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Tuesday, April 13, 2021

In response to questions posed by our members concerning the financial toll wrought by the global health pandemic on local communities, the Municipal Assistance Center (MAC) has assembled the following information related to municipal efforts to potentially lessen the severity of COVID-19.  

For additional information about municipal emergency planning assistance and coordination, please visit our Coronavirus Resources and Recommendations webpage, www.vlct.org/coronavirus.

Updated 4/12! Are there any reimbursements available to towns for expenses incurred in response to the COVID-19 outbreak?

Yes. The American Rescue Plan (ARP) injects $19.53 billion in the country’s municipalities with populations of less than 50,000 based on each jurisdiction's percentage of the state's population; aid is distributed through the states, with the ability for states to request an extension if they are unable to distribute within 30 days. Please see VLCT’s resource page on the ARP at https://www.vlct.org/resources/american-rescue-plan-information.

Here's a chart that estimates how much each Vermont town will receive from the state through the American Rescue Plan aid to municipalities: click here https://www.vlct.org/news/local-government-allocations-american-rescue-plan and open the “Vermont ARP Allocations” attachment. These amounts are subject to change.

Here’s another good summary sheet: https://www.democrats.senate.gov/imo/media/doc/ARP%20State%20and%20Local%20Fiscal%20Recovery%20Funds%20Information%20Sheet%20FINAL.pdf. Scroll down to FAQs on page 4 for information on what ARPmoney can be used for. Examples include:

  • To respond to the pandemic or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality
  • For premium pay to eligible workers performing essential work (as determined by each recipient government) during the pandemic, providing up to $13 per hour above regular wages
  • For the provision of government services to the extent of the reduction in revenue due to the pandemic (relative to revenues collected in the most recent full fiscal year prior to the emergency)
  • To make necessary investments in water, sewer, or broadband infrastructure.

In addition, a recipient may transfer its allocation to a private nonprofit organization, Tribal organization, public benefit corporation involved in the transportation of passengers or cargo, or a special-purpose unit of State or local government, if the recipient government so chooses. The recipient entity would need to use the funds consistent with the purposes listed above. The recipient government must send the U.S. Department of the Treasury periodic reports with a detailed accounting of the uses of the funds (States and territories must also provide all modifications to tax revenue sources since March 3, 2020). The language explicitly prohibits funds from being deposited into a pension fund. States and territories are also prohibited from using the funds to offset, either directly or indirectly, a tax cut made since March 3, 2021.While the State and Local Fiscal Recovery Fund eligible uses are broader than those of the CARES Act Coronavirus Relief Fund, guidance previously released for the Coronavirus Relief Fund may provide insight into how the Treasury may interpret and implement these American Rescue Plan provisions.

Previously, on March 13, 2020, President Trump issued an emergency declaration authorizing FEMA to reimburse states, tribes, and territories of the United States for “eligible emergency protective measures taken to respond to the COVID-19 emergency” at the 75 percent federal cost share. See (copy and paste this link into your browser): https://www.fema.gov/news-release/2020/03/13/covid-19-emergency-declaration.

Towns are encouraged to track all costs related to responding to COVID-19. Please visit Vermont Emergency Management’s Coronavirus Information for Local Officials for the latest updates and contact Kimberly Canarecci, State Public Assistance Officer, at kim.canarecci@vermont.gov or (802) 585-4209 with any FEMA reimbursement related questions.

On June 15, the Governor enacted Act 108 (H.951) which established the Municipal Emergency Statewide Education Property Tax Program. This program authorizes the State Treasurer to assist municipalities by making payments on the costs of short-term borrowing required to manage the cash flow effects of statewide education property tax deferrals as a result of the COVID-19 pandemic. See the State Treasurer’s website for application materials and answers to frequently asked questions about the program: https://www.vermonttreasurer.gov/content/local-government.

How can we process payroll and other bills if the selectboard is not meeting?

Individual members may not merely show up at the town office and sign payment orders at their convenience as this would constitute a violation of the Open Meeting Law (OML). The OML requires a majority of selectboard members to take an action or make a decision (e.g., sign an order approving payment), only within the context of a duly warned open meeting. 1 V.S.A. § 172. There are two exceptions to the above general rule.  Both exceptions require the selectboard to meet at least once, though such a meeting could occur by electronic means, see our Open Meeting Law and COVID-19 Response FAQs for more information.

  • First, the selectboard can vote at a duly warned meeting to approve certain payments in advance so that there is no need for members to actually sign orders. Such a vote must identify the person(s) to whom payment is to be made and the purpose(s) for that payment. The treasurer may then use a certified copy of the minutes of the meeting as full authority to make the approved payment. 24 V.S.A. § 1623(a)(2).
  • The second exception allows the selectboard to authorize one or more members to review and approve orders on behalf of the entire board. A vote to give such authorization must take place at a duly warned selectboard meeting and must be reflected in the meeting minutes. A motion to give such authorization might be phrased as, “I move that we appoint [insert name(s) of the legislative body member(s)] to approve and sign orders for [insert types of claims that the person has authorization to approve such as “payroll,” “operating expenses,” etc.] for [insert period of time].” Any orders that are approved under this authority must state definitely the purpose for which they are drawn. The full selectboard must later be provided with a record of all the orders approved. 24 V.S.A. § 1623(a)(1).

Relatedly, in the event that there are so many vacancies on the selectboard that a quorum cannot be achieved, the remaining member(s) have the authority to draw orders for payment of continuing obligations and necessary expenses until the vacancies are filled. 24 V.S.A. § 961(b).

The Legislature recently passed Act 102 (S.344), which modifies tax and tax penalty laws. What does Act 102 (S.344) temporarily change?

The enabling authority granted by this Act expired on January 1, 2021.

Act 102 (S.344) allows selectboards, without voter approval, to:

  • reduce the municipal property tax rate;
  • extend or establish a new time and method for paying taxes;
  • establish a grace period for, reduce, or waive interest, fees, and penalties associated with late tax payments.

These acts may be taken by majority vote of the selectboard so long as the vote occurs throughout the duration of the declared state of emergency. If voted, any such action would expire on January 1, 2021.

 

Can we change the tax rate without voter approval?

No. The temporary authority to change the tax rate expired on January 1, 2021.

Yes. Act 102 (S.344) gives selectboards temporary authority to reduce, but not increase, the municipal, but not the education, property tax rate. This means that selectboards would not have to set a tax rate necessary to raise the appropriations approved by the voters at town meeting. Instead, selectboards will now have the flexibility to only raise that revenue from taxes which is necessary to fund its reduced operations.

Can we change when taxes are due without voter approval?

No, the temporary authority to change when taxes were due expired on January 1, 2021.

Yes. Act 102 (S.344) gives selectboards temporary authority to either extend or establish a new time and method for the payment of the municipal and statewide education property tax collected from taxpayers. Please be aware that the new law does not apply to any deadlines, penalties, or interest imposed on a municipality with respect to payment of the statewide education property tax due to the State or a school district.

Can we issue a tax bill for the municipal taxes if the rate has been set, or do we need to wait for the state education portion to issue bills?

There's nothing in state law that prevents towns from sending out two taxes bills, either to separate homestead versus non-homestead or municipal versus statewide education taxes, but it may cause some confusion for property owners. Therefore, we recommend including an insert explaining what is going on and what to expect so that people don't think that they won’t owe any additional taxes if they only pay the first bill. If the town doesn’t want to send out two billings (one for the town and another for education), it could push the date for the collection of taxes back which of course would make the new tax due date “30 days from the date of mailing of notice to the taxpayer.”

Can we delay payment of the statewide education property tax due to the State or school district?

Under Vermont law, a town’s tax payment to its school district must be made within 20 days of the tax due date regardless of any demand for payment from the school district. This statute reads, in relevant part,“[h]e or she (i.e. treasurer) shall keep in a separate bank account all the money appropriated or given for the use of the school district. Within 20 days after the date the school taxes become due and payable or within such other period of time as may be agreed upon in writing by both the board of selectmen and the board of school directors, he or she shall deposit in the school account, payments of the school tax levy received.” This means that any payment received on behalf of the school district would need to be made within the subsequent 20 days unless there is some other agreement between the town and school district to the contrary.

It is important to note, however, that a town is only required to pay over to the school district those monies actually collected within the 20 days following its tax due date. It then has another 120 days (which cannot be later than the end of the school year) to pay any outstanding monies that are actually due the school, whether collected or not. “Within 120 days after the date on which taxes become delinquent, but in no event later than the end of the school year, the treasurer shall deposit the balance of the sum of the gross school tax levy in the school account.” 16 V.S.A. § 426(b).

Can we issue abatements?

Anyone can request an abatement of taxes, penalties, or interest under 24 V.S.A. § 1535 so long as one of the statutory criteria has been satisfied. One criterion a person can use to request an abatement is an inability to pay their taxes or charges, interest, and collection fees. 24 V.S.A. § 1535(a)(3). Although the ability to abate exists, it must be requested, it is up to the discretion of the board of abatement (selectboard, town clerk, justices of the peace, listers, town treasurer), and it is not required that the board abate taxes or charges, interest, or penalties, even if the person requesting an abatement meets one of the criteria under 24 V.S.A. § 1535. It is important to note that if the board of abatement is anticipating hearing many abatement requests and considering abating a large portion of taxes, the selectboard should consider how it will cover any associated budget shortfall and otherwise meet its existing financial obligations. See “Can the Selectboard Borrow Money Without Voter Approval?” at https://www.vlct.org/can-selectboard-borrow-money-without-voter-approval-0.

Can we waive penalty and interest on delinquent taxes?

Penalties and interest can be waived upon application to the Board of Abatement. See our Tax Abatement Toolkit at  for more information.

EXPIRED JANUARY 1ST The temporary authority for selectboards to establish grace periods, reduce, or waive any penalties, interest, or fees associated with the late payment of municipal or statewide education property taxes expired on January 1, 2021.

Yes, separate from abatement, Act 102 (S.344) gives selectboards temporary authority to establish a grace period for, reduce, or completely waive any penalty, interest, or fee that would otherwise be imposed on taxpayers for the late payment of the municipal or statewide education property tax

Can we decide not to hold any tax sales?

The delinquent tax collector (DTC) and selectboard together could come up with a COVID-19 related temporary policy to address tax sales. Such a policy could modify the DTC's typical policy on how and when the DTC will proceed to tax sale (e.g., extending the timeframe or circumstances of when the DTC typically initiates a tax sale in order to give delinquent taxpayers more time to pay). If you decide to move forward with a tax sale, we always recommend working with the town attorney, but it is especially important amid the pandemic to do so.

Can we hold tax sales remotely (i.e., using zoom or some other video chat)?

Vermont statutes refer to the tax sale as a “public auction” that takes place in “a public place” within the town where the property is located. 32 V.S.A. §§ 5252, 5253. Therefore, we don't think conducting a tax sale exclusively via a remote method will suffice until the law is changed.

Are the deadlines for property tax assessments the same during the declared state of emergency?

It depends on the deadline, but note that the Vermont Tax Department has extended some property tax assessment related deadlines and may continue to make changes to these processes. Please go to https://tax.vermont.gov/coronavirus/towns for updates on deadlines, contact information for PVR District Advisors, and other helpful information. PVR recommends directing questions or comments to your District Advisor or emailing tax.pvr@vermont.gov. They will continue to update their webpage with frequently asked questions.

How do we continue to fund existing service levels and pay our bills without any incoming tax revenue?

The COVID-19 pandemic is taking a financial toll on everyone, not the least of which includes municipalities. As people experience a loss of income due to unemployment and decreased revenues as a result of social distancing, towns will see a corresponding decline in timely tax payments, an increase in requests for tax abatement, and lower local tax revenues. Despite reducing service levels and staff hours, towns will still have their own outstanding financial obligations to meet including payroll, matching funds for state and federal grants, bond and lease payments, etc. The combination of these circumstances raises the likelihood that towns will need to borrow in order to get by, at least in the short term.

The difficulty with borrowing during a public health pandemic is that it requires voter approval at an annual or special town meeting and mass gatherings are not a luxury that we can presently afford. 24 V.S.A. § 1786a. The President has released guidelines that call for people to avoid gathering in groups of as small as ten (10) or more people. Even if a meeting were called, people would correctly be reluctant to attend and participate which could undermine and even skew the results of such a vote.

Fortunately, the law recognizes nine situations in which a selectboard may borrow funds without voter approval.

A public vote to borrow is not required in the following instances:

  1. Borrowing to paying current expenses so long as the term is one year or less. 24 V.S.A. § 1786. There is no statutory definition or explanation of a “current expense.” Our rule of thumb is that a current expense is one that will be paid for in a year or less. A current expense could arise from provision of a service or from the acquisition of a public improvement or asset. In our opinion, simply because something is an asset or a public improvement does not mean that it cannot be considered a current expense under 24 V.S.A. § 1786. We view the term of the note (one year or less/more than one year) as the defining characteristic.
  2. Borrowing in anticipation of taxes so long as the term is one year or less and the amount borrowed does not exceed 90% of the municipal taxes assessed for that year. 24 V.S.A. § 1786.
  3. Borrowing in anticipation of the sale of bonds as long as the term is one year or less. 24 § V.S.A. § 1773(a).
  4. Borrowing in anticipation of grants as long as the term is one year or less. 24 V.S.A. § 1773(c).
  5. Borrowing for the purchase of tools, equipment and materials necessary for the construction, maintenance or repair of highways and bridges for a term of five years or less. 19 V.S.A. § 304(a)(3); 24 V.S.A. § 1786a(b).
  6. Borrowing from the State Municipal Equipment Loan Fund for the purchase of construction, fire, emergency or heavy equipment or vehicles. 19 V.S.A. § 304(a)(3); 24 V.S.A. § 1786a(b); 29 V.S.A. § 1601.
  7. Alternative financing of personal property, fixtures, technology and intellectual property. 24 V.S.A. § 1789. The selectboard may enter into leases, lease-purchase agreements, installment sales agreements, and similar agreements to acquire assets for the municipality either singly or as a participant in an interlocal contract. Such an agreement, however, must contain a “non-appropriation clause” that states that the annual payments by the municipality must be approved by the voters.
  8. Borrowing to retire a deficit with “refunding bonds.” The selectboard may opt to convert a deficit into debt by issuing municipal refunding bonds for an amount equaling the deficit. 24 V.S.A. § 1771. This bond creates a replacement debt which will be paid off over a period of years.
  9. Borrowing for the preparation of engineering studies or plans for public water/wastewater supply systems/facilities provided such debt is included in any subsequent public authorization of municipal indebtedness to construct the project for which the planning loans were used.

Can we borrow from the highway fund to help pay for general fund expenses?

No. The temporary authority to borrow from property taxes for highway expenditures expired on January 1, 2021.

Ordinarily, no you can’t or at least State law does not explicitly recognize your authority to do so. 19 V.S.A. § 312. Act 113, however, temporarily suspends this prohibition for the duration of the declared state of emergency and gives selectboards the express authority to borrow monies appropriated from property taxes for highway expenditures and use them for general fund purposes, and vice versa. This temporary authority applies only to property taxes collected by a town from taxpayers and does not extend to any State aid for town highways. Any town that takes advantage of this allowance must pay back the amount it borrows to the fund borrowed from, together with whatever interest the selectboard deems appropriate.

Can we disconnect delinquent users of our water and sewer services?

No, at least not during the declared state of emergency. The recently enacted Act 92 clearly states that a “municipality shall be prohibited from disconnecting a person from water or sewer services during a declared state of emergency under 20 V.S.A. chapter 1 due to COVID-19.” Towns can use other collection methods at their disposal (e.g. small claims court, distraint, tax sale, etc.), but they cannot disconnect users so long as the current state of emergency remains in place.

Are any of these federally funded grant programs available for reimbursing municipalities for hazard pay?

Yes, the Local Government Expense Reimbursement (LGER) Grant (see above)  created by Act 137 includes hazard pay as an eligible expense. Please visit tax.vermont.gov/coronavirus/municipal-grants for more information.

Note that the Front-Line Employees Hazard Grant Program, created by Act 136, and associated guidance provided by the Agency of Human Services state that a “[c]overed employer does not include: the state, a political subdivision of the state…” Therefore, as a political subdivision of the state, municipalities are not eligible for this grant to obtain reimbursement for hazard pay resulting from COVID-19.

Are there any financial resources for local businesses?

Yes. The federal Small Business Administration (SBA) is making emergency loans available to businesses in most of the state. Business located in the 10 declared counties (Addison, Bennington, Caledonia, Chittenden, Essex, Grand Isle, Orange, Rutland, Windham, and Windsor) can immediately apply for assistance online at: https://disasterloan.sba.gov/ela/. The VT Agency of Commerce and Community Development (ACCD) anticipates the 4 remaining counties (Franklin, Lamoille, Orleans, and Washington) to receive a designation shortly. For more information, call the SBA disaster assistance customer service center at 1-800-659-2955 (TTY: 1-800-877-8339) or e-mail disastercustomerservice@sba.gov. For local SBA information, call 802-828-4422.

The Vermont Small Business Development Center (VtSBDC) is providing technical assistance to help guide small businesses through the COVID-19 crisis. Requests for assistance can be directed to: https://www.vtsbdc.org/coronavirus/.

ACCD is interested in hearing from all Vermont businesses affected by COVID-19 so that it may assess its full impact. The Agency has developed an Agency Business Impact Form available at: https://www.surveymonkey.com/r/vtcovid19 to aid this process. It also has a dedicated hotline for businesses to report impacts and inquire about available resources: (802) 461-5143. The hotline will be staffed from Monday to Friday, 7:45 a.m. to 4:30 p.m. Business related COVID-19 questions should be e-mailed to the Agency at: commerce.covid19@vermont.gov.