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May 25, 2017

2017 Final Vermont Legislative Update: Commerce

DRM's Government & Public Affairs Team

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COMMERCE & ECONOMIC DEVELOPMENT

Bonding for Affordable Housing (H.518)

Home Loan Escrow Accounts (H.136)

Independent Contractors (H.119, H.323)

Omnibus Economic Development Bill (S.135)

Rural Economic Development (S.34)

Rural Economic Development Districts (S.135)

Real Estate Appraisal Management Companies (H.506)

Transportation Network Companies (H.143)

Bonding for Affordable Housing

H.518

Early in the session, Gov. Phil Scott asked the legislature to redirect $2.5 million from the Vermont Housing and Conservation Fund to finance $35 million in state-supported bonding for construction of affordable housing. After much deliberation, the legislature redirected $1.5 million of existing revenue from the property transfer tax and diverted $1 million of $5 million collected from a property transfer tax surcharge to the 20-year plan. The program was added to the budget before final passage. It is expected to also draw down between $35 million and $70 million in federal funding.

The final proposal attracted significant push-back from environmental advocates, because the entire amount of the 0.2 percent property transfer tax surcharge is currently dedicated to a fund to remediate impaired surface water. Lawmakers concluded that the Scott Administration’s dedication of $46 million in capital funds, $8 million in General Funds and $11 million in Transportation Funds to clean water programs was adequate.

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Home Loan Escrow Accounts

H.136

Vermont Legal Aid proposed legislation that would have added significant new escrow requirements on residential lenders, but the legislature rejected most of them and adopted relatively minor changes that were accepted by the banking industry.

Under H.136 as approved, a lender will be required to conduct an annual escrow account analysis to determine a borrower’s monthly escrow payment for the next computation year. The analysis must be based on the borrower’s current tax liability if made available to the lender by the borrower or municipality, after any applicable income-based adjustment.

A lender will also be required to conduct a new escrow analysis and reduce a borrower’s monthly payment upon receipt of a revised and lowered property tax bill.

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Independent Contractors

H.119H.323

In an example of “déjà vu all over again,” the House Commerce and Economic Development Committee spent months attempting to draft legislation to clarify the rules governing independent contractors under the workers’ compensation system, only to see the effort suffer the same tortured fate that befell similar efforts in the prior four sessions.

The business community has been generally united in seeking repeal of the requirement that a subcontractor be considered an employee of a general contractor if he or she is in a similar line of work. Several committee members proposed various alternatives that retained that requirement, but only as one of many factors to be considered. That approach has been endorsed by representatives of organized labor.

The issue came to a head near the end of the session when Committee Chair Rep. Bill Botzow, D-Pownal, pulled the plug on an effort to force a vote, and Rep. Paul Poirier, I-Barre, erupted in anger and never returned to the committee.

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Omnibus Economic Development Bill

S.135

Workforce development, affordable housing, restructuring government and stimulating growth in semi-rural hub communities were common themes throughout the legislative session. A comprehensive economic development bill, S.135, originated in the Senate Economic Development, Housing and General Affairs Committee and its final provisions address each of those issues.

On workforce development, the bill directs the chair of the Workforce Development Board to convene a task force to look at all of the training and development programs across state government and recommend strategies to develop skilled workers. It establishes a new position of Career Pathways Coordinator and calls for a memorandum of understanding between career and technical education centers and higher education to encourage new collaboration over non-degree programs.

To address affordable housing, the bill allows construction of certain new housing projects to avoid Act 250 jurisdiction in certain downtowns, expands downtown development tax credits, and allows up to six new tax increment financing districts. Municipalities will be required to make a bigger commitment to retire borrowed TIF money, and a slightly larger share of incremental revenues will go to the state’s Education Fund.

Among other provisions in the 94-page bill are new ways for rural communities to collaborate for economic development, support for a training program for heating equipment technicians, authorization for the State Treasurer to establish a public retirement plan and minor changes to the Vermont Economic Growth Incentive Program.

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Rural Economic Development

S.34

The Senate Agriculture Committee was charged by Senate President Pro Tem Tim Ashe, D/P – Chittenden, with crafting an economic development bill to help “the other Vermont,” where rural communities struggle to produce local jobs. The result was S.34, a bill that took aim at high permitting fees, a need for more development expertise in rural areas, the impact of high energy costs and a slump in the forest economy.

Although S.34 struck out in a number of unusual directions, the bill that passed will provide more grant writing expertise in rural communities, restructure some of the programs run by the state’s primary energy efficiency utility and boost forestry by exempting forestry equipment from the state’s six percent sales tax. Passage of the bill was a victory of sorts for Ashe and for Sen. Bobby Starr, D-Essex/Orleans, who undertook the task of forging a bill that addresses economic development from an atypical direction.

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Rural Economic Development Districts

S.135

The legislature approved the creation of rural economic development districts, which are special municipal districts that will have authority to finance, own and maintain infrastructure with the intent of providing economic development opportunities in rural areas. Districts may be created by the legislative bodies of municipalities. They will not have authority to assess property taxes or to levy service charges or fees upon any underlying municipality.

Rural economic development districts will have the power to install, own and operate infrastructure promoting economic development; enter into municipal financing agreements; purchase and sell real property; hire employees; adopt ordinances; and engage in a variety of other powers.

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Real Estate Appraisal Management Companies

H.506

The federal Dodd-Frank Act established minimum standards if states choose to regulate real estate appraisal management companies, entities that contract with lenders to provide lower cost and higher-quality appraisals. The House-passed version of H.506 would have delegated that decision to the Real Estate Appraisal Board, which AMCs argued was akin to turning the chicken house over to the foxes.

The bill as approved by the legislature requires the board to adopt regulations, but also allows it to make recommendations as to whether the real estate appraisal industry should be deregulated.

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Transportation Network Companies

H.143

The House and Senate passed separate versions of H.143, a bill to regulate ride-sharing services such as Lyft and Uber, but the differences were never resolved so the bill was not passed.

The House bill adopted minimum insurance requirements for the companies. Those requirements were consistent with a national model bill that has been adopted by most states. The Senate added several provisions that were anathema to ride-sharing companies, including extensive and annual background check requirements.

A House-Senate conference committee is likely to resolve the differences between the two bills next year.

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