CLA stands for “Common Level of Appraisal.” It is a method of ensuring that each town is paying its fair share of education property tax to the state’s Education Fund.
In 1997 the Vermont Legislature passed Act 60 in an effort to equalize education funding across the state. Before Act 60 was passed, the amount a town could raise to fund its schools was limited by the amount of property value in the town. Because of that, levels of school funding and therefore educational opportunity varied widely across the state. Act 60 shifted education funding to the state level, creating a statewide education property tax rate and a state “Education Fund” to collect the revenue. This new arrangement of shared education funding responsibility made it necessary to check the accuracy of the town grand lists since they are maintained by town listers, not the state. If the grand list in a town did not reflect fair market value, then the town would have ended up sending more or less tax revenue than its fair share to the statewide Education Fund. Since towns don’t reappraise every year, and real estate markets are constantly changing, a correction factor, or “Common Level of Appraisal,” was developed to equalize what is paid in education property taxes across towns.
The Common Level of Appraisal (CLA) for every Vermont town is the primary result of the Equalization Study performed by the Department of Taxes every year. The equalization study compares the ratio of the grand list listed value to the sale price for all the arm’s length sales in the town over the prior three-year period. The study considers sales price as the best measurement of fair market value. If grand list values are generally less than sale prices for the recent sales, the town will end up with a CLA less than one hundred percent. If grand list values are generally more than sale prices for the recent sales, the town will end up with a CLA of more than one hundred percent. Once the CLA is determined, it is used to adjust the homestead and nonhomestead education tax rates. The CLA doesn’t change taxpayer’s property values, only the education tax rate in a town - an example of indirect equalization.
The CLA is also used as one measure to determine whether a town must reappraise. During the 2019 legislative session, the legislature changed the requirements so that municipalities must reappraise if the CLA is below 85% or above 115%. Before 2019, there was only a lower threshold, and it was 80%.