What was a large headache ended quietly at year’s end: Milton began paying its tax increment financing bill, a holdover from the January 2012 audit that said the town owed $3.4 million to the Education Fund.

In the end, Milton will pay back much less: $22,000 to the state and $177,000 in internal transfers. Act 80, passed at last legislative session’s end, required TIF towns Milton, Burlington and Winooski to begin remitting funds by December 15 – or else, after a 60-day grace period, they’re on the hook for the whole bill.

Milton’s Selectboard approved the spending plan six months after Act 80 passed; in May, Chairman Darren Adams anticipated a July approval.

“I don’t think we were ready in July, based on just needing to cool off and get some [legal] advice,” Town Manager Brian Palaia said. “It’s our money, so we’re going to hang onto it as long as we can.”

All three towns initiated payments on time, said Fred Kenney, executive director of the Vermont Economic Progress Council, empowered by Act 80 to oversee TIFs.

TIF districts, allow municipalities to retain education tax increments to fund public infrastructure projects. In Milton, TIF monies buoyed water treatment and sewer line expansions to support Husky and the Catamount Industrial Park; more recently, they helped fund the town core sewer project and will later make realigning the dangerous Railroad Street/Route 7/Middle Road intersection a reality.

Former Auditor Tom Salmon’s report focused on the older projects. About $160,000 of the $177,000 Milton owes itself was used to pay for sewer components that didn’t support the TIF, making costs ineligible.

Town officials disagreed on whether the project was actually grant-, not TIF-funded, but the attorney advised it’s best to just debit the wastewater fund and stop the already expensive fight.

“We don’t have any leverage to argue,” Palaia said. “Even though we feel we have a strong case, we might spend that amount of money on litigation.”

The town has already shelled out $25,000 for legal fees on the TIF case, Palaia said.

Ratepayers won’t be affected as long as the fund balance can absorb the cost, which amounts to $32,000 a year for five years.

“But if things get tight,” Palaia warned, “that might affect our ability to pay for capital items without a greater rate increase.”

He noted there are no major wastewater capital items planned in FY15.

The other interfund transfer is $17,000 from one TIF fund to another: Milton’s Catamount/Husky TIF owes the Town Core TIF the balance, borrowed for the latter TIF’s preliminary startup costs.

Back then, Palaia said, there was no requirement to set up two funds; the town still only has one but plans to create them in accordance with Salmon’s recommendations.

As for the Ed Fund, the town will split the $22,000 bill over two years. The $11,000 payment ate up 13.5 percent of this fiscal year’s contingency budget, which, six months in, was untouched, the town manager said.

Though a major TIF audit chapter is closed, state agencies continue to form TIF rules not covered by legislation; VEPC, the Auditor’s Office, Department of Taxes and TIF towns are all participating, VEPC’s Kenney said.

Rules will cover definitions, record keeping, annual reporting and processes for amending TIF financing plans. The rules, not retroactive, probably won’t be in place until next fall, though TIFs continue to operate, Kenney said.

Palaia is pleased Milton is involved in the process but said the uncertainty makes him nervous. He thinks legislators are largely anti-TIF; opponents argue TIF steals from the Education Fund, but proponents like Palaia say once the TIF borrowing periods end, the resulting growth will pay the Ed Fund back and then some.

Kenney took an opposite tack, saying the rules will clarify outstanding confusions.

“The hope is that in the next audits, that there aren’t as many issues found” or they’re dealt with expediently, he said.

Milton’s audit for its Town Core TIF will be in 2018, Palaia said.