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The Congress and Main downtown redevelopment project under construction in St. Alban’s TIF district on Wednesday, August 7, 2019. Photo by Glenn Russell/VTDigger

In this column, VTDigger business and economy reporter Anne Wallace Allen looks at economic development in Vermont.

Vermont exceptionalism is nothing new: it’s well known that Vermont ranks No. 1 in areas like U.S. maple syrup and organic dairy production. Vermont was the first state to ban slavery, in 1777, and later the first to recognize same-sex marriage through legislation, as opposed to a court ruling. It has the most breweries and cheesemakers per capita, and the fewest fast food restaurants.

An article published Jan. 30 by The Economist contains another distinction, asserting that Vermont has seen the lowest wage growth in the U.S. over the past decade. The Economist blames out-of-control regulation, suggesting that it’s now about as difficult to build in Burlington as it is in San Francisco.

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“What has Vermont got wrong that much of the rest of America has got right?” asks the British weekly.

Good question, said the state’s economic development commissioner, Joan Goldstein.

“The reason why it’s so stinging is because of the element of truth,” said Goldstein, who singled out Vermont’s 50-year-old land use law, Act 250, as one reason for sluggish residential real estate growth. Act 250 has made building houses more expensive and more time-consuming, said Goldstein.

“Therefore, only the people with bigger pockets can get it done,” she said.

Vermont, like other states, is a regular target of slice-of-life stories by reporters who drop in briefly from national publications. The Economist’s writer picked up on Montpelier’s many yoga destinations and mentioned its “eat more kale” t-shirts, identifying the state as a highly educated but not high-income place that “is often seen as a destination for hippies trying to get away from it all.”

Whether or not that description fits, it’s true that Vermont is wrestling with some fiercely difficult problems, including sluggish GDP growth, an aging population, and a wage rate that stays stubbornly low despite a labor shortage so extreme that it’s now suppressing economic growth.

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Conversations about these realities generally head down one of several well-trodden paths. Not everyone agrees there is a housing shortage, but those that do want to use state and federal money to build more affordable housing. They run into the constraints imposed by a tax base that has been stable or shrinking for years.

While many people believe raising the $10.96 hourly minimum wage will help raise pay overall, others fear it will suppress economic growth. Gov. Phil Scott vetoed a proposed wage increase this month.

Supporters of tax increment financing as an economic development tool run into opponents who say it robs the state’s education fund; business groups looking for a way to scale back Act 250 come up against the urgent need to clean up pollution in places like Lake Champlain.

“Maybe they’re blaming Act 250 when they talk about regulation, but we’re reforming that this year,” said Senate President Pro Tem Tim Ashe of the article in The Economist. “Anyway, it has probably suppressed growth, yes, but it has also probably prevented a lot of bad things.”

With no unified economic development policy in place for Vermont, leaders are taking a variety of approaches to the type of problems outlined by the magazine.

Michael Ly, who owns the fast-growing Reconciled accounting firm in Burlington, thinks cities and the state must scale back the regulation that blocks housing construction. Ly ran as a Republican in 2015 for the Burlington City Council.

“It’s not uncommon for a community to be built for 1,000 people in some major metropolitan areas,” said Ly. “Has any developer come to Chittenden County to say, ‘I want to build 500 housing units? How long would it take to get that passed?”

“Honestly, it’s a scarcity of developable lands and the issues we keep running into with NIMBY,” said Evan Langfeldt, CEO of the O’Brien Brothers real estate company in South Burlington.

Tom Torti, president of the Lake Champlain Chamber of Commerce, said creating one multi-stakeholder, bipartisan group would help the state find a way to help business — and workers — thrive.

“We make it hard for companies that pay good wages to locate in Vermont. We have this very Currier and Ives provincial point of view that we can grow our economy one kombucha shop at a time,” said Torti. “That flies in the face of what we are hearing over and over again from people who are either leaving Vermont or thinking of leaving Vermont. We do really well at startups, and when they get bigger, they leave.”

Tom Kavet, the Legislature’s economist, takes issue with The Economist itself, saying that the author relied on inferior wage data and that Vermont doesn’t have the lowest wage growth in the nation.

“Is it a hard place to make a living for some people? Absolutely,” said Kavet. “Is it harder than most? No. Wage growth has been incredibly weak throughout the entire nation.”

For her part, Goldstein and her department are trying to change the perception of Vermont to make it clear that the hippies and yoga coexist with modern companies offering good jobs.

The Economist doesn’t lay all the blame on regulation; it also says the structure of Vermont’s economy — which lacks, for example, a lucrative energy-producing base — has something to do with its low wages.

As far as Ashe, D/P-Chittenden, is concerned, Vermont’s lack of volatility more than makes up for the lack of pizzazz it’s displaying in the complex national economic recovery now underway.

“One of the things that is also true about Vermont is that Vermont in some ways has had this never-too-hot, never-too-cold economy,” said Ashe, noting that during the recession, Vermont’s unemployment rate didn’t rise as precipitously as those in other states, and it didn’t suffer a housing market crash. The state’s unemployment rate peaked at 7%; the national peak was 10%. “That prevents us from having those moments of spectacular growth — which would be wonderful — but the flip side of that rarely do we have what we saw in the southwest or in Florida in the recession. It was very, very bleak indeed.”



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