Current Use
February 25, 2010, page 6
by Representative Scott Orr

I was asked to give an update on the status of the Use Value Appraisal program, better known as Current Use, in this year’s session. Included here is information received from the House Ways and Means Committee that deals with tax and revenue issues. Keep in mind that all information included here is about the legislation as it passed the House, but is subject to change as the Senate now takes action on the bill. 

Current Use is the tax policy that taxes land on its use value, not on its market value. This program has benefited many communities, especially Charlotte, by helping to enable land to be kept available for farming and forestry uses. Built into last year’s budget was a requirement that there be $1.6 million saved in Current Use in the FY11 budget; this provision replaced the devastating cuts ($3.2 million) proposed by the Douglas Administration last year. 

After considering many recommendations and listening to a great deal of testimony, the Ways and Means Committee proposed the following measures to save at least $1.6 million in FY11 while maintaining the integrity of the program and having the least financial burden on the 12,500 people in Current Use (76% of whom are full-time Vermonters, including farmers, loggers and foresters), while also helping reduce abuse in Current Use – thereby helping strengthen it by making it more sustainable. The bill passed by the House, H. 485, establishes a one-year moratorium on the enrollment of land in Current Use. It is estimated that this will save $1.15 million. Applications filed in September 2009 will be held inactive for the 2010 property-tax year and will automatically be enrolled (if eligible) for the 2011 property-tax year. 

While most of us are not happy to take these measures because legislators understand this will impact those planning to join the program in the near future, we have had moratoriums in the past. We had to balance affecting the lives of several hundred people waiting to get into the program with the lives of the 12,500 people currently enrolled, many of whom are suffering the worst economy for their products (milk, wood, etc.) in many years.

 While Current Use is intended to help keep land open, every year 3,000-5,000 acres of land are pulled out of Current Use for development. Thus there has been a Land Use Change Tax (LUCT) – often referred to as the “penalty.” When land enrolled in Current Use is developed, the owner must pay a land-use change tax. H.485 re-establishes the original LUCT of 10% of the fair market value of the withdrawn parcel. This will mean a higher valuation for parcels pulled out for development than the current pro-rated value. This change will go into effect 90 days after enactment, giving landowners an opportunity to withdraw land they plan on developing and pay the current LUCT. 

Implementing these changes, it is hoped, will flush out those who plan on developing, and, going forward, discourage abuse of Current Use. In the past the LUCT has been viewed as being so modest it hasn’t had the teeth to be a deterrent to abuse. Basing the LUCT on fair-market, rather than pro-rated, value will raise revenues, helping the financial sustainability of this program. Once the economy has returned to some normalcy, we can expect that this change will raise about $3.5 million. For the FY11 budget, the best estimate is that this will raise an additional $550,000 in education property tax and that the reimbursement for forgone municipal property tax would be lowered by about $160,000 in FY12. 

In addition, this bill removes the preferential property transfer tax rate applied to enrolled land. The rate for enrolled land will now be increased from .5% to 1.25% which is the same rate applied to all other property transfers. This will raise an additional $300,000 in FY11 assuming that the tax becomes effective July 1, 2010. We are hoping that this money will be appropriated to fund long needed upgrades in the electronic administration of Current Use, which is overseen by the state and by towns. This investment will add efficiency to the management of the program, promote compliance and help the long term sustainability of Current Use.

 Again, we are awaiting action in the Senate on this bill and it is expected there may be changes made. I’ll update as more becomes known and as the House and Senate work out whatever differences exist between versions of the bill. 

As always, you can most reliably reach me by e-mail at repscottorr@yahoo.com, or by phone at the Statehouse 1-800-322-5616 or at home 425-2257, or by mail at 20 Baldwin Road.

Snapshot of Current Use
in Charlotte

Total Land Enrolled: 12,182 acres
Percent of Total Land in Charlotte: 46%
Includes: Agricultural 9,275 acres, Forest 2,679 acres, Non-productive Forest 227 acres
Enrolled Land Value: $46,770,700
Number of parcels: 153

Source: “Parcel Report With Values,” courtesy of Rep. Scott Orr.