Report: Burlington TIF accounting led to over $1.2 million in mistakes

BURLINGTON, Vt. (WCAX) - The city of Burlington must pay back over $1.2 million to its TIF fund for waterfront improvements after several serious errors were uncovered by a state audit.

A TIF district is a tool municipalities can use to fund public infrastructure projects and not have taxpayers pay up front, but rather use money from increased property taxes in these districts to pay back the debt.

One of those TIF districts helped revitalize the Moran Frame, the waterfront, the bike path, and other Burlington improvements. Now, a new report from the state auditor’s office says Burlington needs to repay $1.2 million back to the TIF fund and also pay back nearly $200,000 to the state Education Fund.

“If you don’t have policies and procedures in place for a project of this complexity, then you are just asking for trouble. And whatever mistakes are made along the way are going to be compounded when you have staff turnover, new people come in who don’t have the history and then they don’t have policies or procedures to follow, so it just spirals,” said Vermont State Auditor Doug Hoffer.

Hoffer says his office uncovered numerous errors over the course of 10 years. He says the city took money from the wrong places to pay for TIF projects, that Burlington’s records are in disarray, and the city used incorrect tax increment calculations.

“While we have recognized these issues, they will not affect city operations. We will not need to raise taxes and we will, in fact, be able to continue the important future investment on our TIF districts,” said Katherine Schad, Burlington’s chief administrative officer.

Burlington officials say that the $1.2 million the city owes to the TIF fund will come from the city’s Rainy Day Fund and will have no impact on taxpayers.

As for the $200,000 Burlington owes the state Education Fund, the city blames that error on a disagreement with the state tax department and a private contractor. “It is important to us of course that we are paying everything that we owe into the ed fund and that all parties are aligned,” Schad said.

But even after Burlington’s problems are fixed, Hoffer says TIF district rules are too lenient for cities and towns and they should have less flexibility, “I don’t think this is the best way to accomplish the goals of the Legislature, which is to support municipalities in their desire to upgrade infrastructure in their downtowns. I think there are better ways to do it. It’s very expensive with all this bonding. That’s a lot of debt for all the TIF towns statewide. The debt incurred is going to be over $100 million,” he said.

For the past four years, the city of Burlington has been working to fix its accounting processes when it comes to TIF districts. The city says they are implementing procedures to ensure their accounting practices are fixed moving into the future including hiring private consultants and a senior accountant to specifically work on how TIF funds are paid out.

The city doesn’t believe the audit will impact their future borrowing for TIF district projects. The City Council Monday will consider a resolution to make a substantial change to the waterfront TIF district in order to accommodate the reconnection of St. Paul and Pine Streets that were severed when the Burlington Square Mall was built.

Hoffer says his next audit will target South Burlington’s TIF district.

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