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Administration proposes pilot to reimburse towns for property-tax losses after flood buyouts
Summary
Agency officials described a pilot that would reimburse municipalities for municipal portions of property tax lost when flood-damaged properties are permanently removed through buyouts. The proposal would cover 100% of municipal tax revenue for five years, then 50% for five more years, while towns transition land to public open space.
Agency officials described a pilot program on Feb. 26 that would reimburse municipalities for a portion of municipal property tax revenue lost when flood-damaged properties are permanently removed through buyouts.
Douglas Farnham, chief recovery officer, said the concept aims to remove a principal barrier towns face when approving buyouts: the immediate loss of taxable property that municipalities rely on to balance annual budgets. “When the municipality agrees to a buyout, they have to agree that that property can only be public open space,” Farnham said. Under the administration’s proposal, the state would reimburse the municipal portion of property tax receipts at 100% for five years and 50% for the following five years while communities plan replacements or land-reuse strategies.
Farnham said the plan would be funded from a pilot special fund generated by local-option taxes and stressed the program’s public-safety rationale: buyouts remove people from repeatedly flood-prone homes. He said the pilot is intended as transitional support so communities “can replace that housing stock within that 10‑year timeframe.” The administration characterized the idea as a way to prioritize public safety while smoothing the municipal budgeting impact.
Committee members raised questions about local incentives and timing. One member asked why towns would approve buyouts if they could retain half the revenue for 10 years; Farnham replied that many municipal budgets are so tight that without a multi-year transition they cannot approve buyouts. He also said federal buyout grants typically require land to be converted to open space and that federal funds will generally cover structure removal; municipalities may still bear costs for environmental remediation in brownfield cases.
Farnham said the Vermont League of Cities and Towns had been consulted and “is generally open to the concept,” though he did not report a formal LCT vote. Committee staff flagged the proposal as a large new potential liability and asked for further analysis and consultation with the League of Cities and Towns and affected municipalities before any appropriation.
