VermontCurrent-use program saves landowners taxes while reducing education fund revenue, analysts tell committee

Chair David Durfee opened the committee hearing and turned the floor to Ezra Holban, a fiscal analyst at the Joint Fiscal Office, who gave an overview of Vermont's use-value appraisal program, commonly called "current use." Holban said the program "incentivizes the preservation of Vermont's agricultural and forest resources, by providing property tax savings for the property owners."

Holban framed the program as a fiscal trade-off: property owners receive tax savings while the state and municipalities forego property-tax revenue that otherwise would support the education fund and local budgets. He reported statewide enrollment grew from about 120,000 acres in 1980 to roughly 2,570,000 acres by 2020/2024 and summarized how use values and municipal common level of appraisal (CLA) produce the reduced taxable value for enrolled parcels.

The presentation listed 2024 per-acre use values the Joint Fiscal Office uses: $188 per acre for forest land generally, reduced to $141 per acre when more than one mile from a Class 1-3 road; and an agricultural use-value figure reported in the presentation as "4.83" (unit not specified in the transcript). Holban also noted that farm buildings meeting the statutory definition were assigned a 0% taxable value in the calculation shown.

Holban provided fiscal totals for 2024 drawn from Tax Department and JFO figures: roughly $20.5 million in municipal hold-harmless payments (general fund), about $55.6 million in foregone education-fund revenue, and a cumulative statewide foregone revenue figure presented as approximately $76.19 million split between education and general funds. He said the $55.6 million equals roughly 7% of non-homestead property taxes collected in fiscal 2024, as presented to the committee.

Members asked how the program defines eligible land and participants. Holban summarized statutory thresholds discussed in the presentation: agricultural land may qualify if it is 25 acres or more or meets income tests (the transcript cites $2,000 for parcels under 25 acres and a per-acre threshold for larger parcels; precise statutory language and contemporary indexing were described as statutory and not automatically inflation-adjusted). He described the three alternative ways parcels can qualify and noted farm buildings qualify when used or leased to a farmer under a three-year or longer written lease; a farm processing facility may be partially included up to a $100,000 facility value under the terms Holban read.

The committee also discussed two types of enrolled forest land created or clarified by recent statutes: "managed" forest land (active long-term management for repeated harvest) and "reserve" forest land (managed to attain old-forest values and subject to minimum management standards). Members and witnesses observed reserve forest land was added by Act 146 and that statutory criteria include thresholds tied to ecological sensitivity for large enrollments.

Mike O'Grady, introduced by members as a knowledgeable resource who spoke after the JFO presentation, emphasized the range of approaches among states and the consequential trade-offs of program changes. "Every state has used value," O'Grady said, and he summarized that some states set much lower acreage thresholds or different income rules; he cautioned that altering current use can put development pressure on farms and impose additional municipal costs for roads, schools and services.

Committee members pressed on policy options and consequences: whether converting current use costs into a general-fund transfer (so the program remains unchanged but funded differently) would be a viable approach; how removing the program could affect dairy and other working farms; and how forest enrollment affects state carbon sinks. Holban and O'Grady both recommended further agency testimony and comparative state analysis.

No formal committee action or vote on statutory change was taken during the session. Witnesses and members identified additional agencies and staff the committee plans to call in subsequent sessions, including the Department of Forests, Parks and Recreation and other agriculture and tax officials, to provide technical detail and historical context.