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State auditor: Burlington waterfront TIF extension lacks clear retention rules and produced underpayments
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Summary
Tanya Morehouse, chief auditor for the State Auditor's Office, told the committee that Act 134 extended retention to 2035 but did not specify retention percentages or a base-value date; audit work found automated calculations underpaid the education fund and that one parcel was wrongly excluded from original taxable value.
Tanya Morehouse, chief auditor for the State Auditor's Office, told the committee she flagged multiple technical problems with the Burlington waterfront tax-increment financing (TIF) district during the office’s 2023 audit and urged statutory clarity before lawmakers extend the district’s retention period.
Morehouse said Act 134 extended the municipal and education tax-increment retention period for three parcels until 2035 but did not specify what retention percentage should apply or what date should be used as the base value for tax-increment calculations. "Act 134 ... doesn't address what the retention percentages should be for either of those and also doesn't establish a date to use for base value," she said, noting the omission creates room for differing legal interpretations.
Why it matters: retention percentages and the base-value date determine how much property-tax increment a TIF district keeps and how much is paid back to the education fund and other taxing jurisdictions. Ambiguity can change the distribution of millions over time and complicate administration.
Morehouse reviewed the law’s history and said prior session law (Act 45 in 2011) required a 10% or 25% education-fund payment for some increments and limited payments through 2025. "Act 45 ... stated that the payment would only occur until 2025," she said, adding that Act 134 extended the retention period but did not amend Act 45 to state whether education-fund payments must continue through 2035.
The audit also identified calculation and data problems. "When we did our audit in '23, we found that the automated process, which determines the payment to the education fund, didn't work correctly for multiple years and resulted in underpayment to the education fund," Morehouse said. She recommended not carrying forward the current two-step calculation and urged a simpler approach that is easier to administer.
Morehouse further said one parcel—the former mall garage—was incorrectly excluded from original taxable value (OTV) for the district's life. "Right now, essentially, the OTV has 0 value for the former mall garage property. But it was a taxable property back in 1996, when the TIF was established, so it should have been included," she said, and she recommended correcting the base value if the retention period is extended.
Committee members asked follow-up questions about whether the city had corrected the exclusion; Morehouse said follow-up work in 2025 found the city had not corrected the issue as of that follow-up. She also said the office can estimate the fiscal effect of alternative base-value dates (1996, 2010, or 2016) but would need up-to-date city pro forma estimates for more accurate forward-looking projections.
Morehouse said she will send the committee the presentation and her pro forma so staff and members can analyze the fiscal effects. The committee requested additional information from the city and agreed to follow up; no formal vote or legislative action was taken during the session.
Next steps: Morehouse will provide the slides and a pro forma to committee staff; members said they will seek additional materials from the city to determine whether statutory clarification or corrective action is needed.
