Report says Act 250 unfair to small companies

Vermont Business Magazine, Jan 1994 by Witten, Matthew

A study recently released by the University of Vermont found that during 1991-1992, the average cost of obtaining an Act 250 permit was $172,649. The same study found that, on the average, it takes 517 days to go through the process of preparing for and obtaining an Act 250 permit.

Some members of the business community say that the results show the costs and time involved in obtaining an Act 250 permit are excessive.

Others, however, say that the study is misguided and only points to the need for more definitive and objective studies to get at the real effects of Act 250 on developers.

Whereas many businesses decry the effects of Act 250 on Vermont's business climate, a broad spectrum of businesses, especially banks, have long acknowledged the benefits that Act 250 has had in stabilizing Vermont's economy.

The UVM study, while suggesting trends, is apparently far from being a definitive assessment of the burdens placed on businesses by Act 250. UVM Professor of Economics Jim Gatti, who introduced the study on December 9, 1993, stressed that this new study was only a "first step" in determining the affects of Act 250 on businesses.

The study was conducted by University of Vermont Business School graduate student Susan Buehl, and was funded by the Vermont Homebuilders Association, Vermont Electrical Contractors Association, the Associated Contractors of Vermont, the Vermont Association of Realtors and the Vermont Environmental Council.

In 1991-1992, the Environmental Board conducted a broader study of the Act 250 permitting process. Among its findings were that Act 250 covers about 40 percent of Vermont's development and that 81 percent of Act 250 applications are approved within four months of filing.

Not everyone considers the Environmental Board's study definitive, either. Looking at the Environmental Board's data, Greg Dirmaier of JL Davis Realty in Williston queried, "but how many applications are withdrawn? How many are minor applications?" Dirmaier said that a lot of people question the statistics that the Environmental Board releases.

The question now is how to reconcile existing studies with each other, as well as determining which new studies are needed to achieve objective results.

IS THE LITTLE GUY GETTING SQUEEZED?

While Buehl's study is not definitive, perhaps the most surprising result of her study is the average cost of the Act 250 process as a percentage of the estimated project construction cost. For all the projects in the UVM survey, the average cost of obtaining a permit was 13 percent of the estimated construction cost. For projects under $400,000, "the permit press represented 26 percent of the total cost."

John Caulo of Kessel/Duff Construction in Williston, who represents the Home Builders Association of Northern Vermont, said that these results showed that Act 250 has a "chilling effect on the small businessmen and women in the state."

Vermont Natural Resources Council Deputy Director for Policy Stephen Holmes said that in a 1988 study on Vermont permitting processes, the Vermont Department of Housing and Community Affairs reported that the cost of all permitting for housing developments averaged 11 percent of the construction costs.

"The new (UVM) study is way out of whack with the 1988 study," said Holmes. "I think small and medium-size projects are treated well," he added. "We don't get involved in those (applications), nor do citizen groups."

While Buehl found in her study that "there is no relation between the size of projects and the time of review" by Act 250, her study was based purely on cost rather than on minor and major applications.

This does not necessarily show, as Buehl suggested, smaller projects are suffering under Act 250. Proposed projects that have relatively low costs may be declared major applications if they would have a significant impact on local ecosystems or municipal services. Conversely, some high-cost projects might be declared minor applications if they would have little impact.

Several officials in the Act 250 administration claim that small projects generally move through the process quickly if no major issues are raised by nearby property owners. In fact, Act 250 district commission coordinators in some cases go out of their way to be accommodating for projects even before the application is filed.

"The meat and potatoes of Act 250," said Coordinator of District #3 Environmental Commission Rob Sanford, "are those projects that affect only four or five people."

A Vermont Business Magazine review of small projects in three District Commissions during 1993 showed that projects whose construction costs were between $50,000 and $100,000 averaged only two months or less in the Act 250 permitting process (see chart). (Chart omitted)

While this does not include an applicant's preparation time, as the UVM study did, it suggests that small projects are not bogged down by Act 250.

DIFFERENT TREATMENT BY DIFFERENT COMMISSIONS

"The same project would be treated differently by different commissions," said Patty Donnelly of the Vermont Environmental Council in Rutland. Donnelly said that "some commissions bend over backwards to extend courtesies to opponents" of proposed projects. This, she added, can slow down the permitting process.