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State law leaves paying taxpayers on the hook to make up the difference
By Guy Page
Rising property tax delinquency rates across Vermont are emerging as a growing concern for municipal officials, as local governments shoulder the immediate financial burden when residents fail to pay — even though those dollars are ultimately destined for the state’s Education Fund.
The issue – described as ‘the elephant in the room’ by some property tax reform advocates – was highlighted this week in the Lake Champlain Chamber’s Advocacy newsletter. Although specific numbers aren’t known, delinquent property taxes are becoming a significant problem in some communities already grappling with tight budgets, rising costs, and uncertainty over future education finance reforms.
Under Vermont law, municipalities are required to remit the full amount of education property taxes to the state, regardless of whether individual taxpayers have paid. That structure effectively places towns and cities on the front lines of revenue risk. When payments come in late — or not at all — local treasurers must still find a way to send the state its share.
It’s not known how deep the delinquent property tax problem goes – in part because the State of Vermont doesn’t track municipal tax delinquencies, a must first-step to understanding and solving the problem, some state experts say.
What happens to property owners who can’t pay taxes?
Initially, the overdue amount becomes a lien on the property, writes Amy Loftsgarden of the University of Denver School of Law. Eventually, if you don’t pay your real property taxes in Vermont, the tax collector can sell the property to a new owner at a tax sale.
The tax sale process in Vermont begins with a notification, alerting you to the outstanding debt and the risk of a tax sale. Additional notices are published in local newspapers and posted in public places. The property is then auctioned to the highest bidder, who must pay the amount owed in taxes, fees, and penalties.
Importantly, Vermont law gives the owner a one-year redemption period, which means you can reclaim your property by paying the full amount owed, plus interest, within a year of the sale. If you don’t redeem the property within this period, the winning bidder receives a tax deed and becomes the new owner of the home.
Municipalities may resort to borrowing to cover property tax revenue shortfall
To bridge the gap, municipalities often rely on short-term borrowing, drawing on lines of credit or issuing tax anticipation notes to maintain cash flow. Interest costs associated with that borrowing are borne locally, not by the state.
Compounding the challenge is the lack of a centralized system to track property tax delinquencies statewide. Each municipality manages its own delinquent accounts, but no state agency aggregates that data to show how large the problem has become across Vermont.
Municipal officials report that delinquency rates have been climbing, particularly since the expiration of federal and state pandemic-era homeowner assistance programs that helped many residents stay current on housing costs. Inflation, higher mortgage payments, rising insurance premiums, and increases in municipal and school tax rates have further strained household budgets.
The situation raises a fundamental policy question: is the state effectively offloading revenue risk onto municipalities without fully measuring the exposure?
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Categories: Local government
So in Vermont, when you buy a house, you are buying your home, for the town government, who really owns your home, via property tax extortion, if you fail their terms.
President Trump is searching ways to do away with this system of serfdom/master rule.
When an American works hard, and save up to buy a house, and takes all the risks, and pays the home off, that home should be held free and clear ,unless sold ,forever in the family.
The present system is the same kind of system Americans rebelled against 250 years ago.
GET OFF THE CITIZENS BACKS LEECHES !
The truth hurts…doesn’t it?
Someone has to say it.
Once again a great example of how incompetent the state government is. Not having a clue as to the economic situation of a mandated funding source. I’ve said it before, the majority of Vermont agency heads couldn’t run a lemonade stand and make money.
The state has no problem superintending the affairs of municipalities with sweeping mandates and statutes, such as Act 250 and S.100, which usurp local governance when it has an ideological bandwagon to push. How then is it possible that it has not come up with a centralized system to collect data from each town regarding its delinquent property taxpayers? I don’t really know, but could it perhaps be that ideological overreach seems much more appealing than having to create and implement tools which would assist towns in doing the heavy lifting of accountability and enforcement?
So just as in our welfare system, the law abiding citizens, paying their taxes, also pay for their neighbors? While we work, they skirt the system. Sounds fair, who came up with this? This state is disgusting the way our government runs. How many people are sheep just not paying attention?
Many years ago our annual Town report would include the names of those delinquent and amount owed. I don’t when that stopped, but our Town no longer does it. Now I’m hearing from friends in other Towns that people who are delinquent on their property taxes are not only running for elected office, some are serving, including on a nearby Selectboard. Town Clerks should be required to disqualify those people from running for public office.
When an escrow account that pay the taxes from your house payment stays the same for the year, where do you get the extra money when the taxes come due and enough has not been taken out to cover the state increases?
You may buy a property at a tax sale, but who pays off the mortgage on the property???????
There is an order of payment in liquidation, state is first in line, bank second. Just as first mortgage holders are before second….
I’ve said it before, the highlights:
In VT no one owns property, consider taxes are rent being charged by the town. For proof, notice how the state raises property values and raised “rent” twice, meaning property “rented” by people is a unlimited cash cow for the town and state and they keep milking it. Noticed many haven’t paid their rent in the article. CRUNCH TIME. They make the Delinquent Tax Collector happy. Notice on the notices from the DTC 8% penalty is charged. When any collection is accomplished, the penalty is pocketed by the DTC. The town doesn’t worry about seizing the land, there’s many a Flatlander will transfer some green backs from their pockets and acquire you hard work and all money you spent on the town’s property. Property tax / value grievance is against the renter put in place by the State Tax Dept. Listers / neighbors aren’t your friend, they have been schooled by the tax dept how to conduct them selves with a certain meanest attitude. AND the schools get 80% of rents and they keep asking for more. Vt has on record about the worse state in the country regarding education and high taxes. If push comes to shove, I’d sell out to a bunch of Mexicans or Somalis. Then let the town and state deal with real problems. And enjoy life. HOME SWEET HOME ALABAMA” beckons, no snow or much freezing and nice people and little stress. If over 65, no property tax. Stress is a killer.
One of my beefs is why are towns allowed to donate your tax money to non-profits and ngos’s, the repossession of my house should not be tied to making payments to non profits!