Home News and Features What is behind Montpelier’s property tax rate?

What is behind Montpelier’s property tax rate?

Montpelier, formerly at the top of Vermont property tax rates, has dropped to No. 16 for municipal rate and No. 35 overall. Montpelier’s overall effective tax rate of $2.46 is only 2.9% higher than the average ($2.39) of our four smaller bordering towns. Barre City’s effective rate of $3.15 is 28% higher than Montpelier.

The only accurate method to compare one community’s property taxes to another is to use “effective” tax rates. An Effective Tax Rate is determined once the property values in various communities have been “equalized,” that is, taking into account different community assessment ratios. Let’s compare 2020 effective tax rates and local services within our immediate region; see chart below. Tax information is taken from the 2020 Annual Report of the Vermont Tax Department. 

The average effective municipal (non-school) tax rate for the 8,887 residents in the surrounding four towns is 61 cents, compared to $1.00 in Montpelier and $1.82 in Barre City. What municipal services do Montpelier residents receive for these extra taxes that people don’t get in the towns? 

  • Full-time fire and ambulance service based in downtown Montpelier.  Dispatch records show an average ambulance response time of 4 minutes in Montpelier compared to 8.5 minutes in the combined towns. 
  • Full-time police service based in downtown Montpelier. Officers are on patrol 24 hours per day, seven days per week. In communities served by State Police, one trooper may be covering many towns at once and response can be delayed, often by days. 
  • Full-time dispatching service — Emergency calls are answered in and dispatched from the Montpelier police station by people familiar with both the community and the local police, fire, and ambulance operations. 
  • Paved and quickly plowed roads — 96% of Montpelier’s roads are paved compared with 20% in neighboring towns. Gravel roads can mean more dust, “dings” on vehicles, and difficult access during certain seasons (mud) and weather conditions. When you’re in a business rush or personal emergency, can you rely on being able to pass over your road year round? Paved roads are more expensive to maintain, which is a major struggle in Montpelier. Unlike neighboring towns, Montpelier has responsibilities for snow removal in downtown, sidewalk plowing/maintenance, bike path plowing and maintenance, operating street lights and traffic signals, roundabouts, on-street parking, parking lots, and maintaining many bridges. 
Montpelier also provides a full slate of recreation programs, municipal water and sewer systems (rather than wells and septic tanks), storm drain systems to avoid washouts and direct drainage away from properties, the City Hall Auditorium and Arts Center, the swimming pool and rec facilities, and administrative conveniences like quarterly tax payments and water/sewer bills with automatic bank deductions.

There are also many great things that Montpelier residents support that neighboring town residents benefit from at no cost or greatly disproportionate cost. Hubbard Park and North Branch Park are two prime examples. Others include the Kellogg-Hubbard Library, the Montpelier Senior Activity Center, sidewalks and bike/pedestrian paths, street sweeping, fire prevention efforts, the Montpelier Community Fund, and downtown enhancement and support initiatives. The whole region enjoys events like Independence Day, the Vermont Mountaineers, and other celebrations. 

Why doesn’t the state pay property taxes for all of its tax exempt buildings and properties?

The state’s total Payment in Lieu of Taxes (PILOT) has grown to $1,070,434 (FY22) or about 12 cents on the tax rate. This is approximately 66% of their estimated “full” taxes for municipal services. If the state paid “full” municipal taxes of another $553,000, the municipal tax rate would only be 6 cents lower, a savings of $150 on the average residential tax bill. For perspective, the state only paid $125,000 in 1995. 

Shouldn’t we develop more taxable buildings and properties to reduce taxes? 

Grand list growth is unquestionably important to the long term financial health of the community. Reducing the tax rate by 50 cents — to align with neighboring communities — would require new taxable property equaling 64% of our current grand list. This is $560 million in new property. For scale, think 12 National Life buildings, six complete new downtowns, or 2,300 new houses. None of that accounts for the added costs of serving this new development. 

Can we cut local expenses?

The only way to achieve significant tax reduction through spending cuts is to completely revisit the services that the city provides. To cut the tax rate by 50 cents would mean $4,400,000 in expenditures to be trimmed, which represents 40% of the current tax commitment. Obviously local government services as we know them today would not exist and average residential taxes would be about $6,300. For what? Montpelier’s excellent schools, of course, and municipal services that resemble those of the neighbors. Who will answer the 1,929 fire/ambulance calls? Or respond to the 16,000 police calls? Or plow and maintain the roads, sidewalks, streetlights, and traffic signals? Who will review development proposals? Or provide any of the above listed services?  

Over the last five years, the city council has proposed budgets which have held an average tax increase to 2.93% per year as compared to an average inflation rate of 2.7% per year. The council works hard every year to balance the delivery of programs, services, and capital needs against increased property taxes.   

What about new revenues?

State laws presently offer very little to municipal governments for revenue sources. We are essentially limited to property taxes and various fees for services. The city has already enacted a local rooms, meals, and alcohol tax. The only real option remaining is a local sales tax, which has not been supported by voters in the past.

Montpelier officials will continue to advocate for full state tax payment, seek to develop the grand list, explore new revenues, and keep expenses in check. We will continue meeting community priorities like high service levels, support to the downtown, maintenance of public facilities, and an excellent quality of life. Every service offered and expenditure made is the result of an identified need. Montpelier, Barre, and comparable regional center communities have a tough challenge.