Moretown is grappling with some of the financial drawbacks posed by a state program that would buy and demolish 11 flood-prone and damaged properties in the town.
At a Monday, December 2, 2024, meeting of the Moretown Select Board, staff and town officials expressed concerns about the potential loss of property tax revenue, the increased workload for town administrators as they facilitate applications on behalf of residents, and other issues.
The town submitted applications on behalf of property owners last year and has since received approval from Vermont Emergency Management (VEM). It is now awaiting approval from the Federal Emergency Management Agency (FEMA), which would provide a majority of the costs for buyouts.
Once parcels are appraised, if property owners chose to move forward, VEM acquires the properties and all structures on them are demolished within 90 days of closing on the sale.
Most of these properties are located along Route 2 in Moretown.
DIFFICULT DECISIONS
Select board members expressed concerns about the town losing revenue from taxes generated by properties sold under the buyout program.
After the state takes ownership of properties, towns are required to maintain the land as open, public space – for parks, nature reserves, grazing, camping or use for wetlands management.
State recovery officer Doug Farnham acknowledged that federal buyouts can pose difficult decisions for towns. But since Vermont uses fair market value as the basis for taxation, he said, “the Grand List value of that property has already been destroyed by the flooding.”
Farnham said the average FEMA buyout is around $300,000 to $400,000 per property, with each resulting in an estimated $2,000 in annual property tax loss for Moretown or approximately $22,000.
Any lost revenue for towns should be weighed against the safety of residents who currently live in flood-prone homes, he added – that “whether or not that piece of land is safe to continue occupying given current conditions should always be the primary driver of the conversation.”
Select board member Don Wexler said in a text message to The Valley Reporter that the town’s concerns are about not just losing some of its property tax base, but losing residents, neighbors and friends who take buyouts for their properties.
LINGERING QUESTIONS
Still, many questions about the financials of these buyouts linger.
Select board chair Tom Martin said he was most concerned about the town recouping certain costs from property owners, which the town would pay in advance. He said the town needs to look into drafting a promissory note for property owners to sign, guaranteeing repayment and that the town would not move forward with buyouts if they didn’t have such a mechanism in place.
It’s unclear, though, what costs property owners would be responsible for because 75% of buyout costs are funded by the Federal Emergency Management Agency (FEMA), with a 25% match from the state. That means about $1.1 million in funds the town will likely provide up front, then await reimbursement from the state.
All funds are intended to cover the costs of appraisal, closing fees, purchase price – based on the property’s full market value prior to flooding, contracting services for demolition and final site work. Funding can also include assistance for tenants if there are full-time renters.
The total project cost for the demolition of 11 parcels is about $4.5 million.
When asked why property owners would need to repay town funds, Moretown Town Clerk Cherilyn Brown said the town does not have answers at this time and is awaiting on a response from its attorney.
Regarding the same question, Stephanie Smith, a Hazard Mitigation Section Chief for the state, said “I’m honestly not sure.”
ADMINISTRATIVE DRAWBACKS
Martin said the town will investigate some of these costs further – especially interest rates on a potential loan the town may need to take to cover upfront costs, as well as costs for additional staffing to facilitate applications and communicate with property owners and the state.
Brown said during the select board’s December 2 meeting that board members initially thought property owners could help with more administrative work, but with the town applying on behalf of property owners, the reality is that most tasks under the application fall on the town.
Smith said that since the July 2023 flooding, the state has adapted the grant application to reduce the burden for town employees. She said the state’s workload includes developing applications, working with FEMA to resolve questions, and managing the funding.
Towns are responsible for getting forms signed by property owners, assisting with homeowner communications, and maintaining the parcel as green space once the town gets ownership, according to Smith.
Martin, at the select board’s recent meeting, added that the town would also be responsible for hiring and coordinating contracting services for the demolition work.
If the buyouts are approved by FEMA, the estimated timeline to completion is just over two years, according to a FEMA document outlining programming requirements for the town.
The next meeting of the Moretown Select Board is scheduled for Monday, December 16, at 6 p.m. at the Moretown town office or online.
