As responsible citizens, we should always wonder about how things work, especially concerning matters of important public and tax policy. For example, how does a developer spend more than $6 million to build rental housing, yet the new property is only assessed a total of $962,500 for property tax purposes, resulting in a total annual tax bill of just $23,931? Lest you think that’s an exaggerated hypothetical, those are figures taken from available public documents on Shires Roaring Branch Housing Project which is comprised of 24 units on North Branch Street and Benmont Avenue.
Unsurprisingly, the answer is various government subsidies funded by taxpayers. Without taxpayer subsidies, no private developer could afford to invest six times the market value of future rental income. In the above example, two forms of subsidies were used for construction: A $650,000 federal block grant from the Vermont Community Development Program and the selling of Low-Income Housing Tax Credits issued by the U.S. Treasury. The grant is a one-time award of money for a designated use. Tax credits, on the other hand, are sold by the developer to investors to raise capital, thereby reducing low-income housing capital cost. In exchange, the investor receives a tax credit that reduces the investor’s tax liability dollar for dollar. That is, regardless of tax bracket, a $1 tax credit directly reduces tax liability by $1. Use of credits reduces general tax revenue, requiring either offsetting tax increases or spending reductions, or both, to preserve a balanced budget.
Shires’ proposed $5.4 million Monument View development on Silver Street is based on the same business model. A grant of $700,000 has been approved by VCDP and now awaits a decision by the town’s Select Board to accept or not against a backdrop of widespread citizen opposition. Additional funding will be derived through selling of Low Income Housing Tax Credits. In the process, taxpaying citizens -- including private landlords who must compete against Shires on an un-level playing field -- will subsidize construction as well as future underfunded municipal/school costs resulting from the project. As we recently learned from the town’s draft housing study, housing isn’t the immediate crisis as some otherwise would suggest. A weak local economy and job market are. Voters need to stay informed and involved with where Bennington is headed.