Vermont Legislative Update Week 14 | Government and Public Affairs

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[co-author: Jessica Griswold]

Vermont Legislative Update Quick Links

Governor proposes $90 million for state capital investment

Economic Recovery Grants less than anticipated for anxious business owners

Changes at the State Board of Education

More relief for utility arrearages may be coming

Smart growth bill raises concerns

Cloud tax receives House approval, faces delay in Senate

Act 250 amendments taken up by House

Issue bytes

Governor proposes $90 million for state capital investment

Department of Economic Development Commissioner Joan Goldstein presented Governor Scott's Capital Investment Grant Proposal to the Senate Economic Development Committee this week. The proposal would allocate $90 million over three years for capital investment grants to businesses and non-profits. Regional Development Corporations and Regional Planning Commissions would identify eligible projects. Twenty-five million dollars would be dedicated to outdoor recreation projects.

Senators expressed concerns about how the Agency of Commerce and Community Development would select projects. Commissioner Goldstein said they would consider ready or near-ready proposals that will leverage other financing, with projects funded in every region. The RDC/RPC inventory of projects is a work in progress, and Commissioner Goldstein said she would provide a list to the committee when it is ready.

Examples that were shared include:

  • Vermont Livestock Slaughter & Processing facility modernization, Ferrisburgh ($4.27 million)
  • Vermont Farmers Food Hub expansion, Rutland ($2.3 million)
  • Yellow Barn Business Accelerator, Caledonia ($13 million)
  • IDE building for Zion Growers redevelopment, St. Johnsbury ($1.5 million)
  • Former FONDA site redevelopment, St. Albans ($887,900)
  • Enterprise Daycare building redevelopment, Orange ($3 million)

With the legislature set to adjourn in mid-May, the proposal has a short period of time to go a very long way.

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Economic Recovery Grants less than anticipated for anxious business owners

The business community expressed collective disappointment two weeks ago when Gov. Scott announced $50 million for the next round of economic recovery grants. Given the severe impact from state-forced shutdowns and no support grants since the end of September, they were expecting more aid to cover their revenue gap for the last six months.

Economic Development Commissioner Joan Goldstein told the Senate Economic Development Committee that there is more than $500 million in unmet need for these businesses. The Agency of Commerce and Community Development took into account that many companies were eligible for additional Payroll Protection Act grants which total $400 million and many may qualify for federal grants for restaurant and shuttered events. If ACCD finds the program is oversubscribed, they hope to transfer funds from undersubscribed allocations as they did in the last round of grant distribution.

The formula will be different in this process. Grants would cover three months of fixed costs, capped at $150,000 and processed on a first-come, first-served basis. Businesses will have to have been closed or had capacity restrictions imposed. Given that businesses were forced to significantly decrease their revenue for the past year, and Vermont received an enormous amount of funds through the American Rescue Plan, many believe that this final allocation of support is woefully inadequate. Reopening faces its own challenges, including amassed debt, workforce shortages, and deferred maintenance.

Changes at the State Board of Education

A letter from the Social Equity Caucus to the Senate Education Committee last week raised concerns about diversity and representation on the State Board of Education. The letter was spurred by recent board appointments that the caucus characterized as hurried and failing to “adequately represent … Vermont’s diverse school communities.”

Caucus co-chairs Rep. Kevin Christie and Sen. Kesha Ram appeared before the Senate Education Committee, noting that their intent was not to cast aspersions but to highlight the perspectives that would be missing from the board under its current configuration.

The letter spurred new proposed legislation about state board membership which would require, to the extent possible, that “members shall represent geographically diverse areas of the State the State's geographic, gender, racial, and ethnic diversity.”

Immediately following the appearance by Christie and Ram, new appointees Tom Lovett and Lyle Jepson addressed the committee to share their experience and values. Lovett, the former Head of School of St. Johnsbury Academy, and Jepson, the former director of the Stafford Technical Center in Rutland, are both lifelong Vermonters and educators and are highly qualified to serve on the board.

More relief for utility arrearages may be coming

Vermont’s distribution utilities and the Public Service Department have asked the legislature to set aside $15 million in federal funds to alleviate utility customer debts. As customers fell behind during the pandemic, the legislature in 2020 appropriated $8 million in utility customer relief. The program was over-subscribed. Utilities have requested an additional $15 million for the Vermont COVID-19 Arrearage Assistance Program to be made available for residential and commercial customers who are otherwise ineligible for other available utility relief. Unresolved electric utility debt leads to higher rates for all ratepayers.

The Public Utility Commission recently issued an order extending the moratorium on utility service disconnections until the end of May. During the first round of arrearage assistance, the PUC-issued moratorium on disconnects had to be temporarily lifted in order to spur customers to connect with utilities and take advantage of available funds. Utility leaders said that consumers were slow to take the assistance last time because disconnects were not foremost on people’s minds due to the moratorium, and because they may have had an overwhelming number of other concerns. They hope this time to avoid threatening disconnection to their customers.

Smart growth bill raises concerns

A bill to encourage smart growth stirred strong feelings this week in the House Natural Resources, Fish, and Wildlife Committee. S.101 extends the downtown and village center tax credit to “neighborhood development areas” and creates incentives and funding for municipalities to modernize their zoning and bylaws to allow for more housing. Planners, the Vermont League of Cities and Towns and representatives of the Scott Administration all spoke strongly in support of the bill.

A controversial section that removes the requirement that a developer obtain state and municipal permits for water and wastewater hookups for housing roused rigorous discussion. Legislators struggled to understand how removing the state permitting requirement would not negatively affect water quality. The Department of Environmental Conservation testified that it is the responsibility of municipalities to ensure their wastewater and water systems are operating properly.

Cloud tax receives House approval, faces delay in Senate

The House gave its final approval on Friday to a wide-ranging tax bill that includes the removal of a sales tax exemption on pre-written software. The bill, S.53, began as a feminine hygiene products tax exemption bill, but the House Ways and Means Committee amended the bill before it reached the floor to add language amending the corporate income tax structure, change mutual fund fees, exempt the first $10,000 of military pensions from income tax, and add a new “cloud tax”—a sweeping sales tax on pre-written software. The success of some of the new provisions will likely be short lived, as Senate Finance Committee Chair Ann Cummings, D-Washington, told her committee on Thursday that there was “no way that we’re going to re-write the business code and do a cloud tax at this point in the session.” She plans to move the original language of S.53 on the miscellaneous tax bill and address the House’s additional proposals next session.

The cloud tax, a perennial proposal from the Ways and Means Committee, would raise $14 million annually by 2025. In prior years, the proposal was limited to taxation of software-as-a-service such as TurboTax or Microsoft Office, products that were previously purchased in boxes off the shelf. Concluding that the tax would be easier to administer if a wider net was thrown, the committee expanded the reach of the proposal to include pre-written platform and infrastructure software as well. Website hosts like SquareSpace and WordPress and services like Dropbox would be included.

Committee members justified the tax by characterizing it as a necessary offset for the revenue losses from their proposed corporate tax changes, and as a tax change that reflects the evolution of business operations. Representatives of the business community countered that Vermont businesses that increasingly rely on software services would face significant increased tax liability. The software sales tax would especially penalize the tech sector and remote workers, areas that Vermont is working to cultivate.

Act 250 amendments taken up by House

Though several bills relating to Act 250 have been introduced this session, H.120 will get the attention of the House Natural Resources, Fish, and Wildlife Committee.

The bill contains much of the language in proposals from the previous biennium that were ultimately vetoed by Gov. Scott, including a jurisdictional trigger for development within river corridors; the addition of greenhouse gas emissions and forest blocks as sub-criteria; and a process by which property can be released from Act 250 jurisdiction when it would no longer trigger that jurisdiction.

The bill also adds a new trigger for construction within two-thousand feet of Interstate interchanges. Advocates for this new trigger point to a need to protect the visual appearance of exits as gateways to Vermont’s communities.

Testifying on behalf of the Vermont Builders and Remodelers Association, Patrick O’Brien, project manager for SD Ireland Co., argued the opposite – Interstate interchanges are exactly where we should be encouraging the development of service businesses. O’Brien contended that the jurisdictional trigger would only push development further into rural Vermont. O’Brien said, “The first thing a developer asks is, is this piece of property under Act 250 jurisdiction? If it is, they will move it to two-thousand-and-one feet to avoid Act 250.”

Bills containing administration priorities for Act 250 exemptions for certain designated areas, changes in the makeup of the Natural Resources Board and a pre-application process have been reviewed in committee but have yet to receive further consideration.

Issue bytes

Payroll Protection Act Tax – The legislature passed H.315 last week, which included language to exempt 2020 PPP grants from state income taxes, but it has not exempted 2021 grants from taxation. The business community has risen in objection to the state taxing 2021 grants. Senate Finance has agreed to revisit this issue and will hear from CPAs and the Vermont Bankers Association about the inequity this decision has created.

Short Term Rental Registry – S.79 includes language that would require individuals to register with the state if they operate a short-term rental unit. Testimony from the Vermont Lodging Association highlighted the need for these operators to provide proof of insurance, their address and the number of units they offer. VLA supports small, local short-term rental businesses but said the state needs to collect data on the trends regarding these businesses. They can have a detrimental effect on local housing costs and availability, as well as neighborhood character.

Unemployment Insurance – The House Commerce and Economic Development Committee took testimony this week on S.10, a bill to extend unemployment insurance provisions related to COVID-19. The bill drew a great deal of attention from employers who oppose increasing benefits while not addressing an anomaly in the unemployment insurance calculation that will increase future UI tax rates. Testimony will line up again in the coming weeks, with business owners hoping that the committee will be more receptive to their concerns. The bill passed the Senate earlier by a vote of 18-12.

Public pension reform – The House Government Operations Committee passed a bill to alter the membership and duties of the Vermont Pension Investment Commission and to create the Pension Benefits, Design, and Funding Task Force. The bill is intended to depoliticize VPIC—acknowledging its fiduciary role—by standing it up as an independent commission. The Task Force, by contrast, will include three House members, three Senators, three state officials, and six labor organization members. The Task Force will report findings and recommendations regarding pension benefits, appropriate funding sources, and other considerations to the governor and the House and Senate Committees on Government Operations before September 1, 2021. Representatives Gannon, D-Wilmington, and LaClair, R-Barre, presented the bill to the House Appropriations Committee on Friday.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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