Vt. towns, state brace for collapse in property taxes

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BURLINGTON, Vt. (WCAX) While Vermont finances were strong back in the beginning of March, COVID-19 and the subsequent mass layoffs will take a big toll on both state and municipal tax revenues in the months ahead.

Courtesy: Phil Bobrow

COVID-19 is clobbering tax revenue -- from income Vermonters are not earning to consumption taxes not being generated in stores, car dealers, restaurants and hotels.

"We're concerned about every fund, every source of revenue and we're seeing this across the board," Gov. Phil Scott said Monday.

There's also concern about Vermonters not being able to pay their property taxes to fund municipalities and schools. Even though those taxes are more robust than consumption taxes, the Vermont League of Cities and Town's Karen Horn says they are expected to decline. "Those payments are going to be lower than expected, there will be delinquencies they can't pay," she said.

Now, some Vermont towns are looking for ways to delay the taxing periods so that taxpayers can catch up. "The problem is, we don't know what this is. It's being controlled by a virus. We have no model that says in six weeks everything is going to be good and people are going back to work," said Sen. Ann Cummings, D-Washington County.

Horn says the VLCT wants the Legislature to give municipalities the authority to lower their own tax rates and waive the 8% fee when property owners are late on their taxes. She says it's aimed at helping people who've lost income during the crisis and can't pay their taxes.

"Eventually, your house goes to tax sale -- nobody wants that to happen right now," Horn said.

But those measures would create a gap in the education fund, two-thirds of which is funded by property taxes, or about $1.4 billion. Horn says they are pushing the state to borrow up to $80 million to fill the gap in the short-term. "At the end of the day, it's the property tax payers that are supporting the education fund and it's just going to be an impossible situation this year," she said.

Meanwhile, Governor Scott says the state is already seeing a General Fund shortfall and is urging people to pay their taxes if they can. "If anyone can pay their property taxes who are employed at this time, please do. Help your town out, help your community out. Pay your taxes if you can," he said.

Though tax revenue projections look grim, there is one bright spot -- the $30 billion federal education relief fund. Lawmakers say Vermont could use some of those funds to replace lost revenue.