Vermont Bond Bank outlines uses for Sustainable Infrastructure Fund to support housing-linked water and road projects

Michael Gaughn, executive director of the Vermont Bond Bank, told the Vermont Senate Appropriations Committee on March 18 that the bank proposes using a Vermont Sustainable Infrastructure Fund to help small communities afford infrastructure needed for housing development.

Gaughn said the governor’s original budget recommendation for the fund was $9.1 million and that a draft of related legislation he had seen increased that figure to $15 million. “I recently saw a draft of the related legislation that had this at 15,000,000, and certainly were supportive,” he said.

Gaughn outlined three ways the bond bank would deploy the fund. First, the bank would make direct loans at a target rate of 1 percent to smaller projects — “where the infrastructure need is in the hundreds of thousands or kind of up to a million dollars,” he said. He described the 1 percent loans as an implicit subsidy: on a $1,000,000 project, a 1 percent loan produces about $250,000 of value compared with the next best alternative financing option.

Second, the bank would use fund dollars to “buy down” interest rates in its pooled loan program for larger community infrastructure loans. Gaughn gave a hypothetical example in which a $4,000,000 project could receive $1,000,000 from the sustainable fund and the remainder through the bank’s conventional pooled program, producing a lower blended rate that improves project feasibility.

Third, Gaughn said repayments and equity created by the fund could be pledged as credit enhancement for larger projects that need improved credit profiles to access other financing, including federal programs. He specifically cited the federal TIFIA loan guarantee program as one example where credit enhancement could help a project reach an investment‑grade footing and qualify for direct federal financing.

Gaughn framed the proposal as intended to fill a financing gap in expanding drinking water systems and other infrastructure that often must be in place before new housing can be built. “The SRF program is very limited on expanding drinking water systems, which oftentimes is a prerequisite for housing development,” he said, noting the bond bank already administers some state revolving fund financing and other partnerships with state agencies.

Committee members asked about eligible categories; Gaughn said the draft bill identifies water, wastewater and transportation as primary categories, plus incidental projects connected to those areas. He also described examples the bank has previously financed — such as combining pooled loans with energy‑efficiency financing — to show how multiple sources can be layered to reduce community costs.

The presentation closed without a committee vote; committee members discussed the proposal as part of the fiscal year 2026 budget review. The bank’s written slides and the draft legislation will be available to staff as the committee continues its budget work.