Tax-Exempt Properties Get $277 Million Break

October 21, 2013

in News

(This story was first published in the October 3, 2013 edition of the Vermont Standard.)

By Katy Savage, Standard Staff

While a seven-member study committee, composed of legislatures and state administrators, meet to see if a bill that forgives taxes to nonprofit buildings is worth continuing, many local organizations are concerned the findings could affect their bottom line.

According to a report from the Joint Fiscal Office in January, the state forgoes at least $277 million in revenue each year and there are more than 2,000 buildings that qualify for tax-exempt status in Vermont. Voters have the option to exempt nonprofit organizations from municipal taxes for a renewable five-year period at Town Meeting. In doing so, they choose to pay those properties’ portion to the education fund.

“Now the question is, if they’re even giving as much to charity as they are getting in property tax exemption,” said Sen. Kevin Mullin, who chairs the study committee. “Those are the type of things that we’ll be considering.”

The thought of the study committee is troubling to local organizations that have been tax exempt for years.

If the Norman Williams Public Library had to contribute to property taxes for example, it would put a “tremendous strain” on the library, according to Director Jennifer Belton. The library receives less than 40 percent of its budget from the town.

“We need to get out that we aren’t fiscally sustainable,” Belton said. “We aren’t thriving now and it’s very worrisome.”

It would also “have a ripple effect into communities across the state,” according to Matt Powers, director of the Woodstock History Center.

“We are mission driven,” he said. “Without that exemption, we’d be paying thousands of dollars in property taxes instead of putting it into free admissions and programs…it would affect us financially as an organization.”

There is $44 million forgone for properties classified as public, pious and charitable in the state, according to a report from the Joint Fiscal Office. Woodstock alone has 70 exempt parcels and forgoes about $54.6 million in revenue each year.

But the amount that the state forgoes is, in reality, much larger. Some properties on the grand list are not listed at their accurate values. The First Church of Christ Scientist in Woodstock, for example, is insured for more than $3 million, but it appears on the grand list for about $285,000.

There are nine voted exempt properties in Woodstock, including the Ottauquechee Health Center, which was last valued at $1,607,000 and the Homestead, which is valued at $2,093,600.

In the last legislative session, lawmakers passed a bill that will require every property in a town be on the grand list at their insured value by 2014.

“I think it’s worth taking a look at if this is what we want to continue doing or not,” said Bill Johnson, the state’s director of Property Valuation and Review.

The last time a study was done on property tax exemptions was in 1999, when a group of 11 commission members focused on the pious, public and charitable exemptions. They recommended the properties remain exempt from statewide education property taxes and towns would have the option to exempting them from municipal taxes. The commission drafted revisions to the bill that were taken for consideration in the house but not the senate.

“The issue really has not been dealt with in quite a while,” Mullin said.

Rep. Alison Clarkson, who vice chairs the study committee said its unlikely nonprofits will ever be taxed at their full free market values, but they could contribute at least some portion to take the burden off the other taxpayers.

“Is it fair to put that huge burden on the rest of us who are already heavily burdened by property tax?” said Clarkson. “The education cost could be diffused a bit if the nonprofits were contributing something.”

Exempt properties include those in the income sensitivity provision and the current use program, which represents approximately a third of Vermont’s total land area and includes over 17,000 properties and more than 2.3 million acres. The law automatically exempts some buildings, such as cemeteries and churches from both education and municipal taxes.

The committee’s focus, however, is on nonprofits and those classified as public, pious and charitable use.

“Is that something we want to continue?” Clarkson said. “Are they giving enough value to the communities they serve to continue us picking up their tab?”

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{ 2 comments… read them below or add one }

Frederika Shindler November 7, 2013 at 3:11 pm

Thank you, Diana, for speaking up about the gross inaccuracy reported. I, too, hope and trust that the correction will be made on this e-version.

Diana Brown October 21, 2013 at 3:54 pm

The figures quoted in this article for the First Church of Christ, Scientist
are ridiculously incorrect, a fact pointed out to you two weeks ago when the article appeared in the print edition . You graciously printed the correction in the next edition. Please correct it in this eStandard article as well. (I believe the value assigned by the town in the most recent tax year was in the vicinity of $275K ) .

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