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Overview
 
The authority to utilize incremental property taxes for TIF District debt has been a part of Vermont statute since the 1980’s. With the implementation of a statewide property tax to fund education in 1998, the General Assembly changed the TIF statute to allow utilization of incremental education property taxes, in addition to local incremental property tax revenues, under certain circumstances. 
With the passage of Act 184 in 2006, and Act 190 in 2008, the General Assembly made several major changes to the TIF District statute. Approval of the authority to utilize incremental education property tax revenues is now based on a set of criteria, including:
  • Whether the real property development would not occur, or would occur in a significantly different and less desirable manner, but for the utilization of incremental property tax revenues.
  • Whether the applicant municipality has met a set of process requirements.
  • Whether the project meets one of four possible location criteria.
  • Whether the project will result in three of five possible public-good outcomes.
Further major changes in 2006 included extending the allowed length of time incremental revenues could be utilized from ten (10) to twenty (20) years and limiting the annual percentage of incremental Education Fund revenue that can be utilized to 75%.  In 2008, the legislation extended the types of infrastructure det that can be paid with TIF District revenues beyond bonded debt and allowed TIF District revenues to pay for infrastructure regardless of its location, as long as it directly serves the District.
Program Purpose
 

Tax Increment Financing Districts are financing tools to help pay for public infrastructure improvements required to ensure the development of an area defined by a municipality. TIF Districts are considered a “public-private partnership” because they rely on public action to stimulate private investment. TIF Districts usually fund projects through the repayment of municipal bond financing for public infrastructure costs associated with the redevelopment of an identified area.  Governmental bodies that draw taxes from the indentified area agree to the development, draw the TIF district around the area, and freeze its tax base. The taxes on the frozen base continue to go to the taxing authorities. Infrastructure improvements are made and private developers, enticed by the improved infrastructure, build within the District. The property tax revenues that were flat or declining now increase. This rise, or tax increment, is captured and set aside to help retire the debt that funded the public infrastructure improvements, for a specified length of time. Once the debt is retired, the higher taxes revert to the taxing authorities.

Because Vermont has a statewide property tax to fund education, the taxing authorities in Vermont are the municipality and the state. A municipality must apply for the authority to utilize a portion of the incremental Education Fund revenue generated within the TIF District to help finance the infrastructure improvements.  If a municipality chooses to utilize only incremental municipal tax revenue, they do not need to apply to the state, but they must still follow municipal requirements and the requirements of state law to establish the TIF District.
The purpose of creating Tax Increment Financing Districts, as expressed in Vermont statute (24 VSA §1893) 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.”
The purpose of the TIF District provisions in Vermont statute (24 VSA §§1891 -1900) are to ensure public involvement in the creation of a TIF District and to provide controls on the utilization of municipal and state tax revenues to ensure appropriate use for TIF District purposes.
The purpose of a State approval process to utilize incremental Education Fund revenues for TIF District debt (32 VSA §5404a(h)) is to ensure that the project would occur only with the use of the incremental Education Fund revenues and to ensure that if incremental Education Fund revenues are utilized, the TIF District infrastructure improvements and the development or redevelopment that will occur result in certain public-good benefits.
The following factors should be present to consider utilizing the TIF District financing tool:
  • There is an area within the municipality that requires development or redevelopment to become economically viable.
  • The building or improvement of public infrastructure is essential to ensure the real property  development or redevelopment within the TIF District.
  • Normal and available financing mechanisms are not available or are insufficient to ensure the public infrastructure improvements.
  • There are parties interested in developing the area if the infrastructure is built/improved.
  • The incremental property taxes generated by the expected real property development is sufficient to retire the public infrastructure debt, and/or additional sources of revenue are expected.
 
TAX INCREMENT FINANCING DISTRICT
IT IS VERY IMPORTANT THAT YOU UNDERSTAND THE TIF PROGRAM BEFORE APPLYING. READ THE PROGRAM INFORMATION AND APPLICATION INSTRUCTIONS BEFORE FILLING OUT AND FILING AN APPLICATION. APPLICATION INSTRUCTIONS MUST BE FOLLOWED OR THE APPLICATION WILL NOT BE ACCEPTED.
 

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