PILOT streams: a general pilot that compensates municipalities for state-owned buildings and a separate ANR (Agency of Natural Resources) pilot that covers conservation land.

Committee members were shown why the two programs use different valuation bases and revenue sources. Rowan said the general pilot uses insurance replacement values maintained by the state and then adjusts those values with the CLA so the state figures align with local grand lists. The general pilot is funded from 30% of local option tax revenue after a per-return administrative fee to the Department of Taxes; that percentage split was established by Act 215 of 2005, officials said. The ANR pilot, which covers state-owned conservation land, is funded mainly through the general fund with an interdepartmental transfer; officials said roughly 80% of ANR pilot funding comes from the general fund and 20% from the Department of Fish and Wildlife (an interdepartmental transfer), and that the FY2026 budget includes a line item for the ANR pilot.

Why CLA matters: Towns that have not reappraised recently can see large year-to-year swings. Rowan and Tax Department staff showed Johnson, Vt., as an example: with the same state-owned assessed value year to year, the town’s CLA fell and its pilot payment dropped by about $47,205. "When your values aren't increasing, CLA's are dropping and you may not have much growth in the town grand list," Rowan said.

Jill Remick, director of property valuation and review at the Department of Taxes, defended using insurance replacement values for state buildings. "Since the state already has to maintain those, that's already information that's available," Remick said, adding that the Agency of Administration contracts to update replacement costs annually and that using those values avoids costly, site-specific appraisals for unique assets.

Remick and Jake Feldman, senior fiscal analyst at the Department of Taxes, also showed committee slides comparing pilot revenues and appropriations over recent years. General pilot payments (excluding correctional-facility special payments) totaled about $11.25 million in fiscal 2024; that year marked the first time the pilot program was fully funded after earlier years of proration. The pilot special fund balance, which was roughly $4 million in fiscal 2021, grew to more than $10 million by the close of fiscal 2024, in part because more towns adopted local option sales/meals-and-rooms taxes after the pandemic.

Agency of Natural Resources officials described how the ANR pilot base is set at acquisition and later adjusted by a statutory process. "When we're thinking about the pilot payment ... it is for the purposes of advancing the missions of those departments within the agency," Rebecca Washburn, director of lands administration and recreation at the ANR, said. Niels Reinhardt, lands administration coordinator at ANR, said the statute directs the secretary to recommend an adjustment "every 3 to 5 years," and that the last comprehensive adjustment took place in 2022 after a delay related to COVID. Reinhardt said ANR and Tax Department staff worked with property valuation staff to create the 2022 adjustment method and that a new review is scheduled in the coming budget cycle.

Officials walked the committee through additional technical features the committee asked about: correctional facilities receive separate statutory payments (the presentation cited $152,000 for some facilities and $40,000 for others as line items), and one statutory cap limits the value used for certain university-related buildings (a $750,000 cap was discussed in the session). The committee also reviewed a pair of bills and fiscal notes referenced by staff (H397 and H493) that affect anticipated appropriations from the pilot special fund and would leave different projected year‑end fund balances if enacted.

Several lawmakers pressed for practical fixes. Representative Feltos asked whether the insurance replacement values are updated annually; Remick replied that the state’s contractor updates replacement costs yearly and that the Department of Taxes uses the CLA to bring state-maintained replacement values into parity with towns’ grand lists. Multiple members warned that towns with large nonprofit or institutional state presence — including college campuses and state parks — can face confusing swings when CLA, municipal tax rates and insurance values move in different directions.

Committee staff and presenters noted implementation complexities and next steps rather than seeking immediate policy votes. Rowan and staff recommended additional outreach to municipalities and continued cross-agency coordination ahead of the next statutory adjustment window. "There will have to be some work involved to make [special properties] valuable," said a committee member, summing up the practical valuation challenge for unique public properties.

The committee did not take formal votes during the presentation. Members asked staff to return with follow-up materials, including more detail on which state-owned properties are valued by which state contractors, the list of ANR parcels counted in the ANR pilot calculation, and FY-by-FY pilot payment spreadsheets used in the presentation.

Ending — The technical session left an immediate takeaway for lawmakers: differences in valuation base (insurance replacement value vs. the ANR acquisition base), plus the CLA and municipal tax-rate mechanics, can produce counterintuitive changes in PILOT payments for towns that host state buildings and publicly owned conservation land. Tax and ANR staff said a new statutory adjustment is expected to be considered in the coming budget cycle and committed to provide more property-level data to the committee.