Vermont budget would seed $1 million pilot to reimburse towns for flood buyouts

Douglas Farnham, chief recovery officer for the state of Vermont, told the Ways & Means Committee on Feb. 5 that the governor’s recommended budget includes a municipal buyout reimbursement pilot that would establish $1,000,000 in spending authority to reimburse towns that agree to permanently conserve properties after flood damage. “On page 26 of the GovRec budget, there's an explanation for a municipal buyout reimbursement program that that we're proposing this year,” Farnham said.

Farnham said the program is intended for cases where a property is permanently conserved and therefore removed from the tax rolls, typically when a municipality (or in rare cases the state) takes ownership to keep residents out of harm’s way. “The idea behind this program is when a program becomes permanently conserved, it it comes off of the tax rolls essentially, has to become municipal property,” Farnham said. Under the proposal, after a buyout closes the municipality would receive tax payments based on the pre-disaster value for five years, then 50% of the pre-disaster value for another five years.

The nut of the proposal, Farnham said, is to give affected towns time to rebuild their grand lists and municipal budgets while encouraging more municipalities to approve buyouts. He said roughly half of municipal buyouts are currently approved by towns and that financial hardship can prevent towns from consenting. “We want to tip the scales so that more municipalities would approve buyouts,” Farnham said.

Farnham said the pilot fund is conceived as “seed money” rather than a permanent large appropriation. He described the $1 million as likely to cover initial reimbursements and said the administration would return in future budgets if more authorization were needed. He acknowledged buyouts from the 2023 floods had not yet closed at the time of the meeting: “None of our buyouts have been completed yet, unfortunately.” He told members he expected some properties to close between July 1, 2025, and June 30, 2026.

Eligibility and funding sources

Farnham said the program is meant primarily to apply to FEMA buyouts but could also cover state-funded buyouts that achieve the same outcome — permanent conservation and removal from private tax rolls. He described an alternative funding source discussed in the budget materials, the state’s Community Resilience and Disaster Relief Fund, and said the administration was not writing FEMA explicitly into language in order to allow state-funded buyouts to qualify when appropriate.

The pilot would be funded from excess receipts in the local option tax pilot vehicle (the current 70/30 local option split), with the program structured as a secondary use after the pilot's existing commitments are met. Farnham said he had discussed the idea with the Vermont League of Cities and Towns (VLCT) but that VLCT would continue to consult its membership.

Other funding streams and timing

Farnham outlined other recovery funding in play: the federal Community Development Block Grant Disaster Recovery (CDBG-DR) allocation of roughly $68,000,000, which he said is heavily prescriptive and that the state must submit an action plan by April 21 after public input in March. He said about $50.8 million of that allocation must be spent in Washington and Lamoille counties, with roughly $8.9 million for the rest of the state as presented at the meeting. Farnham also said the state’s disaster-resilience funding after FEMA match is “roughly $10 to $15,000,000” and that there is a pipeline of about $300,000,000 in proposed hazard mitigation projects.

Committee members questioned fairness and long-term funding. A member from Brattleboro and Representative Leslie expressed concern that using local-option receipts could advantage economic hubs over smaller towns that lack a robust local sales tax base. Farnham said it was appropriate to use local-option receipts as a primary source while allowing a small portion of excess for statewide municipal reimbursements. Representative Maslow and others pressed for better revenue forecasting; Farnham said he had spoken with the tax department but that confident long-term projections would be premature.

Local effects and examples

Farnham used Plainfield as an example to show the local impact of multiple buyouts; he said Plainfield had approved more than 20 buyouts and was pursuing plans to replace lost housing by building 50 new homes away from flood-prone parcels. He said the reimbursement structure — five years at full pre-disaster value, five years at 50% — was chosen based on typical local building timelines in Vermont and to give towns “some grace period” while replacement housing is developed.

Next steps

Farnham said the administration expects public input in March on the CDBG-DR action plan and that the state will submit the plan by April 21. He also said the administration will monitor pilot use and could request additional authorization in next year’s budget if the pilot funds are exhausted earlier than expected. “The million dollars, honestly, should last through at least the first several years of reimbursements,” he said.

Ending

Committee members voiced general support for the concept alongside questions about distributional fairness, forecasting and whether the pilot should become a permanent program; no formal vote or motion was recorded during the discussion. Farnham concluded by thanking the committee for the opportunity to present the proposal.