The Vermont Senate has advanced a flood recovery bill that would let some hard-hit communities hold on to more local tax revenue.
The Legislature’s latest response to the summer floods of 2023 and 2024 delves into the minutiae of municipal finances. It would give towns more time to pay off emergency loans, provide flexibility on how they structure their debt, and give select boards the legal authority to use unspent municipal funds for disaster-related expenses.
Barre City Rep. Teddy Waszazak, a lead sponsor of the bill, said it would also allow towns with so-called “local option taxes” to keep more of the revenue generated by those 1% sales taxes.
“It is a very technical bill,” Waszazak said Tuesday. “But the technical changes that are in the bill are very important in helping our specifically smaller municipalities navigate the immediate aftermath of a flooding event.”
Severe flooding during the last two summers caused lasting financial damage to towns and cities across Vermont. Josh Hanford, with the Vermont League of Cities and Towns, said legislation that’s cleared the House and is expected to win final approval in the Senate on Wednesday would address some of the obstacles that municipal leaders encountered during the recovery process.
“A lot of what’s in there unfortunately is learned from some real hard realities of assisting municipalities with repeated floods,” Hanford said.
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Hanford said the “municipal flood finance package” contains three key provisions. It would let towns without charters use “unassigned” funds for disaster recovery purposes; it would allow for a five-year repayment period for emergency loans; and it would let towns structure debt to reduce the size of the payments during the early years of a loan.
Because reimbursement from the Federal Emergency Management Agency takes so long to arrive, Hanford said, towns such as Lyndon and Bridgewater have had to take on emergency debt that totals more than double their annual budgets. Giving municipalities more debt-financing tools, he said, will help minimize the strain that debt places on local finances.
“This flood bill is another important bill for municipalities that are still recovering from the floods over the last two summers,” Hanford said.
The bill also includes financial support for the 30 towns and cities in Vermont that have local option taxes. Currently, towns have to send 30% of revenue from those taxes to the state, which in turn gives the money to municipalities that host state buildings that don’t pay property taxes.
That so-called “payment in lieu of taxes” fund is running a surplus, however, and so lawmakers have agreed to cut the state’s share of local option taxes to 25%, which would result in an estimated $3 million in additional revenue annually for the 30 towns.
The Vermont League of Cities and Towns had sought an 80-20 split, but Rutland County Sen. Brian Collamore said lawmakers didn’t want to risk a deficit in the fund for towns that host state buildings.
“It will still allow municipalities to have a little bit more money to use,” Collamore said.
Waszazak said the flood recovery bill isn’t the only legislation this year that aids flood-hit communities. The budget contains $15 million to help cover flood-related expenses that weren’t reimbursed by FEMA. Lawmakers and Gov. Phil Scott also appropriated $30 million to help municipalities cover the local match that’s required for projects that are eligible for FEMA reimbursement.
While the flood recovery bill and additional funding will provide relief for many communities, Waszazak said “there is still a really long way to go.”
“There’s so much work to do, not just to strengthen our state response systems, but also to make our constituents and our neighbors whole after these events and help them rebuild,” he said. “This is a decades-long project.”
