11-010 Code Vt. R. 11-020-010-X - TAX INCREMENT FINANCING DISTRICTS
Vermont statute [1] charges the Vermont Economic Progress Council with adopting rules for the purpose of providing clarification and detail for administering the provisions of law regarding the creation, implementation, administration, and operation of Tax Increment Financing Districts. [2]
The purpose of this rule is to address issues relating to creating, implementing, administering, and operating Tax Increment Financing (TIF) Districts (herein referred to as "Districts"). Act 80 of the 2013 legislative session (as amended by Act 174 of 2014) clarified tax increment financing laws and specified a process for future oversight and enforcement. The Vermont Economic Progress Council (herein referred to as "Council") was granted the authority to adopt rules in accordance with the Vermont Administrative Procedures Act [3] to provide further clarification of statutory construction and administrative detail.
Act 80 also required the Council to identify issues that require corrective action on the part of the municipalities with Districts that were created prior to January 2006 and were audited by the State Auditor of Accounts in 2011 and 2012. From the date of adoption of this rule, municipalities with Districts in existence prior to 2006 must abide by this governing rule and any other provisions of the law in force. However, this rule also indicates which specific provisions are not applicable to those Districts in existence prior to January 2006 and specifies rule provisions applicable to only those Districts or only to individual Districts created prior to 2006. Any issues identified in the Auditor's reports that remain unresolved and continue to result in disputed underpayments to the Education Fund shall cause an accumulation of underpayments commencing only upon adoption of this rule and shall be subject to the non-compliance provisions contained in statute [4] and this rule.
All terms used in statute or this rule, but not defined herein, shall have the meanings ascribed to them in statute. [5]
"Active District" means a District that has been created pursuant to 24 V.S.A. § 1892(a), has not been terminated pursuant to 24 V.S.A. § 1894(a), and which has not retired all District financing or related costs.
"Appraisal value" has the same meaning as 32 V.S.A. § 3481(1) as the property's estimated fair market value.
"Appropriated" as used in 24 V.S.A. 1891 (8) means approved by the municipal legislative body and dedicated to service eligible District expenditures.
"Assessed valuation" as used in 24 V.S.A. § 1895 and § 1896 is the listed value of each property within the District, less any statutory and voted exemptions.
"Capital assets" as used in this rule means tangible property used to advance the purposes of 24 V.S.A. Chapter 53, Subchapter 5, which is not easily converted into cash, and has an initial useful life extending beyond a single financial reporting period. Capital assets can be defined in terms of a minimum useful life and a minimum initial cost.
"Coordinating agency" as used in 24 V.S.A. § 1892(c) means any public or private entity from outside the municipality's departments or offices and not employing the municipality's staff, which has been designated by a municipality to administer and coordinate a District during creation, public hearing process, approval process, or administration and operation during the life of the District, including overseeing infrastructure development, real property development and redevelopment, assisting with reporting, and ensuring compliance with statute and rule.
"Council" means the Vermont Economic Progress Council, as established by 32 V.S.A. § 5930a.
"District Debt" means financing, as defined by 24 V.S.A. 1891 (7) and this rule, which will be serviced or paid using District incremental revenue.
"District Finance Plan" or "TIF Financing Plan" means a plan filed by municipality with a District created after 2006 either concurrently with, or subsequent to, a District Plan, which is considered and approved by the Council, and which includes District improvement details including finance instruments and tools, timing for incurring debt, finance structures and terms, development and redevelopment schedules, and projections of revenue generation.
"District Fund" means the special fund created by a municipality in accordance with 24 V.S.A. § 1896(a) in which the District's revenue and expenditures shall be segregated and tracked for accounting, recordkeeping, and reporting purposes.
"District Plan" means the plan required by 24 V.S.A. § 1892(a), which was the subject of public hearings in accordance with 24 V.S.A. § 1892(a), adopted by the municipal legislative body and recorded by the municipal clerk or listers in accordance with 24 V.S.A. § 1892 (b), and which, for Districts created after 2006, was considered and approved by the Council in accordance with 32 V.S.A. § 5404a(h). Such plans set the baseline for implementing Districts and against which performance will be measured, but may be amended pursuant to 24 V.S.A. § 1901 and these rules.
"District Reconciliation" means a document filed with the Council by municipalities with Districts created prior to 2006 to provide baseline information and data.
"Education Property Tax Increment" or "Education Tax Increment" means the amount of additional revenue resulting from the application of tax rates when the education taxable value of all the properties within a District for a given year is greater than the education original taxable value of all the properties within a District.
"Financing Plan," "Financial Plan" or "Finance Plan" has the same meaning as District Finance Plan as defined in this section.
"Financing" means, in addition to the meaning provided by 24 V.S.A. § 1891(7), debt instruments, leasing, lease-purchase, other borrowing arrangements, and direct payments, undertaken for improvements in or serving a District, that will be repaid in part or in whole using District increment, only after being authorized by the legal voters of the municipality in accordance with 24 V.S.A. § 1894(h) and (i).
"Improvements" means, in addition to the meaning provided by 24 V.S.A. § 1891(4), the installation, new construction or reconstruction of municipal capital assets.
"Incur District debt" or "Incur District indebtedness" means the proper and appropriate execution, by an authorized official of a municipality, of a debt instrument to finance District improvements, or to make a direct payment for District improvements, if such instrument is intended to be financed, or payment made, in whole or in part with District incremental revenue and has been approved by the legal voters pursuant to 24 V.S.A. 24 § 1894(h).
"Inter-fund loans" as used in 24 V.S.A. § 1891(7) means a method of financing District improvements whereby loans are made from one fund to another within a municipality, with explicit terms of repayment, which, in accordance with 24 V.S.A. § 1894(i), shall not include the payment of interest.
"Listed value" has the same meaning as 32 V.S.A. § 3481(2) as 100% of the appraisal value.
"Municipal Property Tax Increment" or "Municipal Tax Increment" means the amount of additional revenue resulting from the application of all tax rates when the municipal taxable value of all the properties within a District for a given year is greater than the municipal original taxable value of all the properties within a District.
"New real property development" means the development or redevelopment of real property expected to occur through private or public investment caused by improvements financed with District increment.
"Nexus" means the causal relationship that must exist between the improvements and the expected development and redevelopment in the District or the expected District outcomes.
"Non-increment" or "Non-TIF" revenue means any revenue available to a municipality to pay for District improvements, service District debt, or pay for related costs, that are not derived from the increase in taxable value of the properties within the District. Examples include municipal property tax, Federal and State grants, use fees, and parking revenue. These revenues are often used to help pay the proportion of District improvement costs that do not serve the District, as determined by the Council.
''Original Taxable Value" or "OTV" means, in addition to the meaning provided in 24 V.S.A. § 1891(5), the value of all real property within a District as determined under V.S.A. 32, Chapter 129, calculated by aggregating the taxable value of such properties as of April 1 of the calendar year in which the District was created, or in accordance with the appropriate statute controlling the establishment of the OTV. Each District has a municipal OTV and an education OTV.
"Parcel" has the same meaning as 32 V.S.A. § 4152(a) (3); all contiguous land in the same ownership, together with all improvements thereon.
"Pledged" as used in 24 V.S.A. § 1891(8) means authorized by the legal voters of the municipality and dedicated to service eligible District expenditures.
"Proportion" as used in 24 V.S.A. § 1894(e) means the percentage, as determined by the Council at the time of approval of a District Plan, of the total improvement cost that is eligible for financing with District increment, based on the ratio by which the improvement will serve the District.
"Proportionality" as used in 24 V.S.A. § 1894(e) means the relational process used by the Council at the time of approval of a District Plan to determine the percentage of total improvement costs that are eligible for financing with District increment.
"Related Costs" means, in addition to the meaning provided in 24 V.S.A. § 1891(6), expenditures incurred and paid by a municipality, other than the actual cost of construction and financing of improvements, that are directly related to the creation, implementation, administration, and operation of a District.
"Retention Period" means the period during which the approved share of incremental municipal property tax revenue and incremental education property tax revenue may be set aside in a District fund. The retention period commences the calendar year during which the municipality executes the first of any financing or direct payments for District improvements which have been approved by the voters. The retention period for incremental education property tax revenue is limited to twenty consecutive years. The retention period for incremental municipal property tax revenue is as authorized by the municipal legislative body or until all financing and related costs are retired. The retention period does not refer to the number of years the increment so retained in the District fund may be used to service District debt and pay related costs, which may continue until all District financing and related costs are retired.
"Secretary" means the Secretary of Commerce and Community Development.
"Serve the District" refers to improvements that have nexus to the District.
"Share" means the percentage of municipal property tax increment and education property tax increment that may be retained each year an increment is generated.
"Substantial change" means an amendment to an approved District Plan or District Finance Plan which may result in a significant impact with respect to any of the criteria for approval by the Council specified in 32 V.S.A. § 5404a(h) and 24 V.S.A. Subchapter 5, or a request for an extension of the five-year period to incur indebtedness, and, in the case of Districts created prior to 2006, an amendment to the District Reconciliation filed in accordance with this rule which may result in a significant adverse impact with respect to the District Reconciliation.
"Taxable value" means the listed value of real property within a District less any statutory exemptions.
"TIF" or "TIF District" or "District" means a Tax Increment Financing District.
The purpose of a TIF District, as stated in statute [6] , is to provide revenues for improvements that serve the District, and related costs, which will stimulate development or redevelopment within the District, provide for employment opportunities, improve and broaden the tax base, or enhance the general economic vitality of the municipality, the region, or the State.
While this purpose assumes that the improvements will primarily be the construction of public infrastructure, the purpose does not assume that every improvement will be subject to 100% public use. Rather, the improvements should stimulate and cause public good outcomes.
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District : |
Municipality : |
Authority : |
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Burlington Waterfront |
City of Burlington |
Section 45 of Act 60 (1997) |
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Newport Industrial Park |
City of Newport |
Section 45 of Act 60 (1997) |
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Milton North/South |
Town of Milton |
Sections 47 and 58 of Act 71 (1998) |
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Winooski Downtown |
City of Winooski |
Sections 37-38 of Act 159 (1999) |
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Milton Town Core |
Town of Milton |
Sections 2a-2i of Act 184 (2006) |
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Severance Comers |
Town of Colchester |
Sections 2a-2i of Act 184 (2006) |
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Burlington Downtown |
City of Burlington |
Sections 2a-2i of Act 184 (2006) |
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WRJ Downtown |
Town of Hartford |
Sections 2a-2i of Act 184 (2006) |
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St. Albans Downtown |
City of St. Albans |
Sections 2a-2i of Act 184 (2006) |
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Barre Downtown |
City of Barre |
Sections 2a-2i of Act 184 (2006) |
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So. Burlington City Center |
City of So. Burlington |
Sections 2a-2i of Act 184 (2006) and Section 17 of Act 80 (2013) |
Any District which has had a District Plan approved by the Council but which has not yet submitted a District Finance Plan for approval, shall submit a ten-year District Finance Plan to the Council for consideration on a schedule that takes into account the application due dates incorporated into the Council's monthly meeting calendar.
-- After an analysis of the boundary and parcels by the Department of Taxes/PVR, a listing of properties within the District upon creation and including the municipal original taxable value and the education original taxable value indicated by homestead and non-residential;
-- A detailed map of the District, including shape files;
-- Data and information regarding debt incurred and anticipated, including information on debt instruments, interest rates, terms, payments of principal and interest, payment schedule, and balances;
-- An accounting of the District fund to date;
-- Information and data regarding infrastructure improvements completed and anticipated;
-- Information and data on non-TIF revenue utilized and anticipated to pay for or finance improvements.
-- Information and data regarding development and redevelopment that has occurred and that is anticipated;
-- Information regarding the benefits accrued to the municipality, the region, and the state due to the creation of and improvements within the District.
The District Reconciliation shall be approved and certified by the municipal legislative body before being submitted to the Council and will serve as the basis for performance indicators and potential Substantial Change requests for the Districts created prior to 2006.
For Districts in existence prior to 2006, any statutory purposes or goals in place when the District was created and any other goals subsequently added to statute with specific reference to the District, plus the District Reconciliation submitted in accordance with this rule, will be the basis for performance indicators.
The Council will develop a set of performance indicators for each District for which the municipalities must include data and information as part of the Annual Report by municipalities required by statute [15] and Section 1004.2 of this Rule The indicators will be subject to the monitoring and oversight activities of Council staff.
Municipalities must include corrections or minor changes to the approved District Plan/District Finance Plan or District Reconciliation in the Annual Report required by statute [16] and Section 1004.2 of this Rule. Departures from the approved District Plan/District Finance Plan or District Reconciliation that meet the definition of a "substantial change" must be presented at a public hearing prior to approval by the municipal legislative body and then be submitted to the Council for consideration and approval. Any substantial change request must be filed in the format required by the Council. See Section t 003 of this Rule for further detail.
The District is considered created and active at 12:01 a.m. on April 1 of the calendar year in which the municipal legislative body voted to adopt the District Plan. Even if the vote occurs between April 2 and December 31, the life of the District starts on April 1 of that calendar year. The creation date of each of the existing Districts is as follows:
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Burlington Waterfront |
City of Burlington |
April 1, 1996 18 |
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Newport Industrial Park |
City of Newport |
April 1, 1998 |
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Milton North/South |
Town of Milton |
April 1, 1998 19 |
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Winooski Downtown |
City of Winooski |
April 1, 2000 |
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Milton Town Core |
Town of Milton |
April 1, 2008 |
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Severance Corners |
Town of Colchester |
April 1, 2010 |
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Burlington Downtown |
City of Burlington |
April 1, 2011 |
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WRJ Downtown |
Town of Hartford |
April 1, 2011 |
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St. Albans Downtown |
City of St. Albans |
April 1,2012 |
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Barre Downtown |
City of Barre |
April 1, 2012 |
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So. Burlington City Center |
City of South Burlington |
April 1, 2012 |
For Districts in existence prior to 2006, this information must be included in the District Reconciliation due no more than six months after the adoption of this rule. That document will serve as the basis for any substantial change request.
-- Utilities, such as power transmission lines, telecommunications lines, telecommunications towers, and power or telecommunications equipment; wastewater, storm water, water dispersal, collection, and treatment facilities and treatment equipment including force mains, pump stations, sewers, lift stations, and related wastewater, storm water and water equipment.
-- Transportation improvements such as public roads, streets, bridges, parking lots, facilities, garages, and structures, multimodal facilities, public transit stop equipment and amenities, street and sidewalk lighting, sidewalks, streetscapes, way-finding signs and kiosks; traffic signals, medians, turn lanes, and property acquired or used for right of way.
-- Civic facilities and amenities such as hiking and biking trails, parks and green spaces, pathways to facilitate multimodal transportation, bicycle and pedestrian lanes, paths, and bridges, playgrounds, street furnishings, and civic structures such as libraries, town/city hall and offices, public safety facilities and recreation facilities.
-- Land and property acquisition, property demolition, and property improvements.
-- Site preparation for development or redevelopment including acquisition, demolition, and environmental remediation of contaminated property.
Statute [22] and this Rule ( Section 400) are clear that the improvements must serve the District. This means that the improvements do not necessarily have to be located within the District, but must serve the District. For Districts created after 2006, the amount of the total improvement costs that can be paid with District incremental revenue is limited by the proportionality set during the District application process.
The meaning of "improvements" as provided by statute [23] and this rule does not mean annual municipal operating costs, public transportation operating costs, annual maintenance or repair costs, nor the purchase of vehicles, interior furnishings, operating equipment or apparatus, nor other expenditures for non-capital assets.
Related costs may include, but are not limited to:
-- Cost of plans, studies, or reports that are specific to preparing a District Plan, a District Finance Plan, application to the Council, or subsequent filing or reporting required to maintain the District.
-- Costs of providing public notification about, and obtaining public approval for, a District Plan, a District Finance Plan, application or subsequent filing to the Council.
-- Costs such as consulting, design, architects, engineering, accounting, legal, project management, or other professional services incurred during preparation of a District Plan, District Finance Plan, District application, or Substantial Change Request.
-- Soft costs such as consulting, design, architects, engineering, accounting, legal, project management, or other professional services directly related to the implementation and construction of eligible District improvements.
-- Municipal employee and staff costs directly related to the District; however, these costs may only be paid with municipal increment generated beyond the required municipal share to service debt and related costs that are not municipal employee and staff costs (See Section 706).
-- Administration fees paid to a coordinating agency designated by the municipality.
-- Application fees charged by the Council for third party analysis of District Plans, District Financing Plans or subsequent filings.
-- The cost of audits by the State Auditor of Accounts required by statute, [24] including costs billed back to the municipality by the State Auditor of Accounts and any audit-related costs incurred by the municipality during the conduct of those audits.
-- The District-related costs of the independent annual municipal audit required by statute. [25]
Related costs do not include:
-- The direct costs of improvements such as construction costs, financing or debt costs or costs related to financing (If eligible, these costs can be paid with District incremental revenue, but are not related costs).
-- Any costs incurred by private entities undertaking development or redevelopment within a District.
-- Municipal operating costs, public transportation operating costs, annual maintenance or repair costs, the purchase of vehicles, furnishings, equipment, or apparatus.
-- Capitalized interest, underwriter's discounts, or funding of reserves.
-- Time or services provided by employees of the municipality in the normal course of their municipal duties which are unrelated to the District creation or implementation.
-- Expenditures for annual independent audits performed in accordance with statute, [26] except for the specific costs incurred due to the District-related requirements in statute. [27]
Related costs may be incurred starting with the process to establish the District and may continue to be incurred until the life of District ends or the District is terminated. Related costs may only be reimbursed to the municipality or directly paid if they have been approved by the voters. In each year, the priority of the application of incremental revenue shall be first to service debt and other improvement financing, then to pay related costs.
The municipality must retain receipts for and maintain an accounting of all related costs. , The accounting must include a description of the cost; the amount; the date(s) it was incurred; an explanation of how the cost relates directly to the creation, implementation, administration, or operation of the District; the date(s) cost was reimbursed or paid with District increment; and the date(s) the related cost was approved by the voters.
When the municipality seeks voter approval for District financing and a portion of the proceeds will be used to reimburse the municipality for related costs previously advanced or for projected related costs, the notice to voters required by statute [28] must include the amount of the related costs and types to be reimbursed, and an estimate of the amount and type of related costs to be paid in the future with the financing proceeds under consideration by the voters.
-- The personnel time or other departmental costs meet the definition of related costs;
-- The costs may only be reimbursed using incremental municipal property tax revenue; and,
-- The municipal increment that may be used for these restricted related costs must be above and beyond the municipal increment committed to service the District's financing and unrestricted related costs.
For example, if the District was approved to utilize 75% of the annual Education Property Tax incremental revenue, the municipality must utilize at least 75% of the annual municipal incremental revenue to service debt and pay non-restricted related costs. Only municipal incremental revenue generated beyond the 75% may be retained and used to pay restricted related costs, if approved by the municipal legislative body. If the municipality votes to allow the District to retain more than the minimally required level of municipal incremental revenue, the additional municipal may be used to pay for restricted related costs.
The Burlington Waterfront and Winooski Districts are exceptions because they are authorized by statute to retain 100% of municipal increment for debt and related costs and therefore, none of the related costs are restricted.
Incurring expenses which are considered related costs that will be reimbursed by future voter-approved financing, or incurring pre-development costs or short-term debt (i.e. BAN) that will be subsumed in future voter-approved financing, or incurring debt that will not be financed in any part with District increment, even if the debt is for District improvements, does not constitute incurring debt under this requirement.
An extension request is considered a substantial change. Therefore, prior to submitting the extension request to the Council, the municipality must:
-- Prepare an updated Executive Summary of the approved District Plan and update the District Finance Plan;
-- If a District Finance Plan had not been previously filed, the updated District Plan shall include a pro-forma District Finance Plan;
-- Properly notice and hold a public hearing on these updates;
-- Receive approval by the municipal legislative body for the substantial change;
-- File the updated District Plan and updated District Finance Plan with the municipal clerk; and
-- File the extension request with the Council.
The extension request must be received in accordance with the Council's monthly meeting application deadline schedule so that the request can be considered prior to the fifth anniversary of the District creation date. However, if consideration and approval by the Council cannot be completed prior to the fifth anniversary of the District creation date, the submission shall serve as a stay of termination of the District until the Council has approved or denied the extension.
The Council will review the updated District Plan executive summary and the District Finance Plan and determine if the plan has continued viability and remains consistent with the approved District Plan. If the Council makes such a determination, the new District Finance Plan is approved and the District is granted a five year extension in which to incur District debt. If the approval occurs after the fifth anniversary of the District creation date, the approval is retroactive to that date and the extension is for no more than five years from the fifth anniversary of the date the District was created.
For Districts created prior to 2006, the share was established by statute. See Section 716 for detail.
In accordance with statute, [32] the incremental revenues generated by applying all municipal tax rates against the increase in value when compared to the OTV must be shared between the District and the taxing entities. This applies to all municipal tax rates, even if the rate was approved for a special purpose and even if that purpose is included in the municipal charter.
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Burlington Waterfront 34 |
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Debt Period: |
1996 - 2019 |
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Retention Period: |
1999 - 2025 |
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Share: |
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1996 - 2010: |
Education- 100%; Municipal- 100% |
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2010 - 2025: |
Education- 75% 35 ; Municipal- 100% |
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Newport Industrial Park |
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Debt Period: |
1997-2007 |
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Retention Period: |
Until all debt paid |
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Share: |
Education- 100%; Municipal-100% |
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Milton North/South 36 |
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Debt Period: |
1999 - 2019 |
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Retention Period: |
1999 - 2019 |
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Share: |
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1999 - 2019: |
Education- 100%; Municipal-At discretion of municipality. |
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2010 - 2019: |
Education-No more than 75%; Municipal-equal percentage |
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Winooski Downtown 37 |
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Debt Period: |
2000-2005 |
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Retention Period: |
2004-2024 |
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Share: |
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1999-2008: |
Education-95%; Municipal-100% |
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2009-Debt Paid |
Education-98%; Municipal-100% |
For the Districts created prior to 2006, no proportionality requirements were included in statute because only improvements located wholly or partly within the District could be financed with District increment. No improvements made by the Districts created prior to 2006 are subject to the proportionality rule.
In 2008, statute was amended [39] effective retroactively to Districts approved after 2006, to allow financing of an improvement made outside a District as long as the improvement serves the District and limited to the proportion of the improvement cost that will serve the development within the District. This proportion is determined by the Council for each planned improvement at the time of approval of the District Plan and/or District Finance Plan, or Substantial Change request.
The designated proportionality may be met either by applying the proportion to each individual cost factor within the total cost of the improvement or related cost, or by grouping individual cost factors together to meet the approved proportion of the total cost. Increment may not be used to pay for more than the proportion of the total cost that was approved. If the total cost of an improvement increases, the proportionality remains the same. The actual cost and application of the approved proportionality will be monitored through annual reporting.
The ballot question must include the amount of financing and related costs to be approved by the current vote and, after the first instance of District financing is approved, any subsequent vote must include in the ballot question the amount of District financing and related costs to be approved by the current vote and a cumulative amount of outstanding District debt and related costs approved by the voters to date.
The municipality must seek the approval of the legal voters to incur any form of District debt included in the definition of "financing" [42] and as further defined in Section 300 of this Rule.
Regardless of when the District was created or the type of financing to be utilized, including a direct payment for infrastructure improvements, the incurrence of debt or direct payment must be preceded by a public vote. The public vote provides the municipality with the authority to pledge the credit of the municipality, borrow, make direct payment for improvements, or otherwise secure the debt for the specific purposes that implement the District Plan, as warned to the voters.
The public vote does not incur District debt for the purposes of satisfying the five-year deadline to incur first debt, nor does it trigger the twenty-year increment retention period. Debt is incurred for these purposes when a municipality executes the actual financing or payment mechanism.
The financing vote may include sufficient funds, in addition to those needed for improvement costs, to reimburse the municipality for related costs that have already been incurred and related costs that will be incurred after the financing is approved and executed. The financing may also assume pre-development costs and short-term debt incurred after the creation of the District, but these costs must be included in the information provided to the voters at the time of the public vote to incur debt.
If the form of District debt proposed by the municipality to be approved by the voters is a direct payment for an improvement rather than the execution of a debt instrument, the municipality must diligently and completely document the transactions. For Districts created after 2006, use of a direct payment from the increment accumulated in a District fund as the first occurrence of incurring District debt is not possible as no increment will accumulate until after the first debt is incurred. Making a direct payment from the TIF increment in subsequent years is possible, but the municipality must document that the incremental revenues to be used for the payment are sufficient and available in the District fund and are not committed to service other District debt previously incurred.
If the form of District debt proposed by the municipality to be approved by the voters is an inter-fund loan, the notice to the voters must include documentation of the terms and conditions of such loan. Statute prohibits charging interest on inter-fund loans for District improvements. [43]
If the municipality intends to utilize interim or short-term financing (such as bond anticipation notes), or borrow against proceeds anticipated from the debt instrument that is the subject of the public vote, that information should be included in the information provided to the voters.
Refinancing of existing District debt to take advantage of improved rates or terms does not constitute incurring new debt and therefore does 'not require a public vote or prior notification of the Council. Such refinancing should be reported to the Council in the Annual Report required by Section 1004.2 of this Rule.
For Districts created after 2006, the creation of the District triggers the five-year period during which the first TIF debt must be incurred or a request for a five-year extension must be filed. If first debt is incurred before the five-year anniversary of the District creation date or an extension is approved, only District debt incurred prior to the tenth-year anniversary of the District creation date may be financed or paid with District incremental revenues. The debt incurred during this ten-year debt period may be serviced until paid from the incremental revenues held apart in the District fund.
The date on which the first District debt is actually executed, after being authorized by a public vote, is the date the first District debt is incurred. The first-year education and municipal property tax increments to be retained will be calculated using the taxable value filed as of April 1 of the calendar year in which the first District debt is incurred; regardless of when during the calendar year the first District debt is incurred. For that year and for twenty consecutive years, the approved share of education property tax incremental revenues must be retained and segregated in a District fund. For that year and for the period approved by the municipal legislative body, the approved share of municipal property tax incremental revenues must be retained and segregated in a District fund.
Additionally, any financing (for District improvements) which has not been approved by the voters, is ineligible to be serviced using District increment, the exception being short-term or interim financing incurred after the creation of the TIF District which is then subsumed into a debt instrument approved by the voters.
For the Winooski District, the duration of bonds issued to finance District improvements is limited to twenty years. [45]
For the Burlington Waterfront District, education property tax increments may be used for no more than 20 years from the date the debt was incurred for financing of any certificates of participation or HUD Section 108 debt issued between April 1, 1996 and March 31, 2006. [46]
The OTV shall be accounted for as follows:
For the Burlington Waterfront District, the OTV is as established upon creation in 1996 and expanded in 1997, except that the grand list as of April 1, 2010 for the area encompassing the Burlington Waterfront TIF District, but excluding two parcels at 25 Cherry Street and 41 Cherry Street, shall serve as the original taxable value to calculate the increment to be shared between the state Education Fund (25%) and the District (75%). The excluded parcels shall be subject to a share of 100% to the District. [47 ]
For the Winooski District, the OTV is established on the April 1 immediately preceding the date of issuance of bonds (2004) and the properties and values to be included in the OTV shall be determined through an agreement between the municipality, the Council, and the Tax Department/PVR. A meeting shall occur no later than three (3) months after the promulgation of this rule to begin the process to determine the OTV and the OTV shall become effective as of the April 1 immediately following the agreement and will be applicable for the calculation of the tax increment for subsequent years.
For the Milton North/South TIF District, due to the repeal of the ''adjustment to the OTV due to reappraisal," [48] as of the April 1 immediately following the promulgation of this rule, the OTV will revert back to the original taxable value established at the time of the District creation and shall be applicable for the calculation of the tax increment for subsequent years.
Municipalities may file a substantial change request to amend the OTV only if the event or error causing the change occurred within the same grand list year in which the District was created and results in a change to the grand list on which the OTV is based (i.e., the successful appeal of a property value by the property owner in the year in which the TIF District was created). Parcel survey adjustments are considered administrative and do not require a substantial change, but must be reported in the Annual Report required by Section 1004.2 of this Rule.
-- Prepayment of principal and interest on District financing;
-- Future payments of District financing and related costs; or
-- Defeasance of TIF District financing.
If the municipality chooses not to retain any balance for these permitted uses or there is a balance remaining after the funds are committed for permitted uses, any balance remaining shall be distributed to the municipal general fund and the Education Fund in proportion to the rates that generated the increment.
The Secretary of Commerce, based on recommendations from the Council, has the authority to issue decisions in regard to compliance with statute and these rules. [58] To ensure a foundation of information regarding each District upon which progress can be measured and compliance decisions can be made, this rule requires that each existing District submit an updated or original District Finance Plan or a District Reconciliation.
For the Burlington Waterfront, Winooski, Newport, and Milton North/South Districts, the level of recordkeeping and accounting expected for the years prior to this rule is dependent on statutory requirements for that period and extenuating circumstances impacting the ability of the municipality to comply with these new requirements.
For the Town of Milton, for purposes of accounting and reporting, the two Districts known as the Husky (or North) District and the Catamount (or South) District will be treated as a single district. [59 ]
The District Fund recordkeeping must include, at a minimum, the following:
-- An accounting of the real property within the District boundaries; the assessed and taxable value of each property, the original taxable value of the properties for municipal and education purposes, and the total municipal and education OTV of the District, any changes in ownership or value for those properties and the taxable value of each property for each year through the life of the District. Any lists of parcels or parcel values within the District must indicate whether a parcel is homestead or non-residential and any aggregation of the parcels must include subtotals by homestead and non-residential categories.
-- An accounting of all municipal and education tax revenue generated when all tax rates are extended against the assessed valuation, the resulting increment, and all the rates that were applied.
-- An accounting of the municipal and education property tax increment generated each year following the District creation date, the amounts credited to the fund each year due to the appropriate share retained, debits to the fund for servicing District debt or making direct payments or paying related costs, and the balance of the fund.
-- An accounting of any interest earned due to increment held in the District Fund, the utilization of the interest and distribution of interest in accordance to the established share.
-- An accounting of any income generated by infrastructure financed with District increment if the District Plan or District Finance Plan approved by the Council included the utilization of such income to ensure the viability of the District (such as parking garage leases or fees), and an accounting of the utilization of that income.
-- An accounting of all District improvements, including total cost, and a breakdown of the cost factors (design, engineering studies, project management costs, actual construction costs, etc.), how the approved proportionality was applied to the improvement cost, and the amount of infrastructure work (including non-construction costs) that was performed by Vermont firms.
-- An accounting of all related costs incurred, including receipts, for the life of the District. The accounting must include a description of the cost, an amount, when it was incurred, an explanation to substantiate how the cost relates to the creation, implementation, operation, or administration of the District, whether and when the cost was reimbursed or paid with TI F increment, and when the reimbursement or payment was included in a public vote.
-- An accounting of all District debt incurred and any direct payments made for District improvements, including the debt terms and duration.
-- An accounting of any other sources of revenue utilized for District improvements, such as grants, fees, municipal general fund revenue, or revenues gained from District improvements (i.e. parking garage revenues), regardless of whether or not these revenues were applied to the TIF or non-TIF proportion of the improvement cost.
-- An accounting and description of the real property developments and redevelopments that occur because of the District improvements, and a description of other benefits and outcomes that accrue to the municipality, region or the state because of the improvements and development, including less measurable outcomes such as ''walkability" and "connectedness."
-- An accounting of the public good outcomes that were factors in the determination that a District Plan met the Project Criteria approval requirements, [60] which are included in the performance indicators specific to each District, such as: new housing development and data to determine the affordability of such housing; the remediation and redevelopment of contaminated property; the addition of new businesses or business operations or expansion of an existing business(es), the new jobs created by these businesses, and the average wages for such jobs; and enhancements to transportation due to improved traffic patterns and flows and/or improvements to public transportation systems.
-- An accounting of any other performance indicators developed by the municipality and the general performance requirements mandated by statute, [61] including the number of jobs created in the District each year following creation and the sectors experiencing job growth within the District.
The same level of notice and public hearing is required for substantial change requests, and to obtain approval by the voters to incur District financing. Unless a municipal charter requires greater notice, the municipal legislative body shall hold a public informational hearing on the question by posting warnings at least 15 days in advance of the hearing in at least two public places within the municipality and in the town clerk's office. The warning must clearly indicate the purpose of the hearing and the question to be considered by the voters. The public hearing may be held in conjunction with, or after, a warned meeting at which the question is to be considered by the municipal legislative body, but must occur before the issue is submitted to VEPC or the public vote to incur District financing is held. Refer to statute [64] and Section 1003.2.2 of this rule for details on the information required in the notice to the voters prior to a public vote to incur District financing.
-- Total amount of debt to be voted upon and total cumulative District debt incurred (Statute [66] also requires that this information be included in the actual ballot question.)
-- Estimated amount and types of financing that will be serviced or paid using District increment, including principal, and estimated interest, and fees, and terms of the debt.
-- Estimated amount of related costs that will be financed, paid or reimbursed with increment.
-- Identification of the loaning fund and documentation of the terms and conditions for interfund loans, if utilized.
-- If utilized, estimates of interim financing, such as a Bond Anticipation Notes, developer-assisted financing, or other short-term financing instruments to be issued and refinanced with the proceeds of the debt that is the subject of the vote.
-- Improvements to be financed and the proportion of the total improvement cost that was approved for financing with District increment.
-- Estimated development and/or redevelopment and District outcomes expected to occur because of the improvement.
-- Notice to the voters that if the tax increment received by the municipality from any property tax source (education or municipal) is insufficient to pay the principal and interest on the debt, or other forms of District financing, in any year, for whatever reason, including a decrease in property value or repeal of the education property tax source, unless determined otherwise at the time of such repeal, the municipality shall remain liable for the full payment of the principal and interest for the term of indebtedness.
The format of such notification is the responsibility of the municipality and subject to the charter of the municipality but the content is required by statute [67] .
-- A copy of the notice to the voters required by 24 V.S.A. § 1894(i), including information on where and when the notice was published and posted;
-- A copy of the notice of public hearing, including copies of the notice as it appeared in publications;
-- A copy of agendas and minutes of the municipal legislative body indicating votes or resolutions involving the District financing.
Within 30 days after the public vote to obligate the municipality for District financing, electronically provide to the Council a copy of the ballot with a certification of the vote tally.
Municipalities must include in the Annual Report required by statute [68] and detailed in Section I 004.2 of this rule, information regarding any deviation from the approved District Plan, District Finance Plan, or District reconciliation. Minor corrections to a District Plan or reconciliation, which do not meet the definition of a Substantial Change, may be submitted electronically to Council staff at any time, but must be included in the Annual Report.
Municipalities must, pursuant to statute [69] and this rule, after holding a properly warned public hearing, obtain approval from the municipal legislative body for any substantial change request prior to submitting it to the Council for review. The request must be filed electronically, in the format required by the Council, by an application deadline for a monthly Council meeting. If the request is not received by the application deadline, the request may be added to the agenda for the following meeting, or a special meeting may be scheduled, at the discretion of the Council Executive Director and Chair.
A substantial change request must include:
-- A letter requesting consideration by the Council of a substantial change. The letter must be signed by the chair of the municipal legislative body and the top non-elected official (i.e. city or town manager) and must indicate that the municipal legislative body has considered and approved the substantial change.
-- A copy of the municipal legislative body meeting agenda and minutes indicating that a hearing was held and that the municipal legislative body considered and approved the substantial change.
-- A narrative explanation of the substantial change that fully explains the reason for such a change and includes the following:
o Impact of the change on the overall District Plan, Finance Plan, or District Reconciliation.
o Whether the change impacts the District Plan approval determinations made by the Council.
o Whether the change is consistent with the approved local plan and a communication from the regional planning commission commenting on whether the District remains consistent with the regional plan with the change.
o Information and data showing the impact of the change on infrastructure costs, revenue generation and overall viability of the District.
o A proposal and substantiation of proportionality, if the change involves a new infrastructure improvement project.
When making a determination to allow or deny the substantial change, the Council will consider whether and the degree to which the substantial change:
-- Would cause the District Plan to violate any of the approval criteria including Location Criteria, Project Criteria, Purpose, Viability, Nexus or Proportionality.
-- Would change the cost of infrastructure (increase the liability) or the generation of revenue (reduce revenue) to a degree that adversely impacts fiscal viability.
-- Would require that additional education property tax revenue be utilized without offsetting development that would generate additional Education property tax revenue.
-- Would cause the education property tax revenue to increase.
-- Would have an impact on the financial viability of the District.
-- Would put at risk the long term economic benefit and the achievement of other District objectives.
The Council will provide a determination as soon as possible following consideration. The Council's intention is to provide a determination within 60 days after consideration at a regularly scheduled or special meeting of the Council.
-- The original taxable value and annual and total municipal and education tax increments generated;
-- Expenditures for District debt and related costs; and
-- The current balance of the District fund.
Because these requirements are not necessarily included in a normal municipal audit, the Council will develop and publish, in cooperation with representative municipal officials and accountants familiar with municipal audits, "agreed-upon procedures" for these audit engagements.
The annual report must include:
-- A copy of the annual value and increment certification and a certification that it was reviewed by a second party before submittal to the municipal legislative body (See Section 903).
-- A summary of any public votes and debt incurred and documentation of any public vote and debt incurred that was not previously submitted during the year.
-- Information regarding any deviation from the approved District Plan, District Financing Plan, or approved application, including correction and parcel survey adjustments.
-- Information regarding the refinancing of approved District debt.
-- A copy of the municipal audit required by statute. [73 ]
-- All information required by statute, [74] including information and data regarding annual performance requirements, which must be reported by the Council and Department of Taxes to he Vermont General Assembly, which will be requested in the form prescribed and provided by the Council.
1100 Oversight, Monitoring, Non-compliance Enforcement, and Audits
Council staff will also provide an efficient system for municipal communications regarding District statute, rules and compliance questions. The system will require the designation of a single point of contact in each municipality with an active District. Only the District single point of contact may communicate with Council staff regarding District issues and Council staff will communicate with only the single point of contact. All communication must be conducted in writing (including email).
However, if District oversight, monitoring, or annual reporting identifies non-compliance with District statute or rule, or inconsistencies with an approved District plan or District Reconciliation, or if after receiving a written response from Council staff a municipality files a formal inquiry with the Council because the municipality chooses to dispute the staff response, staff will initiate the formal process to issue decisions pursuant to statute. [75]
Examples of non-compliance, include, but are not limited to:
-- Municipality fails to provide required notifications to the voters or the Council.
-- Municipality incurs District debt without a public vote.
-- Municipality uses increment to fund improvements not included in approved District Plan or a TIF Reconciliation without appropriate approvals.
-- The District, as implemented, does not carry out the approved TIF Plan or TIF Reconciliation.
-- Absent a substantial change request and approval, the District, due to actions taken by the municipality, does not meet the required approval criteria outcomes as set in the Council's approval of the District.
-- The municipality retains more than the approved percentage of education or municipal property tax increment.
-- The municipality exceeds the approved proportionality to an improvement cost.
-- The municipality uses incremental revenue improperly or for purposes not allowed by statute or this rule.
-- The municipality fails to maintain the recordkeeping required by this rule.
-- The municipality fails to create and maintain the District fund required by statute.
ENDNOTES
Notes
EFFECTIVE DATE: May 6, 2015 Secretary of State Rule Log #15-013
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