Bill sows controversy over Current Use program
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By Peter Hirschfeld Vermont Press Bureau - Published: April 18, 2010
MONTPELIER – Legislative efforts to trim costs from the "Current Use" program could undermine an initiative that has helped protect more than 2 million acres from development, according to officials in the Douglas administration.
As part of a government-wide budget-cutting exercise, lawmakers are looking to trim $1.6 million from the "Use Value Appraisal Program" – more commonly known as Current Use. The 30-year-old program dramatically lowers taxes on tracts of land used for agriculture and forestry.
But a proposal headed for a vote on the Senate floor next week, according to Secretary of Natural Resources Jonathan Wood, would imperil the working landscape that defines this state.
"Vermonters talk very strongly about how they value the working landscape, that it is what defines us as a culture and a people," Wood said Friday. "It's shocking to me the Legislature would cause harm to the most important program for achieving what Vermont wants with its landscape."
The Vermont House passed a Current Use bill earlier this session that met the savings target by instituting a one-year moratorium on admitting new enrollees into the program. The legislation also changed the "land-use change tax" in a way that would increase financial sanctions on landowners who pull portions of their parcels out of the program.
Citing undue burdens on prospective Current Use enrollees, Senate lawmakers jettisoned the moratorium and replaced it with a "landowner fee." The one-time, $128 assessment on all landowners in the program will help raise the $1.6 million lawmakers are looking to save.
"The moratorium really impacted some individuals," Sen. Anne Cummings, chairwoman of the Senate Committee on Finance, said Friday. "There were people that inherited land, or bought land, based on the very valid assumption that they would qualify. And they would not be able to hold onto that land if we instituted a moratorium."
But the Senate has retained the land-use change tax, a policy reform that Wood said will discourage new enrollees and compel existing current-use beneficiaries to withdraw their land before the new rules take effect.
"The moratorium issues were an excessive problem and it's good to see those removed," Wood said. "But one of the most problematic pieces is the increase in the land-use change tax. That part, I believe, would be damaging to the program and will reduce the number of enrollees in the program."
Landowners already pay a penalty for withdrawing portions of land from Current Use. But the Senate proposal would increase the sanction considerably.
The formula used to determine the penalty – based on a percentage of the value of the land removed from Current Use – won't change dramatically. But the system used to determine the value of the withdrawn land will.
Under existing rules, the value of the withdrawn land is pro-rated based on the value of the entire parcel. So, if someone pulls four acres from a 100-acre lot, the penalty would be based on 4 percent of the value of the whole tract.
Under the Senate proposal, the withdrawn land would be valued as a standalone parcel. Since the acreage pulled from Current Use is often the most desirable portion of a larger tract, it would have the effect of increasing the value, and consequently the penalty.
Ed Larson, executive director of the Vermont Forest Products Association, said Current Use has single-handedly propped up the state's beleaguered timber industry. The proposed changes, he said, would upset a delicate balance that has allowed so many landowners to protect their holdings from development.
"It's bad news for the working landscape, bad news for conservation and truly leaves private landowners wondering what to do," Larson said. "This is going to affect those types of landowners that all they have is land. And they're going to find when they need to make a choice in their life, whether it be to send a child to college, or provide a building lot for a family member, or just to sell a part of their land to retire, they are going to feel the effects."
Rather than suffer the consequences of the heightened land-use change tax, Larson said, landowners will withdraw their land now and sell the portions on which they are unable to pay fair-market taxes.
"I think it puts the working landscape at risk and I think it puts our future at risk," Larson said. "I think it will turn Vermont into a New Jersey and a state we can't afford."
Cummings said the proposed changes maintain the incentives that make Current Use such an attractive option for landowners. Based on committee testimony, Cummings said, under the proposed rule changes, anyone who puts their land in Current Use for six or seven years would see the tax savings exceed the new penalty.
Under the existing system, she said, the "break-even" point takes less than a year to achieve.
Cummings said the changes are needed to ensure the long-term viability of a program that costs the state $10 million annually. The money goes to reimburse municipal governments for foregone tax revenue due to the lower property valuations of land taxed at use, not development value. Cummings said those lower valuations also cost Vermont an additional $35 million in foregone revenue to the state's education fund.
Critics of the existing land-withdrawal penalty say it allows landowners with no long-term interest in conservation to enjoy short-term savings.
"We don't believe that's really what the state wants to invest in. If we tighten up the rules, we can achieve the end the program was set up to achieve," Cummings said.
The one-time landholder fee, Cummings said, will deliver the immediate $1.6 million in savings. The land-use change tax revisions, which would take effect in April of 2011, will provide longer-term savings, she said.
"The difference between use value and fair-market value property taxes is huge in many instances," Cummings said. "So anybody that has a huge tract of land is still well served to enroll it."
Wood, who said the Legislature should find the savings in another area of the state budget, said he hopes the Senate will reconsider the legislation before putting the measure to a vote. Gov. James Douglas, he said, has signaled his strong objections to the bill.
"This is the only program we have that keeps Vermont the way it is," Wood said. "It's quite disturbing anyone would look to jeopardize that."
peter.hirschfeld@timesargus.com
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