Chief recovery officer outlines $1 million pilot to reimburse towns for flood buyouts

Douglas Farnham, the state—s chief recovery officer, told the Government Operations & Military Affairs committee that a proposed one-time pilot fund would reimburse municipalities for lost municipal tax revenue when homes or businesses are removed from local grand lists through federally supported buyouts after the 2023 and 2024 floods.

Farnham, who was appointed after the July 2023 floods and said his office coordinates recovery across state and federal grants, told lawmakers the proposal would draw from a special payment-in-lieu-of-taxes fund created by revenues from the local auction tax. "So this proposal says, give the municipality from this pilot special fund . . . the full municipal value that they would have received from that private owner for 5 years," Farnham said. He added the pilot would then pay 50% of that municipal value for an additional five years to give towns time to rebuild the grand list.

The proposal includes a $1,000,000 appropriation in the budget language, Farnham said, though he told the committee he did not expect the full amount to be spent in the first year. "It would all depend on when the buyouts actually close, and I do not believe that it would come close to reaching that 1,000,000 in the first year," he said.

Farnham framed the measure as a short-term step to help smaller communities that face disproportionate impacts when multiple properties are removed from their tax rolls. "That's, you know, a quarter of their village, essentially," he said, describing how communities such as Plainfield have submitted more than 20 buyout requests.

He also described constraints on municipal revenue in Vermont, noting that most property tax capacity supports the state—s education property tax and that municipalities have limited alternative revenue sources. That structure, Farnham said, leaves towns vulnerable if large portions of their grand lists are removed by buyouts.

Committee members pressed staff on timing and scope. A representative asked whether properties already gone through a buyout or a municipality—s earlier abatement would be covered; Farnham said no buyouts had finalized at the time of the briefing and that applicability would depend on timing. "So the way it's written right now, any properties that go through a buyout right now . . . none of the property buyouts have closed at this point," he said.

Farnham said the proposal intentionally uses a special fund rather than the general fund to avoid broader budget impacts. He linked the pilot to other recovery work the administration is coordinating, citing federal and state funding streams including FEMA grants, Community Development Block Grant disaster relief, and American Rescue Plan Act recovery funds, and noting the administration recently won a disaster case management grant to support individual recovery.

On taxation mechanics, Farnham explained that municipalities sometimes abate taxes for owners in the buyout process, but under current rules towns may still owe education fund reimbursements for abated education taxes; he said an amendment being proposed in the BAA would expand reimbursement of abatements to include 2024 flood abatements. That change, he said, would help cover the education-fund side of abatements while the pilot targets municipal revenue losses.

The committee requested the budget language and a one-page summary of the proposal for members to review. Farnham said he would provide the language to committee staff and follow up with more detail.

No formal motion or vote was recorded during the briefing; members asked questions as the panel prepared to move to the floor.

Ending: The proposal remains under review by the administration and the committee. Farnham characterized the fund as a temporary, targeted measure to help communities manage short- and medium-term revenue impacts from flood-era buyouts, and he said further details will be provided to committee staff for review.