by Michael Bielawski
As the City of Montpelier struggles with aging infrastructure and limited developable space, it’s making new progress to apply for a tax increment financing district, or “TIF” program, to help spur infrastructure development and private investment. The Legislature voted to allow six new TIF districts in Vermont, which produced this opportunity for Montpelier.
The purpose of the TIF project is to secure 70 percent of tax revenue from new private development, which would otherwise go toward the state’s education fund, for infrastructure improvements such as water, sewers, and transportation. Once the debts from the infrastructure are paid off, the new revenue can then go to the education fund.
“The education money from this new revenue is eligible to be used toward TIF,” City Manager William Fraser said. “So 70 percent of the school tax, instead of going toward the state education fund, will go into the TIF fund. So that gives us more revenue to work with to pay off these types of infrastructure bonds.”
Stephanie Hainley, chief operating officer and senior project manager at White + Burke, a real estate development consultancy in Burlington, Vermont, is advising the city on its TIF application and said while it generally can be a great program to boost projects that otherwise wouldn’t happen, there is a certain amount of risk to consider for taxpayers.
“We always encourage municipalities to avoid the ‘If you build it, they will come model,’” she said. “Basically you should never build the infrastructure without having the development agreement in place and a deal prepared with the property owner and that you have a certain amount of assurances that the value will come from that property.”
She points to Sabin’s Pasture as a good example. “Right now, to extend infrastructure all the way out Barre Street, the water and sewer and all the transportation upgrades that we would need to happen is an expense that a private property owner really couldn’t make up.”
She emphasized that ultimately there are no guarantees that private investment will come to fruition and produce the necessary revenue to pay off the debt for new infrastructure investments. And just like any other municipal improvement, the taxpayers are ultimately on the hook for that debt.
According to a PowerPoint presentation by White + Burke presented to the city in late April, there are a handful of public and private projects under consideration across the city. The private ones include a new Hampton Inn with an attached public parking garage in the downtown area near State Street. And in the same area there’s consideration by the Christ Episcopal Church to construct 27 new housing units by knocking down an underutilized expansion of their existing church building.
Fraser noted that approval of the TIF program does not mean all the discussed private projects are a given. “The TIF itself doesn’t approve any particular project,” he said. “Housing, hotels, all those kinds of things, TIF is only a tool that might help any of those projects happen.”
Fraser also highlighted some of the key infrastructure projects under consideration. “I would say certainly aging water and sewer infrastructure is high on the list, parking is definitely on the list,” he said. “I think the Barre and Main streets’ intersection is high on the list. Those are probably the three biggest things.”
The City Council will discuss this project during their May 23 meeting and is expected to vote and approve the application process to move forward. There will be another public comment period at the May 23 meeting for those with any thoughts or concerns to be heard. The application possibly would get approval from the state by this summer. If all goes well with the application, then bond votes for different projects can start to appear on ballots in November or March of next year.