Vermont economy to be legislative focus

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The Legislature's economic development committees will help decide this year whether Vermont should extend two major subsidy programs for companies to create or retain jobs.

The administration of Gov. Peter Shumlin will propose to extend the controversial Vermont Employment Growth Incentive, an employment program that critics say is a waste because many of the jobs would be created regardless of state assistance.

The second program is the Enterprise Fund, a pot of money that a special panel of lawmakers and the governor can allocate to companies they want to keep in Vermont.The administration remains mum on whether they will seek to replenish the special fund, but the issue is on their radar.

In the marijuana debate, the Senate's economic development committee will play a key role in determining how to regulate the drug if it is legalized, since it already oversees laws on liquor control and the Vermont Lottery. The House commerce committee will also take testimony on marijuana bills in its capacity as an overseer of financial regulation.

Two perennial bills will also surface from either the House Committee on Commerce and Economic Development or the Senate Committee on Economic Development, Housing, and General Affairs.

One, a consumer protection bill, includes language to protect Vermonters from online dating scammers. Another will be a jobs bill that will morph in the back and forth between the House and Senate throughout the session.

The committees will also review telecommunications law.

VEGI and the Enterprise Fund

Expect to see a fight when the Agency of Commerce and Community Development seeks an extension of the Vermont Employment Growth Incentive program, or VEGI. The program allows businesses to apply to the Vermont Economic Progress Council for what are essentially tax rebates in exchange for creating new jobs in Vermont.

Critics of VEGI say the program simply reimburses successful companies for jobs they would have already created without the state money. In the past several years, the state made awards to Dealer.com (up to $1.2 million), MyWebGrocer ($453,000), Revision Ballistics ($619,000) and Keurig Green Mountain ($7.7 million), which has just been sold to a private investment firm in a $14 billion deal.

The controversial program will sunset in 2017 without legislative action. Patricia Moulton, the secretary of the Agency of Commerce and Community Development, said the administration will propose to make VEGI permanent during the session.

Pat Moulton

Secretary of the Agency of Commerce and Community Development Pat Moulton. Photo by Erin Mansfield/VTDigger

VEGI started in 2008 following controversy surrounding another tax credit program, the Economic Advancement Tax Incentive. Two years earlier, in 2006, the state auditor identified waste and abuse within the Economic Advancement Tax Incentive program, and the VEGI program emerged, built with more controls to stop businesses from abusing the tax credits.

But in the 2015 legislative session, the Shumlin administration proposed removing some of the VEGI controls and lower the wage threshold for jobs created through the program. The Legislature's economist denounced the plan, saying changes would force people onto millions of dollars worth of public assistance, and lawmakers pushed back in both the House and the Senate.

Lawmakers and the administration eventually settled on compromise language that kept the current wage threshold for Chittenden County companies at 160 percent of minimum wage — or $15.36 in 2016. They only lowered the threshold in areas of Vermont with lower-than-average wages or high unemployment, where the jobs must pay 140 percent of minimum wage — or $13.44 in 2016.

The administration also wanted to permanently remove legal provisions that capped how much the state could award through specific sections of VEGI. The compromise language required the Vermont Economic Progress Council to apply to the Emergency Board to have the caps raised, and the council did that in 2015.

At one of those meetings, Rep. Janet Ancel, D-Calais, chair of the House Ways and Means Committee, said that she was concerned that the Shumlin administration would continue to ask for extensions. Shumlin told her the state would likely fall into a recession within three years, so the state should accommodate businesses while it has the chance.

Sen. Tim Ashe, D/P-Chittenden, chair of the Senate Finance Committee, had already scrutinized the VEGI program when it came through his committee in 2015 and helped establish the compromise language. At the December meeting, he told Moulton and others that the state should pay "the best price" to get companies to stay, "not any price."

Enterprise Fund

The Enterprise Fund was created at the end of the 2014 session essentially to give the Shumlin administration a $4.5 million account of money that they could use to convince IBM to state in Vermont if the company ever threatened to leave.

In 2011, the company maintained it would leave if Vermont Yankee ever closed down, which occurred at the end of 2014. But in 2015, IBM paid GlobalFoundries $1.5 billion to take over its plant, with no incentives from Vermont as part of the deal.

Budget pressures and legislative changes eventually depleted the Enterprise Fund to $2.1 million before the governor ever sought to use it. Then, as part of the 2015 omnibus economic development bill, the Legislature spent $425,000 of that fund.

Lawmakers allocated $200,000 of that to the Department of Tourism and Marketing to perform a study on how to market Vermont as a good place to do business. Another $100,000 went to the Lake Champlain Regional Chamber of Commerce to build relations between Vermont and Quebec. The final $125,000 was used to start a first-time homebuyer program.

In October, the Emergency Board and the Shumlin administration spent down another $700,000 of the Enterprise Fund. GW Plastics in Bethel received $500,000 to build an expansion, and an unnamed Canadian company will be offered $200,000 (over and above the VEGI awards offered).

But the existence of the fund has always been a source of tension. When the policy was first being debated, in 2014, Sen. Anthony Pollina, P/D-Washington, told VTDigger: "We wonder what we get in return when we provide these incentives. What does a half a million dollars or a million dollars mean to some multinational corporation?"

The Emergency Board is scheduled to meet again Jan. 8 to decide whether to give Enterprise Fund money to another currently unnamed company. The fund could only be refilled if the Legislature decides to do so in 2016.

Moulton said in an email it is up to Shumlin to propose to refill the fund. Scott Coriell, the governor's spokesperson, said Shumlin's priorities will be announced in his State of the State address on Jan. 7.

Marijuana regulation

The Senate Committee on Economic Development, Housing, and General Affairs, which oversees liquor control, tobacco, and the Vermont Lottery, will take up marijuana legalization regulation this session.

In Vermont, medical marijuana is legal, but it is tightly regulated under the Department of Public Safety, which includes the state police. It is not clear what agency would be tasked with regulating recreational marijuana.

Sen. Kevin Mullin, R-Rutland, who chairs the Economic Development Committee, said he'd rather spend all his time on job creation. But he said he's been assigned to consider the regulatory aspects of legalization. Mullin said he's keeping an open mind over whether to vote "yes" on legalization.

"I want to make sure that what we do doesn't just create an opportunity for a couple of individuals to make some money," Mullin said. He said Vermont should only create an open market for selling marijuana, "not a protected market for a few cronies."

Because it oversees banking, the House Committee on Commerce and Economic Development will be responsible for figuring out how marijuana distributors could access banking and insurance services given that their business would remain illegal under federal law.

Currently, in states that have passed legalization laws, marijuana is a cash-only business. In Colorado, banks have largely shut out marijuana distributors, according to the New York Times, because they fear they will be accused of aiding and abetting drug dealers.

Rep. Bill Botzow, D-Bennington, the chair of House Commerce, said the state should thoroughly understand any banking and insurance issues involved because it is a "fundamentally" different business model. "It is largely a cash economy, and as other states have done this, it has been a problem that they have not yet solved," he said.

"It has a lot to do with federal regulation of banking, and if you want banking services such as credit cards, you need a permission from the Federal Reserve, and the Federal Reserve has not been granting those permissions," Botzow said.

"You are dealing with something that is considered a contraband substance," he said. "It makes sense to me that if you are fundamentally wanting to create a business sector, (you should) understand how the basic platforms of business connect to it."

Economic development and consumer protection

These are two perennial bills, and right now it's not clear where the economic development and consumer protection bills will start out. In 2015, the Senate side passed a shell of an economic development bill, and the House side loaded in amendments after the full Senate passed it.

Going into 2016, the Senate side has promised to take up online dating scams at the beginning of the session, and the language could later get jumbled into an omnibus consumer protection bill. The Senate side is also working on technical amendments to the 178-page economic development bill passed in 2015.

Any renewal of VEGI or replenishing of the Enterprise Fund would likely fall into the economic development bill. The Agency of Commerce and Community Development has also signaled it might include an extension of a downpayment assistance program passed in 2015 in either an economic development bill or a general housing bill.

Botzow, who chairs House Commerce, said the House Appropriations Committee has ordered his committee to spend the first three weeks of the session evaluating programs it oversees. When that's over, he said he wants to continue to focus on workforce development.

"I'd be curious to see how Vermont can position itself as best as it can and be competitive in the world for basically people, so that people can say this is a great place to have a life," Botzow said.

Telecommunications

Botzow said his committee plans to look at a telecommunications rule passed in 2013 that requires applicants for cell tower and broadband buildout to go through the Public Service Board process, called Section 248, as opposed to Vermont's more stringent land-use development law, called Act 250.

A section of the 2013 law also made the Public Service Board's authority over cellular infrastructure sunset on July 1, 2017. The law also included language to give towns automatic party status in Section 248 cases.

"Did that legislation meet its intent?" Botzow asked. He said that question should be answered keeping in mind that ubiquitous cell service is important as people spend more of their lives on mobile devices and businesses rely on them.

The Public Service Department, which took on the duties of the now-defunct Vermont Telecommunications Authority in July, is scheduled to submit a report to the Legislature on how it can fund the three new positions in the Division of Telecommunications and Connectivity.

For fiscal year 2016 only, the department was allowed to use money from the universal service fee — the surcharge on landline and cell phone bills — to pay for those positions. Rep. Sam Young, D-Glover, added an amendment to the telecommunications bill in 2015 seeking a study on whether the gross receipts tax on telecom companies should be used to fund the Connectivity Division.

Several telecommunications bills remain on the wall in the House Committee on Commerce and Economic Development, including bills that would make it easier for small telecommunications companies to connect to telephone poles and provide universal fiber.

Studies called for in 2015

• A report on whether the state could implement blockchain technology—a system based on mathematical algorithms that is also used to back up digital currency—to back up state records is due by Jan. 15.

• The Department of Tourism and Marketing must report back to House Commerce and Senate Economic Development by Jan. 15 on an initiative to market Vermont as a good place to do business.

• Several parts of the executive branch, including the Agency of Education and the Department of Labor, were required to submit a report by Dec. 15 outlining how career and technical education centers could help keep young people employed.

• The Department of Financial Regulation and the Agency of Commerce and Community Development were required to submit a report by Dec. 1 on how the state could make it easier for entrepreneurs to lend to each other using so-called peer-to-peer lending.

• The State Treasurer's "ABLE" task force must report back to the Legislature by Jan. 15. The group was assigned to study how the state could make certain savings accounts more attractive to disabled Vermonters.

• A report on how to modernize the Department of Liquor Control is due by Jan. 15. A full preview of the issue is available here.


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