Maintaining strong and vibrant downtowns is a challenge for communities throughout Vermont. Downtowns are often at a disadvantage for development or redevelopment due to the added costs of property assembly and site preparation or the challenges inherent in meeting building codes in historic structures. The state Downtown Program was developed to help level the playing field between downtown development and projects in outlying areas through financial incentives, regulatory streamlining, and technical assistance. When communities apply for and receive downtown designation, both the municipality itself and private owners of income-generating properties within the downtown are eligible for tax credits and Act 250 waivers that can substantially reduce the costs of downtown development.
The first goal of Vermont’s Planning and Development Act is to plan development so as to maintain the historic settlement pattern of compact village and urban centers surrounded by rural countryside. The reality, however, is that it is often much easier to develop in rural areas, and as a consequence, much of Vermont’s recent development has been scattered across the working landscape rather than integrated into existing developed centers. To counter this trend, Vermont launched the Downtown Development Program in 1994 to provide technical assistance and training to communities seeking to bring development back into their downtowns.
Four years later, the state legislature built on the success of this program with the Downtown Development Act of 1998, which added a variety of incentives for municipalities to implement specific planning and organizational standards and procedures intended to strengthen their downtowns. (In 2002, village center designation was added as an option for communities with smaller village centers.) Applying to the Vermont Downtown Board for formal designation is voluntary, but the benefits apply only to those communities and individuals that fulfill the requirements and receive designation.
Some benefits of downtown designation apply only to the municipality. Others apply to private property owners. Municipal governments of designated downtowns enjoy the following benefits:
- Access to capital transportation and related capital improvement fund grants. Designated downtowns are eligible for grants up to $75,000 from the Downtown Development Board for capital transportation and related capital improvement projects to support economic development.
- Priority consideration by state agencies. Designated downtowns get priority consideration by any state agency administering any state or federal assistance program for which a project in the downtown is eligible.
- Broader allowable uses for special assessment district funds. For those communities that choose to enact a special assessment district (also known as a special benefits district or business improvement district), funds that are raised can be used for both operating and capital expenses.
- Traffic calming options. Designated downtowns have the authority to post speed limits of 25 miles per hour to help calm traffic and make the downtown more pedestrian friendly.
- Expanded signage options. Within a designated downtown district, alternative signs may be posted by a municipality to help guide visitors to transportation centers and unique educational, recreational, historic, or cultural landmarks.
- Priority consideration for new state buildings. When considering leasing or constructing a new building, the state will give priority to designated downtown locations.
The following benefits apply to property owners and/or lessees of those properties within the district:
- 10% tax credit for substantial rehabilitation of certified historic buildings. A state income tax credit of 10% for the cost of substantially rehabilitating a certified historic building is available as an “add on” credit for projects that qualify for the 20% Federal Rehabilitation Investment Tax Credit (RITC).
- 25% tax credit for facade improvements. A state income tax credit of 25% is available for owners or lessees of buildings built prior to 1983 that undertake projects to rehabilitate a building façade or storefront that contributes to the integrity of the designated downtown, but that does not qualify for the 20% Federal RITC and 10% State “add on” credit listed above.
- 50% tax credit for code improvements. A 50% state income tax credit is available to property owners and lessees for costs associated with bringing a building into compliance with state building codes, abating hazardous materials, or redeveloping a contaminated property.
- Sprinkler system rebate. A rebate of up to $2,000 of the construction permit fees paid to the Department of Public Safety when installing a complete automated fire sprinkler system if the project receives any of the tax credits listed above.
- Higher thresholds for Act 250 review. The Act 250 threshold for reviewing “mixed income housing” and “mixed use” projects is eased from the current 10 housing units. In a designated downtown, the new threshold is a sliding scale that ranges from 20 units in a community with a population under 5,000 to 100 units in a community with a population over 20,000.
- Reallocation of sales tax on construction materials. A municipality may receive a reallocation of sales taxes paid on construction materials used on qualified projects in the Designated Downtown to be used in support of the qualified project. This benefit cannot be used in projects using either the 10% or 25% state building rehab tax credits listed above.
Related Case Studies
State Designation Program [downtown designation application page]