House committees hear Ways and Means’ tighter guardrails for CHIP, TIF use of education property tax

Members of two House committees on Wednesday reviewed amendments from the House Ways and Means Committee that narrow how municipalities and developers could use the Community Housing Infrastructure Program (CHIP) and related tax increment financing (TIF). Charlie Kimball, a member of House Ways and Means and the committee’s reporter on the amendment, led the panel through the measure and its fiscal guardrails.

The change package adds a “but‑for” test, tightens eligible locations, lowers standard increment retention to 60% with an 80% retention available for projects that meet the bill’s affordable/middle‑income definition, sets annual and cohort caps on foregone statewide education property tax revenue, and establishes a pilot sunset and rulemaking requirements.

Why it matters: the bill would allow municipalities to retain part of the increase in property tax revenue generated by a development to repay infrastructure bonds, rather than remitting that revenue immediately to the Statewide Education Property Tax (the “education fund”). Committee members and staff framed the Ways and Means amendments as an effort to permit housing infrastructure financing while limiting possible long‑term drains on the education fund.

Kimball said the committee sought “to put some meaningful, reasonable guardrails around the use of the statewide education property tax.” He explained the package’s main elements: a but‑for test to show that the project would not occur or would be meaningfully delayed without CHIP/TIF assistance; a location standard that focuses on designated centers and existing settlements (including areas within a half‑mile of an existing settlement) and excludes strip development; and a housing floor that requires roughly 65% of a project’s floor area be housing in many cases.

On retention and caps, Kimball described the Ways and Means compromise: a 60% retention of incremental statewide education property tax revenue for most projects to pay bond debt (raising to 80% for projects that qualify as middle‑income/affordable under the bill’s incentive), a peak annual cap equal to one penny on the statewide grand list (described in the hearing as about $14,000,000), and a lifetime‑increment cohort cap of $40,000,000. Kimball and JFO staff walked members through example math showing how those caps translate into potential private investment over a 20‑year CHIP life: depending on assumptions, the package could support hundreds of millions in private development and, over 20 years, “well over a billion dollars,” Kimball said.

Patrick Jitter of the Joint Fiscal Office cautioned that the caps establish an upper bound on potential exposure to the education fund, not a precise cost estimate. “We’re still not able to estimate a cost for it,” Jitter told committee members, repeating that the JFO could provide ranges if the committees provided per‑unit infrastructure cost assumptions.

Members pressed for clarity on how the increment is split. Committee discussion clarified the bill’s mechanics as explained at the hearing: when a development generates new property tax revenue, the municipality would generally retain a portion to repay bonds (Ways and Means’ amendment sets the default retention at 60%), while the remainder would flow to the education fund (the 40% balance under the example used in the hearing). The municipality’s portion can be used to service bond debt or passed to a private borrower that financed the infrastructure.

Committee members raised equity and practical questions. Several lawmakers asked whether the cap and the prioritization criteria would favor larger projects in more expensive communities (for example, Burlington) and disadvantage small or rural towns. Members asked whether VEPC (the Vermont Economic Progress Council) or the CHIP application process might prioritize projects that generate the most revenue, and whether rulemaking and review requirements would ensure geographic equity. Ways and Means members responded that the bill includes prioritization factors such as geographic equity, verifiable housing shortages and labor‑force needs, and that the TEPC/VEPC rulemaking process would flesh out details.

The Ways and Means amendment removes language that had made an Act 250, Section 51 permit (the transcript refers to Act 250/10 V.S.A.) an explicit route to eligibility; instead, Ways and Means said applicants should be permitted to apply before permit decisions are final. The amendment also inserts a pilot/sunset review (the committee discussed a sunset through late 2030 and the amendment read in the hearing sets the pilot to end 12/31/2031) so the legislature can assess CHIP’s interaction with TIF and the education fund after several years of operation and rulemaking.

Members also debated definitions around the bill’s housing incentives. The amendment narrows the extra increment available for qualifying projects and ties the enhanced retention to developments subject to housing subsidy covenants or a middle‑income definition referenced to housing‑finance standards. Committee counsel and witnesses said rulemaking will need to clarify how covenants and income bands will be enforced and monitored.

No final vote on the amendments occurred in the hearing; committee chairs described the session as an opportunity to ask questions and align understanding. Committee members directed staff and JFO to produce additional modeling and signaled that VEPC rulemaking will be a critical next step before the program could be widely implemented.

What’s next: committee members asked JFO for per‑unit infrastructure scenarios and asked VEPC to develop rules that address geographic equity and auditing of the but‑for test. The measure remains under committee review; the Ways and Means amendments set new statutory guardrails but rely heavily on forthcoming rulemaking and agency procedures to implement the program in practice.

Ending: witnesses and members agreed the subject will return to committee with additional JFO numbers and draft VEPC rule language; no formal committee action or floor votes were taken during the hearing.