Vermont Legislature SmartTranscripts:

[Emilie Kornheiser (Chair)]: Ways It is still January 28. We are still the Ways and Means Committee. It is 01:15, and we are hearing our first testimony about the FY 'twenty seven proposed budget from Adam Gretchen and Rebecca Sumneros. Floor is yours. Rebecca's right behind you with her camera.

[Rebecca Sameroff (Vermont Department of Taxes)]: Hi, Rebecca. Hello there, commissioner.

[Adam Greshin (Commissioner of Finance & Management)]: Alright. I'm trying to share here. Oh, I see.

[Rebecca Sameroff (Vermont Department of Taxes)]: Okay.

[Adam Greshin (Commissioner of Finance & Management)]: Gresham, commissioner of finance and management. I'd like to start off with just a very quick overview of how we found the revenues for our budget. Since this is the revenue committee, I figured you guys might be interested.

[Rebecca Sameroff (Vermont Department of Taxes)]: Love that. Thank you.

[Adam Greshin (Commissioner of Finance & Management)]: So if you look up top, you'll note we break the general fund into sources and uses, the sources of the revenue. So this is the page that we always show that shows the revenue that we're relying upon for putting forward our budget. And this is a pretty simple page. If you remember last year, there were a number of governors' revenue initiatives that subtracted from the top line. I think there was the IT and CBoost, maybe Social Security. I don't remember all of them. But on this one, there are no revenue initiatives. So really what you're looking at are the vast majority of our revenues, which is always the case, is the Eborg. Top number of 2,533,000,000.000. I would note and keep in mind, this was downgraded about 8 and a half million dollars for fiscal twenty seven by the e board in January. That is a little bit and that is worth noting. But I think more importantly, this top line number of 2.533 was 2.403 last year. So it's a 130,000,000 higher. So the revenue downgrade was from a higher level. It wasn't an absolute downgrade over the year before. So we're still dealing with about a $130,000,000 more revenue than when I sat in this chair last year and spoke to you guys. So overall, what I would say from a budgeting standpoint is we you know, our revenues have allowed us to do what we do. The next line down is the property transfer tax, and that comes from the property transfer tax that buyers pay when they purchase a property. This the half of that amount goes to the Vermont Housing Conservation Board. Roughly a little over a third goes to the general fund, and a little less than a third goes to the municipal and regional planning commissions. It's a small amount that goes to the property value valuation review to administer the current use program use value appraisal, as well as small amount that goes to ADS for the geographic information systems. But the additional property transfer tax here comes from two sources. First source is you'll remember that when we issued a housing bond six or seven years ago, The payments for that bond, 2 and a half million dollars, were going to come from the property transfer tax. 1,500,000.0 of that actually was taken off the top from the bond housing conservation toward allocation. Another million approximately is from a surcharge on clean water. So that's 2 and a half million dollars of that 3. The remaining roughly $600,000 is actually from our friends at tax who, when they administer the use value appraisal program, require roughly in this budget a little over $600,000. But statute sends them 1.5% of the overall property transfer tax, which is over $80,000,000. That amounts to roughly, I think, 1,300,000.0 or so. They don't need that amount. So they submit to us a budget about what they need for administering the use value appraisal program. And the remainder, which this year amounts to about $600,000, we just sweep it to the general fund. So that's how the $3,000,000 come from. 2 and a half million is to service a housing bond, the remainder is

[Emilie Kornheiser (Chair)]: I don't understand why that's separate from the e board forecast. The

[Adam Greshin (Commissioner of Finance & Management)]: e board forecast what comes in in total for property transfer tax. That's what we do with that transfer taxes up to statute or up to session law. Okay. Yeah.

[Emilie Kornheiser (Chair)]: So where you have official e board forecast, that is not the sum total of all the revenue coming to the state because you've separated out this million dollars?

[Adam Greshin (Commissioner of Finance & Management)]: That's the current law total of what goes what what's part of that forecast is the 37% of the property transfer tax that goes to the general fund. That's in that forecast. Okay. So the remainder of the property transfer tax, it goes to BHCB.

[Emilie Kornheiser (Chair)]: It goes to all these are. Okay. So if the

[Adam Greshin (Commissioner of Finance & Management)]: reason that 3,000,000 is there is it's on it's not current law. It's not hardwired into current law. It's a budgetary maneuver that we say. I in the little bit that I've gathered

[Emilie Kornheiser (Chair)]: about this year's budget, it seems like there's a lot of moving things from sort of their usual funds into new places. And I think the ways we account for that are an interesting part of what I'm I'm looking forward to your rhetoric on the matter.

[Adam Greshin (Commissioner of Finance & Management)]: We are about to head right into that.

[Emilie Kornheiser (Chair)]: Okay. It seems like we've started.

[Adam Greshin (Commissioner of Finance & Management)]: So the remainder on this page, the direct apps are pretty standard, and we take some money from the human services, additional federal receipts that they're not using. You know, the cash register, otherwise known as Department of Financial Regulation, That comes from their various funds. Attorney general, typically, they send us $2,000,000 or so from their total settlement money, liquor, complaint property, sports wagering. I think you're familiar with that here. And these are these are estimates. And you'll see during budget adjustment nine times out of 10, at least one of the financial regulation, liquor, unclaimed property, sports wagering, those will change, hopefully, for the better, sometimes for the worse. Sometimes we overestimate what our receipts will be. Other times, we underestimate. In the past few years, we've more underestimated than overestimated. Now liquor control, for instance, is the net revenue from

[Unknown Member (House Ways & Means Committee)]: eight zero two spirits or whatever it's trying.

[Adam Greshin (Commissioner of Finance & Management)]: Otherwise called property. It's an enterprise fund. So, yeah, it's the net. So we add that into our e board revenue and property transfer tax, and our total base sources come to 2.644. There are two other things to mention. One, when we received the emergency board 8 and a half million dollar downgrade, that came on a Thursday, and we were submitting the budget the following Tuesday. And there was a three day weekend in between. So we scrambled to fill that hole, and we did that with additional reversions. We revert money from existing appropriations every year. Money that's either not needed, an appropriation that was too high for the cause that it was trying to accomplish or whatever reason.

[Emilie Kornheiser (Chair)]: Can you just jump in for one second? Yeah. So there has been a rhetoric that's been spreading about the about this e board downgrade. And I just wanna remind everyone, and we heard this from the economists, that this is actually the closest they think they've ever gotten in any of their memory to what their projection was. So it might be rounding slightly down, but it is I think calling it a downgrade is a bit of a misnomer.

[Adam Greshin (Commissioner of Finance & Management)]: As you please

[Emilie Kornheiser (Chair)]: I will really try to let you finish that.

[Adam Greshin (Commissioner of Finance & Management)]: At the end of the day, though, we were 8 and a half million dollars in the hole because they changed their forecast. So the reversions are simply, our way of helping you fill that hole. The next line down, there will be, I suspect, a fair focus this year. We are in last year's budget. There was additional money that was evident was available towards the end of the budget season. So the house and senate appropriators created what they call contingent appropriations. Meaning, if that money is actually there, those appropriations will be met. One of those contingent appropriations was a 30, pardon me, was a $30,000,000 temporary reserve to be used for federal backfill, you know, in case we lose federal money, property tax relief, emergency housing, or any other function for the good of the state of Vermont. We are unreserving that reserve, because you have to unreserve a reserve to use it, and we are carrying it forward into fiscal twenty seven, and we are going to be sending that and the balance after the budget adjustment of $74,900,000 to the education fund to provide property tax relief. So because we're unreserving $30,000,000 reserve and we're carrying forward from the BAA in '26 into '27, $74,900,000. Those are additional one time revenue available to us to spend. And those monies will be packaged together with a bow and sent to the education fund for property tax relief, which is a total of a 104,900,000.0. Later on in this presentation, you will hear of another 10,000,000 regarding the purchase and use tax that will be added to that 104.9. So those are all of our sources. And at the end of the day, I had $2,759,000,000 to deploy in the budget.

[Unknown Member (House Ways & Means Committee)]: Can I just ask, because we haven't spent a

[Bridget Burkhardt (Clerk)]: whole lot of time on the BAA, where does the 74,900,000.0 in the BAA come from?

[Adam Greshin (Commissioner of Finance & Management)]: So the lion's share of that came actually from the July board fiscal twenty six forecast. You'll remember that in July, the economists got together and determined that the forecast that they laid out for fiscal twenty six was shy about 75 to 80 I I think it was $77,000,000. And so they increased, upgraded the revenue forecast, that amount of money. So immediately, we had another, I think it was $77,000,000 to spend. So that's where most of that comes from. Now if I wanna switch to another how do I unshare?

[Emilie Kornheiser (Chair)]: Like a button that's brightly colored at the bottom. Or the top.

[Unknown Member (House Ways & Means Committee)]: Or the top.

[Unknown Member (House Ways & Means Committee)]: I don't care.

[Adam Greshin (Commissioner of Finance & Management)]: Let's see if that

[Unknown Member (House Ways & Means Committee)]: It says stop share.

[Adam Greshin (Commissioner of Finance & Management)]: Oh, there it is. It's a red one. And I will share another screen.

[Emilie Kornheiser (Chair)]: You usually use Teams. So we're making you're switching platforms here. It's so fun.

[Adam Greshin (Commissioner of Finance & Management)]: We go. So here's the the budget language that I'd like to share with you guys. And our language document actually, this year, our language document was shockingly short. It was 34 pages. Last year, I think it was almost twice that, partly because we don't have as many one time appropriations, which is partly due to the fact that we don't have as much spare cash to spend. I don't know

[Unknown Member (House Ways & Means Committee)]: it's just a font size.

[Adam Greshin (Commissioner of Finance & Management)]: No. Okay. Just saying. Anyway, so what I did was what I've typically done is I took out from our budget the components that I think pertain to this committee. The house appropriations committee may send you other stuff, but I suspect this is, what you will receive. I've already addressed the property transfer tax, but I what I wanted to say is in past years, we have not withstood this language, and we have directed more to the general fund typically, out of the allotment that goes to the Vermont Housing Conservation Board. Last year, we did not do that. This year, again, we are not doing this. So they'll get their statutory allotment, which this year is about 37 and a

[Emilie Kornheiser (Chair)]: Where are you taking it from, Lam?

[Adam Greshin (Commissioner of Finance & Management)]: Where are we taking the extra property transfer tax? Or

[Unknown Member (House Ways & Means Committee)]: well,

[Adam Greshin (Commissioner of Finance & Management)]: 37 percent goes to the general fund anyway. And then the additional 2 and a half million dollars in session law, actually, if you read through this language, you'll see of that that comes as redirected into the general funding. And then we not withstand the component that directs one and a half percent to property valuation and review, and we set them a specific budget of $6,608,000, I think it was. Actually, Rebecca, you may know better than I what the PVNR budget is, but, we direct whatever is over and above that into the general fund. So that's where the Fed exit March.

[Emilie Kornheiser (Chair)]: So from where the money was going last year to where the money is going this year Identical. The only change is that you're not sending it to PBR anymore?

[Adam Greshin (Commissioner of Finance & Management)]: No. The the we did the same thing last year. We've done the same thing every year. The big change over, say, two and three years ago is we're not, reducing the, VHCb budget. We're giving them their statutory law. So the other thing I would point out here, actually, which we also did last year, which is not a change, but I think it's outside of the statutory allocations. The I think it's 13% of the or 17. I think it's 13% of the property transfer tax goes to the municipal and regional planning commissions. ACCD contacted us and and said the allotment normally, I think 70% of that goes to the regional planning commissions, 20% goes to the municipal planning commissions. They said they'd like to change that percentage because, evidently, they're doing it based on need. And so they're the amount that we're supposed to send to both of those organizations, the top line amount is the same. We haven't changed that. We're giving them, I think, 13%. But the how we're divvying it up between the municipalities and the regionalities, if that's a word, is different than what we're told to do. That's the only other worthy comment from the property transfer tax.

[Emilie Kornheiser (Chair)]: And, folks, we're gonna we will spend time on this language turning it into a table so that it is more digestible than a combination of Adam's words and the words on the screen.

[Rebecca Sameroff (Vermont Department of Taxes)]: Would that be

[Adam Greshin (Commissioner of Finance & Management)]: If I were

[Emilie Kornheiser (Chair)]: Great.

[Adam Greshin (Commissioner of Finance & Management)]: If I were better at getting screens on Zoom, I could actually have a tape off my computer. Oh,

[Emilie Kornheiser (Chair)]: we don't mind if you show us all

[Rebecca Sameroff (Vermont Department of Taxes)]: the stuff

[Emilie Kornheiser (Chair)]: with your computer screen while you're finding it.

[Adam Greshin (Commissioner of Finance & Management)]: I'll send it to you.

[Unknown Member (House Ways & Means Committee)]: Hey. So the

[Adam Greshin (Commissioner of Finance & Management)]: next thing I think worth pointing out, I'm going to yield to my colleague from tax. You see in our transfer section, in every budget, we're transferring money here and there. And from the general fund, you'll see there are actually two transfers, the tax computer system modernization fund, one from the general fund and one from the education fund. And I think, Rebecca is better able to speak to that then.

[Rebecca Sameroff (Vermont Department of Taxes)]: Sure. Yeah. And, I can give a high level overview of this and would just encourage, the committee to hear from Andrew Stein, our Chief Operating Officer, if you want more of a refresher on the details of this annual transfer to the Computer Modernization Fund. High level, this is a statutory transfer, section 3,209 of 32 VSA. And it states that the CMF shall receive an annual transfer from the general fund and education fund in amounts not to exceed point 21% of total revenue collected in the prior fiscal year by the department, we've never asked for a full point 21% of total revenue collected and instead use a methodology that estimates need based on point 21% of a limited number of revenue sources within those funds. That methodology has been reviewed by JFO numerous times and is calculated by our fiscal analysts at the department, And then reviewed with finance and management. For the FY twenty seven budget, the proposed annual budget for the Computer Modernization Fund is 6,397,000.000. This is the appropriation authority to make expenditures from the fund. The amount that we, I should have mentioned, the amount that we will or request to be transferred into the fund is only $6,200,000 A little mismatch there. And about like, I'd say 70% of that, 71% of that will go to our major contractor who handles our integrated tax system, Fast Enterprises, that supports our, you know, integrated tax system that lets us do all we do. And also supporting that system and also supporting an upcoming upgrade or a version upgrade update to that system. We have other smaller amounts that go to other vendors like Cambridge that host the model that the joint fiscal office and tax team share for doing our income tax modeling. Catalyst, the BTPi property software, our scanning contractor has been great, and just other potential IT expenses related to servers and, yeah, other miscellaneous spenders. So that's kind of the high level overview. I may be able to take some questions, but Andrew's really the master of CMF.

[Emilie Kornheiser (Chair)]: And I know that the Appropriations Committee sent out sort of testimony guidance related to budget testimony in early December. And so when we have Andrew in maybe next week or so, we would love to sort of use that format for our conversation. That'd be great. Thanks. Right

[Adam Greshin (Commissioner of Finance & Management)]: in between the general fund transfer and the ed fund transfer to the tax and funeral modernization fund is the education fund transfer. You saw up above in our sources that we are taking 74,900,000.0 that we're carrying forward from the budget adjustment and 30,000,000 that we're unreserving and carrying forward from '26 to '27. We are transferring those to the education fund, which is a total of 104.9. However, the total transfer to the Ed Fund is $10,000,000 more than that. And that gets to the change that will you'll see later on in the budget to the purchase and use tax. So we are filling the hole that in the Ed fund from removing $10,000,000 of purchase and use receipts from the Ed fund and leaving it in the transportation fund. So the total Ed fund transfer is just under a $115,000,000.

[Emilie Kornheiser (Chair)]: You're welcome to answer this question now or when you get to the T Fund part. But why do you have some separate? I understand, like, that the philosophical reasoning behind it is different, but the budget's not usually, like, full of philosophical reasoning.

[Adam Greshin (Commissioner of Finance & Management)]: So why do we have

[Emilie Kornheiser (Chair)]: It's a general fund transfer to the Ed Fund to fill a hole in both cases. Why do you have them separate in here?

[Adam Greshin (Commissioner of Finance & Management)]: Why do we have I'm sorry. Why do we have what separate? Why is there a separate fund for the ed for education, transportation, and general fund?

[Emilie Kornheiser (Chair)]: No. Why do you have the transfer from the general fund to the ed fund? I think you just said that the transfer for the purposes of backfilling purchase and use was in a different part of the budget language than here. And that's my question. It's a transfer from one fund to another of some. Why do have it in two separate places? Other than philosophical?

[Adam Greshin (Commissioner of Finance & Management)]: No. It's it's from a technical standpoint. The language or the explanation of what we do is in one section. The actual movement of money is in the other. The d section always has transfers to and from the general fund or any fund. The e section has all the explanations of what actually is going on. That's why you see them separately.

[Emilie Kornheiser (Chair)]: And so this is the full transfer including both?

[Unknown Member (House Ways & Means Committee)]: That's correct. Thank you.

[Adam Greshin (Commissioner of Finance & Management)]: So and, again, we'll we'll get to purchase and use actually right towards the end, but I just wanted you to see the total transfer amount. So moving into the e section, you'll see a number of things. The first is one of the revenue statutes directs any estate tax revenue over a 125% of the e board forecast into the higher education endowment crossing. That's been the practice for a number of years. I don't know when was that that was initiated, but that has been the practice. I might say for most years, that's been kind of a nothing burger. But in some years, typically, when estate taxes are when there are a lot of estate taxes, that becomes a factor. Last year was one of those years when there was about twenty five to thirty million dollars additional estate tax paid in above the forecast. So that amount is generally and was last year directed to the Higher Education Endowment Trust. You will see in this document, we are asking to change that and direct that additional estate tax revenue to a new fund called the school construction

[Unknown Member (House Ways & Means Committee)]: school actually, you

[Emilie Kornheiser (Chair)]: right. The fund that already that we created.

[Adam Greshin (Commissioner of Finance & Management)]: So what we would like to do is instead of sending it to the Higher Education Endowment Trust Fund, send it to the school construction fund school aid and construction fund. And this is the first of two or three statutory change oops, statutory changes that you'll see that

[Emilie Kornheiser (Chair)]: Can I just ask a question?

[Bridget Burkhardt (Clerk)]: Can you just say a word about what the Education Endowment Trust Fund does? What that one is usually used for?

[Adam Greshin (Commissioner of Finance & Management)]: So that is overseen by the state treasurer, and he actually would be a good person to come in and speak about it. But they are a trust fund.

[Emilie Kornheiser (Chair)]: Taking more just for the committee, we're taking more testimony about the estate tax tomorrow. Commerce and education are taking testimony about the trust fund tomorrow. And it's helpful to hear your thinking on this, Adam.

[Adam Greshin (Commissioner of Finance & Management)]: Yeah. So please go ahead. So they receive three sources of revenue. One is anything that the general assembly and the governor in their wisdom and generosity choose to appropriate or transfer to it. Two is private contributions, which is somewhat unusual. We generally don't have funds to take private, but they do. And then the third is excess estate tax receipts from '25. So that's their sources. Their mission is to help offset the cost of higher ed for students. So up to 5% of their total assets at any one year can be distributed to three recipients, the Vermont State University, the University of Vermont, and BSAC. Doesn't have to be 5%, but up to 5% can be distributed. So I think and those monies are used, I believe, to offset the cost of going to college for students. So

[Rebecca Sameroff (Vermont Department of Taxes)]: Thank you.

[Adam Greshin (Commissioner of Finance & Management)]: You're welcome. And, the the state treasurer, I think, has quite a bit more articulate sayings on this.

[Emilie Kornheiser (Chair)]: This language is not from the treasurer's office. No. It is not.

[Adam Greshin (Commissioner of Finance & Management)]: So you will see in this a number, let's see, of instances. So there you see the school construction aid special fund, and there you see we've added a a line that essentially what we did was took it from what was formerly the Vermont Higher Education Endowment Trust Fund. We simply beamed this line that we're taking out. We beamed it up to the school construction aid special fund.

[Emilie Kornheiser (Chair)]: Take that technical term. Do you anticipate this is gonna be enough to capitalize the fund, to pay debt payments on construction? What do what's your expectation on how these revenues can be used and how stable they'll be into the future?

[Adam Greshin (Commissioner of Finance & Management)]: In terms of enough to capitalize, you know, honestly, there are some years when this don't even get enough estate tax to hit forecast. So I I don't know is the answer, but it's a start. And, you know, the governor was clear that he's not thinking this is the answer to school construction. I think we're all aware that we're gonna need quite a bit more than what we're gonna get from the estate tax excess. But it's another arrow in the quiver, is probably the best way to put it. But again, if you look back, and I think I think actually tax has and joint fiscal also have And, Rebecca, you may be aware. I mean, I think we've looked back at the estate tax overage over the years. And, you know, it's it's pretty lumpy. Some years were in the money, other years not. So I don't know. Rebecca, do you have any

[Rebecca Sameroff (Vermont Department of Taxes)]: No. I didn't prepare that history for this testimony, but we could certainly grab it. I think, lumpy is a great great term to describe how often we hit that, 125% mark. We're

[Emilie Kornheiser (Chair)]: taking some testimony on that tomorrow. And so you're taking the money that's intended for low income Vermont kids to pay for higher ed and moving it into the school construction event.

[Adam Greshin (Commissioner of Finance & Management)]: I don't know what the demographic is, honestly. I don't know what the demographic is for the children who use this, for the people who use that. I don't know what the demographic is. So low income, I don't.

[Emilie Kornheiser (Chair)]: I don't wanna take testimony from the treasurer about an idea that wasn't theirs. Who's the best person to take more testimony about this idea from?

[Adam Greshin (Commissioner of Finance & Management)]: This came from the administration.

[Unknown Member (House Ways & Means Committee)]: So are you the best person to

[Emilie Kornheiser (Chair)]: come in for that testimony?

[Adam Greshin (Commissioner of Finance & Management)]: It's in the budget. And I can see that, I think the treasurer would be able to talk to answer the question of what is a higher education down a trust line. I wouldn't trust my words on that, but but this was a a proposal from the administration.

[Emilie Kornheiser (Chair)]: The administration is abrupt. I I'm not trying to be difficult here. There are a lot of people in the administration, Adam. So if we wanna take more testimony on this idea, are you the person who should come back in or is it someone else?

[Adam Greshin (Commissioner of Finance & Management)]: No. I would I would invite you to welcome back in the agency of education.

[Unknown Member (House Ways & Means Committee)]: K.

[Adam Greshin (Commissioner of Finance & Management)]: Probably would be because they are the most knowledgeable, I assume, about school construction.

[Rebecca Sameroff (Vermont Department of Taxes)]: I see that.

[Adam Greshin (Commissioner of Finance & Management)]: Lost out.

[Emilie Kornheiser (Chair)]: We had a report about it just

[Adam Greshin (Commissioner of Finance & Management)]: So I would defer to them.

[Emilie Kornheiser (Chair)]: Go ahead. Thank you.

[Adam Greshin (Commissioner of Finance & Management)]: You're welcome.

[Emilie Kornheiser (Chair)]: Yes. Representative Lamoille. How much money are we

[Unknown Member (House Ways & Means Committee)]: talking transferring?

[Adam Greshin (Commissioner of Finance & Management)]: Like I said, it's pretty lumpy some years. I think last year, it was somewhere between 25 and $30,000,000 in excess of the 125% of the e book forecast. So call it 25 to 30,000,000. In other years, there's been a few million. I would say in 50% of the years, there's been zero. You know? So and again, I mean, I've seen a chart. Again, I tax may have it or the joint fiscal office may have it, but it's again, it's it's not a what I would call a reliable source, but it is one source. And so would this be an in perpetuity change? Our proposal That's does. There's no end date.

[Unknown Member (House Ways & Means Committee)]: So,

[Unknown Member (House Ways & Means Committee)]: Adam, I understand that. And you said the governor admitted that this was not necessarily enough money to solve the need for school construction. Are you privy to or thinking about what may be that funding source in the future that's not relevant to this budget?

[Adam Greshin (Commissioner of Finance & Management)]: We've had a lot of discussions on that. I'm not ready to share discussions because the thinking isn't fully baked.

[Emilie Kornheiser (Chair)]: When might you be ready to share the discussion? Rests on those decisions.

[Adam Greshin (Commissioner of Finance & Management)]: When decisions are made.

[Emilie Kornheiser (Chair)]: Some decisions can't be made until those decisions are made.

[Adam Greshin (Commissioner of Finance & Management)]: Understood. Well

[Emilie Kornheiser (Chair)]: Thanks.

[Kirby Keaton (Legislative Counsel)]: Welcome.

[Emilie Kornheiser (Chair)]: Is there something else out of that trust fund that was also in the budget?

[Adam Greshin (Commissioner of Finance & Management)]: Yes. But not a there's see, don't know if I highlighted that because I I didn't think it was for this committee. But there is a onetime transfer from the Higher Education Endowment Fund to the University of Vermont for a stadium. It's the best way to put it. Stadium. I believe a sports complex. This place that

[Emilie Kornheiser (Chair)]: was Astroturf or natural grass? Or

[Adam Greshin (Commissioner of Finance & Management)]: I believe it's an indoor facility for various athletic events. The University of Vermont has put in, I'm going to say, about $70,000,000. They have donors lined up who are waiting for the state to put some skin in the game. So there is a $15,000,000 one time transfer from the higher education endowment trust fund to UVM for a contribution to the sports complex that was well, I think it would be a good idea to have the University of Vermont in there. If this is the committee of jurisdiction for that, I'm sure they'd be very happy to come in here and explain.

[Emilie Kornheiser (Chair)]: Coming from the administration when I explain it other than

[Adam Greshin (Commissioner of Finance & Management)]: I think the proponent would probably be Jason Malucci would probably be the best person to talk to.

[Emilie Kornheiser (Chair)]: Thank you. And we're if we're gonna be looking at the estate tax, sort of anywhere that the estate tax is anticipated to go would be an important part of that conversation. That's why I'm bringing it up here. Thank you.

[Adam Greshin (Commissioner of Finance & Management)]: So moving on down. The next item that I believe will cross this committee's jurisdiction. You may be more familiar with or not. But one appropriation within our general fund is three well, last year, was $3,410,000 for reappraisal and listing payments. You guys are probably aware that the state helps offset the cost of a number of functions that towns do.

[Emilie Kornheiser (Chair)]: We just heard testimony about this. Alright.

[Rebecca Sameroff (Vermont Department of Taxes)]: Can I ask for you?

[Adam Greshin (Commissioner of Finance & Management)]: Are you ready to move I mean, you understand what we're doing? And

[Emilie Kornheiser (Chair)]: I have questions about it coming out of the pilot fund. I don't understand the thinking there. You don't I'm sorry? The use of the pilot fund for it. So

[Adam Greshin (Commissioner of Finance & Management)]: one thought there actually, the thought that probably carried the day is the pilot fund is paid for by municipalities. Those that choose a local option tax, They keep 75, formerly 75% this year, and the state takes 25%. So that's what fills the pile. So doesn't it make sense to recycle that money back to the communities who are actually paying it in? There would be some minor redistribution since not every community has a local option tax. Although, this point, virtually every community where you can buy anything does. But the local option taxes are paid by communities, so this would be recycling back to communities.

[Unknown Member (House Ways & Means Committee)]: But I think there's

[Emilie Kornheiser (Chair)]: sort of an interesting thing that most communities that, like, need the litigation assistance or the smaller towns that actually don't bring in that much money on the pilot. But we haven't looked I think it's worth us looking at that analysis, if that's the argument you're making. Representative Burkhardt? Yeah. My question is just could you remind us what that 25% is already being used for by

[Bridget Burkhardt (Clerk)]: this date? So what is that 25% going to now if we're choosing to use it for a different purpose?

[Adam Greshin (Commissioner of Finance & Management)]: Well, the lion's share of that 25% would still be used for the same purpose that it always is. But the issue has become the pilot fund has grown, and the pilot payments back to the communities don't dry up the fund. Remember, used to be back in the day, we didn't even pay a 100% about the pilot payments.

[Emilie Kornheiser (Chair)]: We really just started paying.

[Adam Greshin (Commissioner of Finance & Management)]: We used to pay about ninety percent and ninety five, and then the fund assets grew to the point where we now pay a 100% and we still have a growing balance. So and it you know, tax actually Rebecca can speak to this better than I. They've done fair amount of analysis on this, and they're convinced that this could be you know, have no impact on the balance of the fund. So

[Unknown Member (House Ways & Means Committee)]: Except that I know there's an allocation to for the BAA to take money out of pilot fund, and then we also have a municipal grant less stabilization program, which we started last year, which could go out ten years. I'm really concerned about just the viability of that fund if we start taking other things from it.

[Adam Greshin (Commissioner of Finance & Management)]: Well, BAA appropriation, you can turn to your right there and ask him about that. That was not our suggestion. But to the extent that immigrate imitation is the sincerest form of flattery, I'm very pleased with that. But, I mean, not to be flip, I mean, I do think that there was I mean, we we did a fair amount of work on this. You know, this wasn't something that we thought would just be a great idea and we put it forward. Actually, you know, Rebecca and her team have done a fair amount of work at it. And I know that your joint fiscal office is not the same. So I don't know.

[Emilie Kornheiser (Chair)]: I know that there's lots of stakeholders that you talk to in advance of putting the budget forward publicly. Have you had any conversations with the League of States and Towns about this?

[Adam Greshin (Commissioner of Finance & Management)]: Personally, have not. I Rebecca, have you guys

[Rebecca Sameroff (Vermont Department of Taxes)]: No. We have not either.

[Unknown Member (House Ways & Means Committee)]: Okay.

[Emilie Kornheiser (Chair)]: We will make sure to have them in. They had particular proposals for the pilot months last year that we did not entirely fulfill, that I imagine are gonna re merge this year.

[Adam Greshin (Commissioner of Finance & Management)]: So, one of the issues, maybe the hardest issue of all, this is, it's surprising to me that, you know, a $3,410,000 appropriation has so many statutory citations. So you have the $8.50 per parcel appraisal or reappraisal, amount. That that is in statute. You have the $1, equalization study per parcel fee paid to towns. That's in statute. You have the $100,000 lister education, that is in statute. And you have the $70,000 hydroelectric plant litigation assistance, that is in statute. So that's why, I'm gonna thumb down about, don't know, two or three pages to get past all of the various changes that we had to make to statute to get to our next. Next on the list that I think will come to this committee, I believe you've already spoken with Nolan on the health IT fund. So So I don't think I need to be I'm stand on that.

[Emilie Kornheiser (Chair)]: But Well, I'm curious. One year is a, like, must we? That's Yes.

[Unknown Member (House Ways & Means Committee)]: Like

[Emilie Kornheiser (Chair)]: I mean, do you have, like, grand plans for next year that you're just not ready for yet, and then one year makes sense? But, like, otherwise, one year just seems like a wild amount of extra words we'll all have to use.

[Adam Greshin (Commissioner of Finance & Management)]: So, madam chair, I think

[Emilie Kornheiser (Chair)]: I understand that you're not have it, but

[Adam Greshin (Commissioner of Finance & Management)]: I think we wanna make sure that we study this issue. We feel like two years is too long. This essentially is what we're saying to you is we're gonna look at this and we're going to come back to you with a recommendation about whether we just eliminate or, you know, we propose eliminating the sunset entirely or we actually sunset? Know, both of those are on the table. There's been some intersection between the rural health transformation program and electronic medical records and the like. So I think part of it is that because of this new rural health transformation plan and the likelihood or potential for intersection, we thought, let's just push it out of here. But, you know, really, I think part of it is we're just trying to hold our own feet to the fire here and say we gotta come back to you guys with something. Either we want this fun, we're in love with it, or we're not. So that's somewhat inarticulate way of saying we thought two years was too long. One year might be not long enough, but better than two.

[Emilie Kornheiser (Chair)]: Thing I would offer is that if it's the sun sets out five years and you have an idea next year that doesn't foreclose changing things next year just because the sun sets out Five years. And so I guess I would just sort of consider, would the governor veto the budget over this sunset petition being pushed out a little bit further? You don't have to answer that now, Adam.

[Adam Greshin (Commissioner of Finance & Management)]: Anyway, so and there's two things, really. There's the health IT fund, then there's the revenue source, as you guys are aware, the health care claims tax that feeds that. I think it's point one nine nine of 1%, if memory serves. So both of those needed to be I don't think the claims tax was abolished, but I think the component of the claims tax that goes into the health IT fund was sunset. So we changed that sunset. And there, here, you see in e five sixteen, that's the change to purchase needs. And we ratchet it down roughly 10 millimeter. And then in e five sixteen point one, we simply make clear in statute that no motor vehicle purchase and use tax will be used in the education fund, and it will all be used in the transportation.

[Emilie Kornheiser (Chair)]: I understand the strong desire to strengthen the transportation fund right now and share that goal 100%. Even in my really endless commute through the snow yesterday, I had these old panics about not having any cloud trucks on the highway anymore, instead of just one lane cloud. At this point, the proposal does nothing but raise property taxes, because we haven't gotten through transformation. And is so if we're transferring general fund, why not just transfer from the general fund to the transportation fund? Why must it be washed by the education fund?

[Adam Greshin (Commissioner of Finance & Management)]: Because I think consistent transfers from one fund to the other are suboptimal practice. Why not just Transfer twice?

[Unknown Member (House Ways & Means Committee)]: That's the point.

[Adam Greshin (Commissioner of Finance & Management)]: Why not just eliminate the reason for the transfer?

[Emilie Kornheiser (Chair)]: You're not doing that here.

[Adam Greshin (Commissioner of Finance & Management)]: We are taking the first step in that direction. Yes, we are. And this doesn't raise property taxes this year. That's why there's a transfer.

[Emilie Kornheiser (Chair)]: I mean, if that transfer was applied to property taxes instead of a transfer, it would lower property taxes more. But that's all.

[Kirby Keaton (Legislative Counsel)]: I'm sure

[Unknown Member (House Ways & Means Committee)]: I'm

[Adam Greshin (Commissioner of Finance & Management)]: following you on that. But the idea being is $10,000,000 less of the purchase and use tax is going to the Ed Fund, so there's $10,000,000 of general fund being sent over there to replace. They'll never know the difference. Money is green.

[Unknown Member (House Ways & Means Committee)]: So long I don't know if this we're only looking at this budget. But long term, are you counting on savings in the

[Unknown Member (House Ways & Means Committee)]: education fund

[Unknown Member (House Ways & Means Committee)]: to make up for the loss of the purchase and news tax transfer into the education fund?

[Adam Greshin (Commissioner of Finance & Management)]: This is a component of education transformation. I don't think there's any question that if we don't go forward with transformation, that this would be somewhat troubled, but our intent is to move forward with the transformation, and we are expecting savings.

[Unknown Member (House Ways & Means Committee)]: The only reason why I bring that up is if the expectation savings aren't realized, then it's looking at continued reliance on the general fund or income taxes, other sources of funding for education.

[Adam Greshin (Commissioner of Finance & Management)]: We're acutely aware of the luxury of having this money. As I mentioned earlier, we were talking about this. We got an upgrade in pardon me, July 2025 of $77,000,000 that instantly goes right to the bottom. That's not gonna happen in future years. So we know that our revenue sources are going to be strained. The other thing I'll say is, you know, our current services cost this year, just running government exactly the way we ran it last year, was a $139,000,000, Jim. So we're going to need a 139,000,000 more dollars next year or counting for inflation, probably a 145,000,000 more dollars next year just to run government. So those kinds of revenue scenarios have you believe that if you're going to transform, you gotta get going and start transforming. And so we're, you know, we're very desirous of moving.

[Emilie Kornheiser (Chair)]: So act 73, regardless of how anyone feels about it, very carefully implemented all of the tax changes in the same year so that it would not cause some of the challenges that this particular change is going to cause. And I'm curious why you did not slot that into that same time frame.

[Adam Greshin (Commissioner of Finance & Management)]: I think we view this separately. I mean, honestly, I think we just

[Emilie Kornheiser (Chair)]: Just said you viewed it together. Okay. Cool. When we continue to argue about this, do you wanna come back each time, or should we ask someone else for the administration to comment?

[Adam Greshin (Commissioner of Finance & Management)]: About which topic, madam?

[Emilie Kornheiser (Chair)]: About the purchase and use.

[Adam Greshin (Commissioner of Finance & Management)]: Purchase and use text? Rebecca, what do you say? Should I think

[Unknown Member (House Ways & Means Committee)]: Oh, good. And you have to get it

[Adam Greshin (Commissioner of Finance & Management)]: expecting that our revenue department is better than our budget. I'm the guy who spends money transportation.

[Emilie Kornheiser (Chair)]: I mean, it might be the transportation agency too. Right? I don't What's the transportation fund revenue doesn't go through tax?

[Rebecca Sameroff (Vermont Department of Taxes)]: Just said this is, you know, my the one one of the the tax types that we don't actually touch, but.

[Unknown Member (House Ways & Means Committee)]: Maybe it is

[Emilie Kornheiser (Chair)]: not Rebecca's responsibility to testify.

[Rebecca Sameroff (Vermont Department of Taxes)]: Would be happy to argue about this with you too, Emilie.

[Emilie Kornheiser (Chair)]: Thanks, Rebecca.

[Adam Greshin (Commissioner of Finance & Management)]: From a policy standpoint, you're welcome to invite me back in. I don't promise you I'll say anything more than I'm saying now, but you're welcome to continue. Thanks. I think, much as I really enjoy being here, I think that's all that I have to do.

[Emilie Kornheiser (Chair)]: I imagine that we're as we look through the budget, we'll find more sections that have some joystick. We'll invite you back for that.

[Adam Greshin (Commissioner of Finance & Management)]: I mean, I made best efforts to figure out what you're going you guys are gonna receive. There may be other stuff in there.

[Emilie Kornheiser (Chair)]: Thank you. And I you know, ways and means is always your home, Adam. And Rebecca, we will schedule a separate time for you. It'll go through your department budget ask as well.

[Rebecca Sameroff (Vermont Department of Taxes)]: Awesome. Thank you so much.

[Emilie Kornheiser (Chair)]: Thank you. We're gonna take a deep breath and shift gears. In that gear shifting, we are going to move to the tax classifications work and implementation of that. Kirby drafted some language that really We're gonna take a brief break and gather We're not going to? Okay, great. We're not gonna take a brief break and gather ourselves. That essentially takes the report from tax, turns it into a bill, and adds the decision points in as decision points. This might be a framework of working through something that we'll use a few times this year. So I'm also curious for people's feedback on how this works. Usually, we have a bill or we don't have a bill. And this is a bill with great big questions just sitting in the middle of it in slightly different font. So And it feels helpful to me as a way of thinking about it. Anyway, Kirby, do you wanna

[Adam Greshin (Commissioner of Finance & Management)]: join us?

[Emilie Kornheiser (Chair)]: And so we are gonna have this language, we're gonna

[Bridget Burkhardt (Clerk)]: have the rad

[Emilie Kornheiser (Chair)]: language, maybe pre K, and those things might all wind up All those separate pieces of language might come together into one bill, once we work through it. But we'll work through them separately for a little while. I think everyone knows that part of the usual go around. Questioning fund, how it's end? Original fund fund? I don't know.

[Kirby Keaton (Legislative Counsel)]: It's just highlighted. Sorry.

[Emilie Kornheiser (Chair)]: I think only Grady at JFO even stands for comic relief.

[Kirby Keaton (Legislative Counsel)]: Kirby Keaton, Legislative Council, not a person who has knowingly used common sense as an adult.

[Unknown Member (House Ways & Means Committee)]: No. That correct.

[Kirby Keaton (Legislative Counsel)]: And as the chair said, we have some language to look at. Before we go in, yeah, want to preface what we're looking at, which is based off of the tax departments report on classifications that it was required to submit December 15 under Act 73, that report has eight steps for implementation between now and 2028 when Act 73 says that this is to go online. So for the next calendar year, steps one and two from that report are covered in calendar the year. So we have language for step one that I will be flagging as all along the way involves policy decisions for all of you. I've tried to prepare good placeholder language for you to look at for things, but I will be reiterating all along the way that it's placeholder language that's based off of mostly recommendations from the department, but for things for you to make decisions about. And then for step two, I did not draft it as placeholder language. Instead, it is those things tend to be bigger questions about how you want to go about something. So those are just phrased as policy questions separately. So with that, we can get into what I have here, which is taking classifications language from Act 73 and modifying it. Another preface comment I'll make in general, when Beth and John and I go about drafting Act 73 stuff, unless we're asked to do it differently, the default for drafting this tends to be, we're gonna assume a repeal and replace, because it just seems the cleanest drafting wise for us to line things up. It doesn't have to necessarily be that way, but that's what we're doing. So you can envision this as we are pretending like we are going to take out the language max 73 and we're gonna place it with this other more detailed version of a of a roadmap for classifications. Okay. I'm going to skip step one because we're gonna visit at the end because that's a tax department step two item. So we'll go into section two of the bill, which is the grand list content statute. It is repeated here because it's an act 73 as part of setting up classifications. There's no change except for one, which is that I have removed the VCGI contiguous parcel language for our purposes for this project we're doing, because it's not needed for classifications. It's not actually related to classifications. It was in there in Act 73. You heard testimony this morning that the department's interested in VCGI, they said was also interested in changing how to go about that issue. So we're just gonna, since that is really not related to what we're talking about, we're just, it's gone from here for now. And that's it for that section. Section three gets into the framework from x 73 on establishing a classification system, and the changes from the x 73 language start in subsection C of section three on page three. And I'm going to skip to the definition for non homestead residential, which is a lot of these other definitions play off of that. So I think that's kind of our anchor point. So we'll start with that. The definition we have for non homestead residential, and in other words, this is the definition of the second homes and short term rental properties that are intended to receive potentially different tax treatment. Right? So that's what non homestead residential is. It means a parcel or portion of a parcel with a dwelling that is new with a dwelling that is not a homestead, not rented out as a long term rental, not a mobile home, or used exclusively by the owner of the homestead on the same parcel for domestic purposes as part of the homestead. I'm going to walk through what all of this means and unpack everything. It means that when the department will be working with assessing officials to determine for each property, and that they'll be using forms and stuff that will go into as well. When they're going to make this decision for a property or a unit within a property, if it's declared as a homestead, if it qualifies as a homestead, it's not going to be taxes, non homestead residential. If it's rented out as a long term rental, which we have definitions for, which we'll get into in a minute, not going to be treated as that unit is not going to be treated as non homestead residential. If it's a mobile home, the department's suggestion through its report was what do we do about mobile homes? So this placeholder language is one thing that's good about mobile homes is to say never tax them as second homes. So if they're a homestead, they'd a homestead, which is how it would be anyway. But if they're not someone's homestead, the mobile home would go under non homestead, non residential, like the treatment would be under current law.

[Bridget Burkhardt (Clerk)]: I have a small thing, which is I've just been talking to a lot of folks who've been working on manufactured home legislation, and I know they're trying to shift to that terminology. Does that create a problem if we switch to that terminology? Or is there a definition someplace else of manufactured home that gets mixed up?

[Kirby Keaton (Legislative Counsel)]: I didn't decide which to put here, and I put mobile home because there are definitions around it now. If if the change you're talking about takes place, all references to mobile homes, including this one, would be in that process changed over to that other terminology. So I'm sticking with what the statutes have now, but, yeah, I'm aware that that there's talk of changing that.

[Emilie Kornheiser (Chair)]: We'll probably take testimony on that later.

[Kirby Keaton (Legislative Counsel)]: And there's a question here about, I did not define mobile home. I can't define it by reference to one of the definitions that exist. Didn't think that that was going to be a huge problem for administration for tax. And by not defining it by reference, leaves them a little room to make some, to use their own deference a little bit. So that's kind of why it is, but that's another policy questions part of this. If you want a specific definition by reference, that's another thing. Obviously the policy question is whether you're okay with this default treatment for these types of properties to never be considered non homestead residential. When we get into the definition of dwelling, I'll just give you, I'll skip ahead on that since it's related. Through a different mechanism, we are also leaving out seasonal properties. Those would also not be under the language before you, and we'll get to that language in a minute. But I think it's kind of a similar reasoning. Those are also being excluded, but they're being excluded under the definition of dwelling. So moving on, the last part here.

[Emilie Kornheiser (Chair)]: Should say that one, but this is the source of most of my email. So I just want to say it loud and proud for the record that we're going to get to it. Seasonal dwellings camps are excluded from this, but we're going get to that language in a little bit.

[Kirby Keaton (Legislative Counsel)]: Under the language you're looking at, it's placeholder. It's a recommendation from the department. But yes, this language excludes seasonal properties. It doesn't use the term seasonal property. Well, let's just jump to it. We're talking about it. Let's just do it. If it's fit for year round habitation as determined by the commissioner, that was the language the department wanted for this, but that by requiring a dwelling to be fit for year round habitation, this is like a legal way of, so you can slice things up different way. When it comes to the mobile homes, we are just saying those are never going be considered second homes. When it comes to seasonal, we are saying, we're not going to count those as dwellings. And since dwelling is part of what makes something a second home or a short term rental, effectively the same thing, leaves them out of that different type of taxation, but for slightly different reasons. So there it is. So I'm going to jump back to where we were with another use of a property that suggests from the department in their report for something to be left out of the second home to short term rentals classification is an instance where basically you've got a duplex and one side of the duplex is a homestead. And the other side of it is residential, but it would meet the definition of dwelling that we're talking about. So the question becomes, what do we do about it? What this says is if that other side of the duplex is used by the homestead owner for their own purposes, then we're not going to call that a second home. If we don't address that, then you could end up in a situation where, just by law, a situation like that would be taxed more. And even though the use of it by the person is to basically treat both units as their one singular home.

[Emilie Kornheiser (Chair)]: So it's the other side of the duplex for an in law or their kid or something like that, but don't charge them rent?

[Kirby Keaton (Legislative Counsel)]: If it's not used exclusively by the owner for domestic purposes, then you start to look at the other definitions and If where they fall it's used by a family member

[Emilie Kornheiser (Chair)]: It's not domestic purposes.

[Kirby Keaton (Legislative Counsel)]: Would maybe still fall under homestead. But if it's used for business purposes, let's say it's a therapist, they use that other side of their office in their business. That's going to end up falling under non homestead, non residential. And that would be a mixed use and we will be talking about how this language addresses mixed use. Doesn't it feel good after all the testimony you've had about all the problems that we are actually walking through and solving problems potentially? I feel really good. That's a nice part of what we're doing right now.

[Emilie Kornheiser (Chair)]: What's exciting is we didn't actually even have to solve the problems ourselves. TAC solved these problems for us. We're just seeing it as solved problems instead of as a report.

[Kirby Keaton (Legislative Counsel)]: It's true. They've done a wonderful job of thinking of a great many things for us to get out ahead of. It's true. So that's the definition for non homestead residential. And now I will hop back up and look at dwelling. As you saw, the part non homestead residential definition involves a property that has a dwelling. So if it doesn't have a dwelling, it's not going to ever be classified as that. And if it's not a homestead, that would mean all of those would be, all the properties without dwellings are going to be treated as non homestead, non residential. What we are currently calling non residential. Like commercial properties, in other words. So the definition of dwelling that we have that is suggested from the department says a dwelling means a building or part of a building, including a single family home, a unit with a multi family building, within a multi family building, an apartment, a condominium, a mobile home. So a mobile home could be a dwelling, but then we eliminate it down below. We can change that. We can change that. Or other similar property or structure containing a separate means of ingress and egress that is designed or intended to be used for occupancy by one or more persons in a household, including providing living facilities for sleeping, cooking and sanitary needs and is fit for year round habitation. So the last part goes to seasonal. The first part of that goes to, is it used for a personal event? So that's the suggested definition of dwelling, which again would be mostly applied in the context of when a property is not a homestead or declared as a homestead and figuring out whether it's a non homestead residential property.

[Unknown Member (House Ways & Means Committee)]: Did you look at the other states that have classifications? Did you look at any of the states used for this type of motion?

[Kirby Keaton (Legislative Counsel)]: I've looked at other states. The department looked at other states in the process of putting together a report.

[Emilie Kornheiser (Chair)]: You've spent a lot of time looking at other states, like let

[Kirby Keaton (Legislative Counsel)]: us Yes, and it's just that it's just so different. That's what I would say. It's just so different that adopting what we have or adapting what we have, rather, to make this work is the best avenue. Unfortunately, there's no silver bullet with other states. Hawaii does a lot of their street zoning. That's not the case for us. Montana already has the state assessing everything. That's not our situation. So, yeah. So moving on, the definition for homestead from the Act 73 version, we just added a reference to the existing definition of homestead to make very clear that we are not changing what that means at all through the classifications. Homestead means homestead as it always has. On the top of page four, we have a definition for long term rental. Versions of this that were considered last year made references to the landlord certificate to try to get at long term rentals. You've heard a lot of testimony from the department where they'd rather not do that. They'd rather approach long term rentals from a different way. So that's what this is. So none of this is relying on landlord certificates in law here. So long term rental means a dwelling, just looks at that definition for which rent is paid for the right of occupancy for periods of at least thirty days. That's the first part. If you're trying to decide whether something's a long term rental, first question, the dwelling here, rents paid for the right of occupancy, and is that rental period for thirty days at a time? Because if it's a rental period for a week at a time, that's not going to count under this definition. Must be thirty days at a time. Second question with combined rental periods in a current calendar year that total at least six calendar months. So thirty day rental periods for the current year totaling at least six months of those thirty day rental periods. Third question, there is a bonafide landlord tenant relationship between the parties. This is not a situation where a parent is letting their kids stay there and calling it a long term rental or something like that. Or a situation where someone sets up a LLC. LLC to rent it to themselves. Like, this language is intended to see through those kinds of things.

[Emilie Kornheiser (Chair)]: And I in thinking about not the department's decision to not use the landlord certificate, I've been sort of thinking about what is helpful to use as explicit verification and data matching for the purposes of implementing this versus the ways that the tax department uses other data available to them for the purposes of making sure that folks are following the law when they do audit, pre audit work. And I'm looking forward to exploring the difference between those two things with the department. So just because they have data available they're not using explicitly here doesn't mean they wouldn't use it implicitly somewhere else. And that's something I want to understand with them a little bit better.

[Kirby Keaton (Legislative Counsel)]: Yeah.

[Unknown Member (House Ways & Means Committee)]: Yeah,

[Unknown Member (House Ways & Means Committee)]: What if the landlord does not call it a lease and calls it a boarding agreement? There's a bona fide landlord tenant relationship, kind of a landlord tenant relationship, but the landlord or the person who's allowed the boarding says I can come in and flip the video in this if I need to.

[Emilie Kornheiser (Chair)]: Like a roommate situation?

[Kirby Keaton (Legislative Counsel)]: Yeah, sounds like you are getting into something that would not be a landlord term relationship because the right of occupancy is a legal term. I mean, if you don't have a full legal right, that if someone else, if it's not really your space, that would raise some questions. There's a lot of questions where you can start to get into landlord tenant law, which is what some of this does touch on. Generally, you don't have to have a written agreement necessarily, but you do need some kind of rental agreement under this language and under landlord tenant law. Our language here is a dwelling for which rent is paid for the right of occupancy and there is a bonafide landlord tenant relationship. So you can have a written or an oral agreement and you would at least need the right of occupancy as in having some rights over use of the property. If either of those two things are missing, then you are starting to get towards an ambiguous area where maybe there's not a landlord to a relationship.

[Unknown Member (House Ways & Means Committee)]: We have another question on the long term rental. I know some have mentioned, you know, here it says also means a dwelling use to house farm workers. There's been some talk about, let's say, a condominium that houses resort workers? How would that go?

[Kirby Keaton (Legislative Counsel)]: That's a policy question I wanted to flag for you. That's moving on to the next part of the language, which is long term rental also means a dwelling used to house farm workers for at least six calendar months, which should not be consecutive in the current calendar year. The question was raised by the department, what to do about farm workers? A related question is, well, what to do about any employee housing? Which is what you were getting at. And so we have some placeholder language here that addresses the farm worker question, which is to say those will count as long term rentals. So in other words, as long as you're following the similar kind of requirements as long term rentals, as in having them there for six calendar months, just for a long term rental, you need a renter for six months. So that's this placeholder language is there to address it that way. That could be changed instead to of farm workers, could be expanded to employees. That's one question. Another question is, Vermont law does not have a definition of farm workers even though it uses the term farm workers, so I just want to flag that. I did not try to define it here. I spoke with some of my colleagues. Everyone's like, I don't know.

[Emilie Kornheiser (Chair)]: I bet they all use a lot more words than that.

[Kirby Keaton (Legislative Counsel)]: I could write a definition of something like, a farm worker means an employee of a farm operation. Mean, we could do something like that. So those are the kinds of policy decisions, and a lot of what I'm saying right now, you're going want to hear from the department later about their thoughts and what they're comfortable with as far as terminology.

[Emilie Kornheiser (Chair)]: It's a useful flag, though. Farm worker and a resort worker are functionally in the same landlord tenant type relationship with their employer functionally. And that's something that we can work out as we go. You don't have to define farm worker or resort worker if we can get at the relationship with the employer. And some traveling nurses as well.

[Rebecca Sameroff (Vermont Department of Taxes)]: Hospitals. Yep.

[Kirby Keaton (Legislative Counsel)]: That's a good point. If we want to change this to employee, there'll just be some questions about employee in what sense. How far do we get into? Department of Labor, they have to

[Unknown Member (House Ways & Means Committee)]: you get it. An overlap with current use with buildings that house farm workers, but exempt from property taxes.

[Kirby Keaton (Legislative Counsel)]: Mhmm. And in that case, you know, farm workers not defined.

[Unknown Member (House Ways & Means Committee)]: Sometimes staff, new staff of any club, is provided temporary for even long term housing.

[Emilie Kornheiser (Chair)]: Do you have to think about that?

[Kirby Keaton (Legislative Counsel)]: Yeah, that's the policy question for you here is, there's many policy questions. And what treatment do you want those things to have? Is the language framework that we would use to either to add, to flush this out more or remove it or do whatever you want. Another policy question here is under non homestead, non residential. The department has suggested adding to the definition, this would be homestead, non residential means the commercial properties. A lot of what you think of when you think of when people, when taxpayers pay the non homestead rate right now. Adding to the definition and the classifications that non homestead, non residential includes a multi family building with five or more units. I want to give you some explanation just so you know, but I think the department could give you more of their policy argument for wanting this. Currently, when it comes to property valuation world, there is a distinction often made between a building that has four or fewer units and a building that has five or more units. Five or more units tend in property valuation to be treated as a commercial apartment, where the former tends to be more treated residential or often does in different contexts. The department is interested in having that treatment baked into this and it would make some of the administration easier because if you have that many units, there would be less data collection because those could be automatically put into a category. The flip side though is, it is absolutely possible to have a five unit building that is all short term rental. And if you do this, then you are potentially giving better tax treatment to a building with five short term rentals than you are a building that has one short term rental. That's the policy question.

[Emilie Kornheiser (Chair)]: Reflect. Which I will just

[Unknown Member (House Ways & Means Committee)]: say, it's not even completely theoretical. But we have a mixed use building in Downtown Bay Area that's commercial on the 1st Floor, then I think there's seven or eight Bay Area B.

[Unknown Member (House Ways & Means Committee)]: This is another question in regards to this classification. I believe the report from the tax department suggested changing that non homestead, non residential to non homestead commercial.

[Kirby Keaton (Legislative Counsel)]: They did mention that. I didn't touch that one here because it was like a semantics thing. Absolutely something you could do. I guess my thoughts on that are, Is a large apartment building residential or commercial? Both. So not entirely accurate, no matter what you call it.

[Bridget Burkhardt (Clerk)]: Definitely because non homestead, non residential still implies that a big apartment building isn't residential. So either way, it's sort of a strange way to title an apartment building.

[Kirby Keaton (Legislative Counsel)]: Those terms absolutely you know, can be changed. There's not a legal reason to have a certain thing.

[Emilie Kornheiser (Chair)]: But I think we had some conversation last year about how the terms might not work very perfectly, and we didn't want to get into one of those committee naming activities because we did more than enough of that last year.

[Unknown Member (House Ways & Means Committee)]: That was fun. It was fun. We just

[Emilie Kornheiser (Chair)]: can't do it every day. Is everyone in agreement that our legislative intent on this was to not include short term rentals? Yes. In the non homestead, non residential.

[Bridget Burkhardt (Clerk)]: Is to not give favorable tax treatment to short term rentals, to not do that.

[Unknown Member (House Ways & Means Committee)]: Do we want to take any testimony on that?

[Emilie Kornheiser (Chair)]: Well, I'm curious about people's intent last year. We can take testimony on what to do or what not to do, but I see mostly agreement and some people feeling uncomfortable about making a decision right now. I was just trying to get a gist, we're not voting. Okay, thank you. If we wanna

[Unknown Member (House Ways & Means Committee)]: go further with that, we certainly have had a lot of correspondence with people that have a short term rent on their property, relying on it for the ability to pay them taxes. Absolutely. So in that regard, I would think otherwise. Overall, I have a concern with this okay.

[Kirby Keaton (Legislative Counsel)]: There's a footnote from the department's report.

[Emilie Kornheiser (Chair)]: Sorry. I just wanna say, I appreciate that even though you have had huge concerns with all of this from the very beginning and you voiced them, you've also constructively helped make it a stronger bill throughout the process. I just wanna name that. Thank you for that.

[Kirby Keaton (Legislative Counsel)]: There's a footnote in the department's report when discussing this topic that says, According to BHFA, in 2025, only 1,900 out of Vermont's 12,000 short term rentals are apartments. Found that bit of information interesting.

[Unknown Member (House Ways & Means Committee)]: Could you make sure that I have the report?

[Kirby Keaton (Legislative Counsel)]: It says according to DHSA in 2025, I think we're only 1,900 out of Vermont's 12,004 term rentals are apartments.

[Unknown Member (House Ways & Means Committee)]: And the rest would be single family or less than four units?

[Kirby Keaton (Legislative Counsel)]: I think that it's implying what we're talking about, that's in a building with four fewer units. Stolen or condominium dispute. But if you want to read more about the department's argument on this, you can look at the report, page 13 is where they make their case. Those are the definitions as you can see. I'm not sure if I remember to flag every policy question that was on my mind, but hopefully I did. And we're going move on to the mixed use, unless you have questions.

[Unknown Member (House Ways & Means Committee)]: I just have a question. I don't know which category this particular place, it's a camp. It's also a dwelling, it has a living room dining, a sleeping area, a sanitary place as well. It's only used three or four times, they're only used three, three, four, maybe five months of the year. Whether it be in the summer or maybe just, if it's not homestead, non residential.

[Kirby Keaton (Legislative Counsel)]: It comes down to whether it's possible to live there year round, it's fit for habitation year round, if it's weatherized and all that, And this is not a homestead you're talking about.

[Unknown Member (House Ways & Means Committee)]: It perhaps was a homestead at one time.

[Kirby Keaton (Legislative Counsel)]: But it's not being declared as a homestead in the current year? Not now. It would be taxed as the non homestead residential, as a second home.

[Bridget Burkhardt (Clerk)]: This could be a weird, unique question, but I'm curious about how this would work for homes that are in transition. So say you're someone who is either buying a house, trying to fix it up so that it will be a long term rental. How does that work during the year that it's maybe under renovation or you buy it at a certain point in the so during that past year, it's not rented for six months, but it's meant to be a long term rental at some point?

[Kirby Keaton (Legislative Counsel)]: We don't have anything specifically addressing that in the language now. So with the language that you're looking at in that situation, it would likely fall like in a lot of cases, if I'm understanding the question, it would fall under non homestead residential during that time period, only that one year, it would get a tax into that classification, assuming it has a dwelling, not declared as a homestead, it's not being rinsed out because it's being renovated. We're not talking about a mobile home in this case. And we're also not talking about a situation where a homestead person is using it as part of their home. So it would end up being non homestead residential for that year.

[Bridget Burkhardt (Clerk)]: And then it would switch once it was rented out.

[Kirby Keaton (Legislative Counsel)]: And then in the next year, it would print it out for six months out of the calendar year. I think it's the calendar year.

[Emilie Kornheiser (Chair)]: I think this is a super good example of a problem under current law that might or might not get exacerbated by this. So when I bought my house, it was in an estate because the owner had passed away, and so it wasn't declared at the homestead. And so during the transition time, it caused us all kinds of tax confusion.

[Unknown Member (House Ways & Means Committee)]: Is this curvy where that attestation would come into play as well?

[Kirby Keaton (Legislative Counsel)]: We'll get into that because there are some policy questions around that. That is part of what we're going to discuss.

[Unknown Member (House Ways & Means Committee)]: I mean, if they don't attest when they buy it, the restrictor will have It

[Kirby Keaton (Legislative Counsel)]: would be a yearly attestation and in this case, we should get into it separately. Yeah, I'm gonna say that, because it's a whole different conversation. Is it okay if I move on to mixed use?

[Emilie Kornheiser (Chair)]: I think so, yes.

[Kirby Keaton (Legislative Counsel)]: Okay. Subsection D was part of this section from the Act 73 language that dealt with mixed use. This has been fleshed out more here to address more of the questions that have come up. The language here says a parcel with two or more portions qualifying as different classifications shall be classified proportionally as follows. Number one, building shall be classified proportionally based on the percentage of floor space use. This is similar to current law when you have a homestead that has part of it being used for a business purpose. It gets taxed proportionally based on the percentage that's being used as a business purpose, that doesn't get the homestead treatment, the rest of it does. So similar concept. In the case of a homestead though, to give you some background info, which is very relevant here, If any part of the parcel is part of a homestead, all the land is treated as a homestead under current law. So the only part that gets a different tax treatment is the portion of the floor space of the building that's used for the business purpose. We're retaining in the language that you're about to look at. We are retaining the homestead treatment everywhere that current law touches on homesteads. It's retaining that same practice. So when it comes to a homestead, same treatment with the proportionality for mixed use, same treatment for the land surrounding. So some of this other stuff we're about to look at, I want you to keep in mind only deals with the new situation in which you could have a non homestead residential and a non homestead non residential mixed use in the same parcel. With homestead, we've already got that covered. So you start by looking at buildings and you look at the floor space used. And then to deal with underlying land, the way that this is written, there's different ways to skin this cap. Isn't that a great expression? The way this is written is you'll take the building proportionality and you'll just apply it to the land. So if it's sixty percent second home, 40% commercial property, then the land would also be classified 60%, 40% with that same proportion. That is why this is written, it could be other things. But this is a solution to that problem.

[Unknown Member (House Ways & Means Committee)]: That floor space is going to be now a percentage of the whole

[Unknown Member (House Ways & Means Committee)]: parcel? Like

[Kirby Keaton (Legislative Counsel)]: the sixtyforty example I was just using, yeah, it would be the whole sixtyforty of the whole parcel, but you are basing it off of floor space of the building being used.

[Emilie Kornheiser (Chair)]: So I think it's the opposite.

[Unknown Member (House Ways & Means Committee)]: It's the opposite. I'm hoping. So the floor space is all we're doing, even though it's gonna be part of the whole parcel. It's still only that 100 square feet. No. Underneath that floor space.

[Kirby Keaton (Legislative Counsel)]: Let's say you've got a thousand square feet and you've got an acre of land around it. You look at the square footage, say it's 600 square feet second home, 400 square feet commercial use. Building, the value of the building is going to be proportional in tax, sixty percent second home rate, 40% non homestead non residential rate. Then for the land value, 60% of that will be taxed at the second home rate, 40% of that land value tax at. 6040% of it will be taxed as the non homestead non resident.

[Emilie Kornheiser (Chair)]: We need a diagram.

[Unknown Member (House Ways & Means Committee)]: You just do the diagram.

[Kirby Keaton (Legislative Counsel)]: The easy way to say it is you take the proportionality of the building and you apply it to the land,

[Adam Greshin (Commissioner of Finance & Management)]: which I'm

[Kirby Keaton (Legislative Counsel)]: sure you could point out some cons with that as in

[Unknown Member (House Ways & Means Committee)]: 10 acres and the 40%, assuming the commercial, you could use a swamp land rather than acreage around the house. I mean, that's what I would look at as a As a problem. Listener, what am I gonna do? He's gonna say, you know, that 40 of it's commercial, if you're gonna assess the land, should be assessed on the swamp that's out back.

[Kirby Keaton (Legislative Counsel)]: The value, this won't affect. As far as deciding the value won't affect, we're just talking about the tax rate that's applied. We're talking about the tax part of it. Because remember with the classifications, this process we're going through is just deciding which tax rate is going to get applied. Is it going to be presumably the higher second home rate to the value? So when we talk about proportionality, we take the value is not gonna change. The value of the whole parcel is the value of the whole parcel. Take the building value, sixty forty, and then take the land value, sixty forty. As far as 60% of it will get the higher rate, 40% of that value will get the lower rate.

[Unknown Member (House Ways & Means Committee)]: But the business is not 40% of the whole person. It's not taking up that that much space.

[Kirby Keaton (Legislative Counsel)]: It's not using the land at all. Right? So you'll there'll be peep you know, there'll be arguments.

[Emilie Kornheiser (Chair)]: I think need to find our way through

[Unknown Member (House Ways & Means Committee)]: this. Yeah.

[Kirby Keaton (Legislative Counsel)]: And think this is a classic, there's ways to make it administratively easier, but then the downside could be you can come up with situations that aren't as equitable. And you get that attention all the time, the fact law. It's all over the place. And then the more complex it gets to try to be equitable can sometimes create inequities just doing that because fact payers no longer know what they're supposed to do and so on. So yeah, it is one of those situations. For alternatives, to give you a comparison, I was trying to think about other ways to possibly do this. Again, there's only two classifications this would apply to. Because if it's homestead, we already have the answer. The land's gonna be taxed as homestead. So it's only when there's not a homestead. So it's the other two classifications of the mixed use is what we're talking about. You could say it's always fiftyfifty when it comes to land. You could look at the building proportionality and then we can write in that the land is always fiftyfifty. Or you could say, well, if any part of it's a second home, let's tax all the land as a second home. That's another way you could go about it. There are different ways. That's why these are policy choices. I think the important thing is to answer the questions so that people know what the law is.

[Unknown Member (House Ways & Means Committee)]: If it's a business, not a second home, a portion of the building. It's not a business.

[Kirby Keaton (Legislative Counsel)]: If it's 100% business, then the land is 100% business. And in the

[Unknown Member (House Ways & Means Committee)]: Somebody lives in the house and they're using one room as a business.

[Adam Greshin (Commissioner of Finance & Management)]: Is it their homestead? Yeah.

[Kirby Keaton (Legislative Counsel)]: It's their homestead? Then we apply current law, which is that only the business use is taxed like the business and the land and the rest of the dwelling tax as a homestead.

[Emilie Kornheiser (Chair)]: So homestead sort of prevails over any other thing?

[Kirby Keaton (Legislative Counsel)]: Homestead, yes. It's good to have a homestead as far as the tax treatment, that's for sure.

[Unknown Member (House Ways & Means Committee)]: He's talking about if you rented the rest of the building up.

[Kirby Keaton (Legislative Counsel)]: But in your example, what we're talking about here applies if instead of a homestead, that's a unit that's a second home. It's in a unit that's not someone's homestead. And you could have a situation in a large apartment building that some of them are short term rentals, some of them are long term rentals, and then you start to have that mixed use of some of it's non homestead residential, some of it's non homestead non residential. And then you would take the proportionality of the building and apply that to the land to decide what tax rate applies to the value of the land.

[Emilie Kornheiser (Chair)]: And I think the further conversation of this section will be best served with a whiteboard. Or like a flowchart or something. I don't know. Yeah. Or Carol, do a

[Bridget Burkhardt (Clerk)]: little No, I understand what he's saying. Was saying, can think of at least three examples in, maybe not in my district, but at least adjacent. One is in my district, but two others that are at least adjacent, where the land is all used for business purpose, essentially. It's like hobby farms, basically, that are producing stuff that goes into products that they're selling in a little shop. And then they also have a short term rental or two that they use as another part of how they're making money. And so you're saying under this treatment, if half of the building is short term rental, then half of the land would also be considered second home tax rate.

[Emilie Kornheiser (Chair)]: So if we don't think that works, let's think of something that- And

[Unknown Member (House Ways & Means Committee)]: so what I'm gonna

[Emilie Kornheiser (Chair)]: I don't know if we're gonna get through all of this today, but I hope we will. I don't really have a sense of how far you are. But, like, next time we do a go around on this, if folks wanna give some thought to the sections, Like come with new ideas for sections, guess is what my sentence is.

[Kirby Keaton (Legislative Counsel)]: Before we move on from the mixed use question, I do want to flag that to consider that if you This is a shortcut for looking at the actual use. We would know the building proportionality because the owner would declare that under this scheme. The use of land starts to become a lot more ambiguous and a lot harder to administer. That's why this placeholder is trying to find a shortcut. Actual use of land is a lot harder to assess out than the actual use of the building.

[Emilie Kornheiser (Chair)]: Great. Okay.

[Kirby Keaton (Legislative Counsel)]: The third part we have here is not withstanding any provision of this subsection of the contrary, the entire parcel. This is the number three here is we're saying a homestead wins like we've been studying. Number four here is from the Act 73 language, and it's applying the current law treatment to when a homestead has a business use. Number five is also from Act 73, but this is the part of the mixed use question that gets at, what do you do when some of the force base is used for multiple purposes? This provision just states that whichever use is the most often is going to be the primary use, so that's what you put that down as. So if you have a second home with a room that you use as an office, but you also do recreational things in there, whichever one you use it the most often for is what you should put down as the use of it. So that's that question. And that's what we have for mixed use here. Is our attempt at trying to get all the things that the department flagged for mixed use issues.

[Emilie Kornheiser (Chair)]: Again, this is going to be one of the harder parts of what we do, and it's hard under current law, and we have something under current law for this. So I just don't want us to get sort of perfect enemy of the good kind of situation, because we already have that problem under current law.

[Unknown Member (House Ways & Means Committee)]: Yeah. Our purpose in creating these additional categories is to raise more money or to be more accurate in our taxing.

[Emilie Kornheiser (Chair)]: And it's more accurate in our taxing. It's to be able to If in the future we want to use taxation for policy change, I think the big push last session was to tax second homes or non primary homes at a higher rate in order to lower property taxes for other properties. Does that represent other people's I mean, I don't wanna speak for everyone.

[Unknown Member (House Ways & Means Committee)]: Now except for 88 counts.

[Unknown Member (House Ways & Means Committee)]: What?

[Unknown Member (House Ways & Means Committee)]: We're we're kinda doing that now for second homes. They have the non residential rate, which is generally higher except that in 88 towns right now, the residential rate is higher.

[Emilie Kornheiser (Chair)]: 88 towns is a lot of towns. And it's also

[Unknown Member (House Ways & Means Committee)]: for the non homestead rate being higher and sometimes then also taxes for small businesses more than, and so also, and that's what I'm making here in Bay Area City is folks have said, Well, if we wanna tax the second homeowners, if we start to go down that path under current law, I'm also raising the property taxes of the hardware store remains. So I think that that's another, being able to separate those two communities of taxpayers.

[Unknown Member (House Ways & Means Committee)]: Well, we're raising taxes on each of the people that have a second home that are not there all the time, that don't have children in the school system. It

[Adam Greshin (Commissioner of Finance & Management)]: doesn't

[Unknown Member (House Ways & Means Committee)]: seem fair to me.

[Emilie Kornheiser (Chair)]: I appreciate that. We are tasked with continuing to implement accept me for here. But I totally appreciate that. But that is definitely a difference of opinion at the table.

[Unknown Member (House Ways & Means Committee)]: Okay.

[Kirby Keaton (Legislative Counsel)]: The things that we covered and the language we looked at so far, I think cover everything that was in step one, which is what the department has said in their report is what the legislature should figure out now, so that other things can be done building off of that. From here, I'm going go to step two, which relates to data collection that's needed, information gathering that's needed to start to implement this in 2028 under the '73 timeline. So we have language here that's from Act 73 that's about the transition. I've highlighted this just to ask the question, this says for calendar year 2027, the commissioner shall amend and create forms so that the taxpayers report information on the use of their property for such property to be classified as these different classifications. Is this still the desired approach? That's kind of the question. I mean I think it is, but I just because that relates to the next part, is there's a policy question here for the department step two, which is how do you go about a property owner attestation? How do you go about gathering information from property owners about how they are using their property in the current year? And then there's a side question to that. How do we get go about knowing what properties have dwellings and what don't? So those are kind of two things and reading the department's report, it's clear that they're envisioning an attestation from property owners where they're gathering information, and it's clear that they're also going to be relying on listeners and assessors to gather some information on the ground, informs this. I think part of the questions for you are going to be, what do you want to put into the law specifically to help facilitate this? Based on the report, I think that the department wants the Homestead Declaration to have an added part to it. That is a, as Jake has called, to do the dwelling unit access station. And I think that that's the idea, but I haven't drafted anything about that because that's a policy question for you. How do you want to go about the property owner attestation part? Second question is

[Emilie Kornheiser (Chair)]: I just want to sort of pause on that. The way I think about that is right now, only homestead property taxpayers file a declaration. And not all do, even. Part partly because of some of the reasons that were just laid out. And so do all property taxpayers now file an attestation in this scenario? Do some of the categories file and some don't?

[Unknown Member (House Ways & Means Committee)]: Sorry, back to you.

[Kirby Keaton (Legislative Counsel)]: A lot of this is about identifying dwelling units, because if you don't have a dwelling unit, then the tax cost patient's straightforward. That means it's non homestead non residential. But because non homestead residential is presumably going to be the classification with the highest tax rate, If people won't report the use of their property, should the default be the higher rate? Which the default be to an assumed dwelling unit? There's questions like that there. But the other part of it which the department's report was, they clearly were expecting some on the ground data collection to also supplement this information. And with this, I'm going to scroll up to the top. If you remember, I skipped the first section. So we're going to finally get back up to that. Which is one thing that I drafted about their step two, which is to potentially add to the grand list contents, a separate column listing the number of dwellings as defined by the commissioner. This would be putting it on assessing officials to put on the grand list, number of dwelling units for each property. So this would be how you answer that question, how do we know what properties have dwelling units and how many do they have? This is one way to go about that and it's putting it on assessing officials to do that.

[Unknown Member (House Ways & Means Committee)]: I listen to this and I think that's a lot of burden on the assessing officials and then I think about regulation of, I mean, excuse me, registration of apartments and dwelling units, and I think that would possibly, would that be in here something else?

[Emilie Kornheiser (Chair)]: I think that's all the questions. Yeah.

[Unknown Member (House Ways & Means Committee)]: How do they know what they've got? Say the dwelling unit. I'm I'm thinking of a lady in my district who has three daughters. My daughters love horses. She has one. When the husband made some improvements to the barn, He built a little kitchenette for her out there and the bathroom has running water and a walk in shower, not a tub. Sometimes, well more than half the summer, her mother says, to throw a sleep out there with her horse. So is that a dwelling unit? With the hay? In the hay? She has a folding pot, something you see at the fair the kids bring to you with their towels. That's very sweet. Very Let's

[Bridget Burkhardt (Clerk)]: talk. Can't

[Unknown Member (House Ways & Means Committee)]: meet your constituent visit. I'm already

[Emilie Kornheiser (Chair)]: out. So

[Unknown Member (House Ways & Means Committee)]: what would that be called?

[Unknown Member (House Ways & Means Committee)]: Is that a dwelling unit?

[Adam Greshin (Commissioner of Finance & Management)]: We apply the language to

[Kirby Keaton (Legislative Counsel)]: this situation. The question when it comes to dwelling units though is, is it designed or for one thing is, okay, is there one ingress and one egress? Is there an entrance and an exit to the barn?

[Unknown Member (House Ways & Means Committee)]: Many, yeah.

[Kirby Keaton (Legislative Counsel)]: Okay, that's one question.

[Unknown Member (House Ways & Means Committee)]: At least four.

[Kirby Keaton (Legislative Counsel)]: Next question is, is it designed or intended to be used for occupancy, including providing living facilities for sleeping, cooking and sanitary needs? The lack of kitchen and bathroom might not be.

[Emilie Kornheiser (Chair)]: There's no refrigerator

[Unknown Member (House Ways & Means Committee)]: like in a college dorm, feeding pads where social can heat up ghettios and stuff like that. The kid lives there.

[Kirby Keaton (Legislative Counsel)]: Finished floor?

[Unknown Member (House Ways & Means Committee)]: Wouldn't call it a finished floor. It's a cement floor. With

[Emilie Kornheiser (Chair)]: an And area so there is the intended to be used for occupancy. And I think that's meant occupancy as humans, not occupancy. But I think we're gonna be testing each of these definitions against some experiences we've had. We'll be testing them against current law and how those things are resolved in current law. So right now, we rely on self attestation for lots of things, including our income taxes to some degree. And that works or doesn't, as the case may be.

[Unknown Member (House Ways & Means Committee)]: This will be fun. What? This will be fun.

[Emilie Kornheiser (Chair)]: I think so too. I really like today.

[Kirby Keaton (Legislative Counsel)]: Some of the policy questions around the data collection are, do you add it as part of the grand list, like the language I showed? Is it going to be part of regular grand list maintenance to keep up on the number of dwelling units in the municipality? It seems like that's going to be a necessary part. It's hard to avoid that, to be honest. So then the next part is, do you directly pay municipalities to classify these? One question is, the department suggests or envisions at least partly in its report is that this upcoming summer there would be some concerted effort by listeners and assessors to go out and get information and their suggestions that the state pay them for that effort that's outside of their usual force of work. Or do you want to take the approach of we're just going to make this going forward part of their usual force of work? Second question, aside from a direct appropriation to pay for this work, if that's the way you want to go about it. Second question is, do you indirectly pay municipalities through allowing this classification system to be used for municipal taxes? Because under the language we have now, this is written for state education tax. The question of whether a municipality gets to decide whether they want to tax second homes at a higher rate has not been answered.

[Unknown Member (House Ways & Means Committee)]: What happens now?

[Kirby Keaton (Legislative Counsel)]: With the language we have now under Act 73 for municipal taxes, it would still be homestead, non homestead.

[Unknown Member (House Ways & Means Committee)]: What do municipalities do now? What do municipalities do right now? Do they charge

[Kirby Keaton (Legislative Counsel)]: non homestead tax? Under current law, they set their municipal tax rate and it applies to them yet.

[Unknown Member (House Ways & Means Committee)]: I think that's not homestead. Think that's not homestead. Represent that's

[Unknown Member (House Ways & Means Committee)]: Waszazak?

[Emilie Kornheiser (Chair)]: What did say?

[Unknown Member (House Ways & Means Committee)]: We couldn't hear you.

[Unknown Member (House Ways & Means Committee)]: Oh, sorry. It's just anything that's not a homestead gets turned for non homestead.

[Kirby Keaton (Legislative Counsel)]: I was going say, you set your municipal rate and it applies to the properties in the municipality. What distinction are you making?

[Unknown Member (House Ways & Means Committee)]: Guess I don't know. I don't want to know.

[Emilie Kornheiser (Chair)]: We heard testimony this morning when we were talking about the RADS, about how municipalities are compensated for this work and how maybe we need to be looking at how we should be compensating them differently for this work as that work has evolved. And we sort of punted that conversation last year because

[Unknown Member (House Ways & Means Committee)]: it Again, the tax department suggested that local municipalities could piggyback off a new classification for local growth or retain more of the ed tax which is point 225%. There's two options.

[Kirby Keaton (Legislative Counsel)]: But, you know, the point when it comes to municipal taxes is, yeah, under current law, there's no way for a municipality to tax second homes differently. And then under the language we have from Act 73 so far, it was drafted in a way in which that's not an option either because he set the factors to apply to the state education tax only under Act 73. There's no factors still applied for municipal property taxes.

[Emilie Kornheiser (Chair)]: And if folks wanna do some ground truthing and find out if this is something municipalities want,

[Rebecca Sameroff (Vermont Department of Taxes)]: please do so and report back.

[Unknown Member (House Ways & Means Committee)]: Where are you Kirby?

[Emilie Kornheiser (Chair)]: You're on page seven zero seven.

[Kirby Keaton (Legislative Counsel)]: Yeah, I think we're done. Unless there's more questions. Again, I'll just reiterate, we're down at the effective dates here. There's nothing there right now, but the idea is this is going to be repeal and replace using the same effective dates as accident three. And at this point, you know, not assuming that you wanna have the same contingencies that exist in x 73. So those might get lost unless you ask me to put them back in. Such as the contingency that classifications will not happen unless you set up school districts by a certain date.

[Emilie Kornheiser (Chair)]: So for next steps on this, folks, for the pieces that are outstanding, if folks could do their best thinking about if there are smaller pieces, that folks have ideas for changes. If there are bigger pieces that were flagged as problems that folks have ideas for improvements, let's bring them to the table. For the pieces that were a little more confusing, I think we can do a diagram or a flowchart or something together next time we're together. And think about who we would wanna hear from in terms of testimony. Vala, definitely. Probably, Tax, of course, though Kirby worked with them on this language. So if you have other folks who you think would be helpful on that. Realtors? Realtors. Thank you. We're done until tomorrow. Tomorrow Gosh, I have no idea what happens. Tomorrow, like I've said 20 times already today, we're taking testimony in the AFA tax, and I did not retain that information. So we're going to do that with Pat in the morning. And then the Downtown and Village Center Tax Credit, we're hearing testimony about that. Folks who have been on the committee, maybe even last year, we took testimony on it. It's just the annual part of our work. And then we're going to take testimony on counting students, particularly from economically disadvantaged backgrounds, because that's come up a few times. And we want to make sure we're all on the same page with the agency of education on that. And then in the afternoon, we're gonna look at developing guidance for reserve funds for school districts. And it. Thanks.