Taxes & Fees

  1. Taxes & Exemptions
  2. Observations
Key Elements of the Budget
Taxable properties, tax exemptions and local expenses are key elements of local budgets and tax rates. All of these impact the tax rate but they are not the biggest part of the story. The major factors behind Montpelier’s budgets and tax rates are service delivery and service population. And with Act 60 and Act 68 leveling the field for school taxes, the focus must be on municipal services.

Interesting Parallels
If we look at communities around the state with high tax rates we start seeing some interesting parallels. There’s our Central Vermont counterpart, Barre City claiming the top municipal (non-school) tax rate in Vermont. We also find Springfield, Rutland City, Middlebury, Windsor, Newport City, Rockingham/Bellows Falls, and Brattleboro. The similarities are strikingly obvious. All are older communities who serve as regional centers for other towns near them.

Unlike a Burlington or South Burlington, they have neither the population base nor the “grand list” base to spread the costs of service delivery very widely. As a result, they all provide many direct services and maintain older infrastructure for use by people from an entire region but only paid for by residents. Many of these (Montpelier, Barre, Rutland, Middlebury, Windsor, Newport) were historically part of larger municipalities but were split off (i.e. Barre City and Barre Town). This resulted in greatly reduced land areas compared to most Vermont towns.

Expanded Service Needs
This notion of expanded service needs and delivery can be most visibly illustrated by the provision of Fire service. There are only 12 full time or “paid” fire departments in all of Vermont, the 220+ others are all run by volunteers. Out of these 9 top tax communities, however, 7 have paid departments - only Middlebury and Newport still use volunteers. And the other 5 communities in the state with paid departments fit the mold as well. Burlington of course has the largest population base in the state.

Hartford and South Burlington maintain lower municipal rates through a property base which is 1.5 to 2 times more per resident than Montpelier. The remaining 2, St. Albans City and St. Johnsbury, have the highest municipal tax rates in Franklin and Caledonia counties respectively but their relatively low school rates keep them out of the very highest total tax rates. All other towns and cities in Vermont have volunteer Fire Departments.

Obviously Fire Departments are not the only service being delivered in these communities and are not the only costs driving local budgets. The jump to a paid department, however, represents a major policy and cost shift for any town and is only made if the local people believe the need is justified. The presence of a paid Fire Department is almost always indicative of expanded overall local service needs - often to handle demands created by non residents.

Service Phenomenon
Montpelier is really the “poster child” for this service phenomenon. Our daytime population of approximately 20,000 represents jobs, customers and economic activity. But those individuals also get into accidents, use parking spaces, speed, get injured or sick, commit crimes and cause wear and tear on roads and facilities. Under the very limited revenue raising options available to Vermont’s towns and cities, virtually all of these costs fall to the 8,000 or so local property tax payers. For example, the city handles over 18,000 to 20,000 police incidents (large and small) annually. At more than 2 calls for service per capita, this is the highest police activity rates in Vermont except for Barre City. By comparison, Burlington - even with the colleges and being the center of the metro area - only handles about 1 police incident per capita.

One contributing factor to this situation is the steady population growth in our neighboring, more rural, towns. The most recent census showed a combined increase of 915 residents (+11.5%) in Berlin, Calais, East Montpelier and Middlesex. At the same time, Montpelier’s population dropped by 349 residents (-4.1%). This is something of a “chicken and egg” situation since many people will say that they moved to Berlin, Middlesex, or East Montpelier to avoid Montpelier’s taxes yet have handy access to our downtown, community facilities and, yes, local services. Once again, their presence in our community is felt positively through business, the arts and civic efforts but the cost of services falls on Montpelier residents alone.

2005 Tax Rate Comparison
Let’s compare 2005 tax rates and local services within our immediate region. Tax information is taken from the 2006 Annual Report of the Vermont Department of Taxes. An Effective Tax Rate is determined once the property values in various communities have been “equalized”, that is taking into account the different overall community assessment ratios. The Actual Tax Rate is the rate that residents saw on their bills and is applied to their non-equalized tax bills. When comparing communities, it is much more accurate to look at the Effective rates rather than the Actual rates.