MONTPELIER — The proposed property tax bill would see an increase in residential rates and a decrease in the commercial and nonresidential rate.
On Tuesday, House lawmakers gave preliminary approval to a bill that would raise the average property tax rate by 0.2 cents, and would lower the commercial and nonresidential rate by 0.5 cents.
While the commercial and nonresidential rate is the same for everyone, regardless of where they are located, the residential tax rate will vary from municipality to municipality.
For the second year, property taxes — which fund the vast majority of the state’s Education Fund — are based on a formula that results in what’s referred to as a “yield amount.”
The yield amount is the amount of money that would result from a tax rate of $1 for every $100 of assessed value.
On Tuesday, lawmakers approved a yield amount of $9,701. This means that a school district that has a per-pupil cost of $9,701 will have a residential tax rate of $1. A school district whose per-pupil spending is twice that amount — $19,402 — would have a tax rate of $2.
Under the terms of the tax bill, the average residential property tax rate across the state would be $1.527.
The bill included a number of amendments, including one from Rep. Cynthia Browning, D-Arlington, who proposed a shift in money from the General Fund to the Education Fund to pay for tax incentives available under Act 46 of 2015, the school district merger law.
The law offers a series of tax breaks — 10 cents in the first year — for districts that are quick to merge. The incentives are expected to result in a tax shift from merging districts to non-merging districts of $2.3 million this year, and $7 million next year.
Browning said she objects to the idea of taxpayers in a non-merging district paying for tax breaks in merging districts.
“I think the state should be covering the cost of their policy decisions,” Browning said.
Rep. Adam Greshin, I-Warren, disputed the notion that the tax shift amounts to an unfunded mandate.
“Incentives do not cost the Education Fund one penny. They don’t add to the cost to deliver education,” Greshin said.
Browning’s amendment was defeated by a vote of 94 to 40.
Browning introduced a second amendment, also dealing with Act 46. The law allows for districts to merge voluntarily, while giving the secretary of the Agency of Education the authority to create merger plans for remaining districts, with those plans subject to the approval of the State Board of Education.
Browning said it is wrong to force a district to join another district in which it had no say in the creation of the articles of agreement.
“I find that profoundly undemocratic and disrespectful to our communities,” Browning said. “Shotgun marriages usually don’t work.”
Browning proposed that the State Board of Education’s decision be nonbinding, meaning a district that wanted to ignore Act 46 and not merge would be free to do so.
Ultimately, House Speaker Shap Smith ruled the amendment was not germane to the property tax bill. An effort by Browning to suspend the rules to consider the amendment failed by a vote of 103 to 35.
The bill does offer a form of cost containment, albeit not as strong as the school district spending thresholds that lawmakers voted to raise in January for the current fiscal year and repeal altogether for the next fiscal year.
The bill calls for education spending penalties to kick in for districts that spend 119 percent of the statewide average, beginning in 2020. The percentage is a reduction from the current figure of 121 percent, which will remain in effect through fiscal year 2019.
House Minority Leader Don Turner, R-Milton, said that if lawmakers had not raised the spending thresholds in January, residential property owners would be looking at a reduction in their tax rates, rather than an increase.
“The bottom line on this bill is it raises property taxes,” Turner said.