House amends CHIP in S.127, adding cap and new affordability rules; committee flags limits on eligible infrastructure

The House passed S.127 on third reading May 27 and replaced the Community Housing Infrastructure Program, or CHIP, provisions with a floor amendment that would broaden what counts as housing development while narrowing which infrastructure projects can use the program's tax-exempt financing.

The committee on Economic Development, Housing & General Affairs met May 27 to review the amendment and discuss options for a committee-level response. "The house has just passed on third reading, S-one 27, which includes, quite a few changes to, the CHIP proposal that we sent them," the committee chair said. John Gray of the Office of Legislative Counsel reviewed the amendment and its key changes for the committee.

Why it matters: the amendment changes who can use CHIP and what they can build with it. Committee members flagged potential impacts on municipal flexibility, the amount of property tax increment that will be retained statewide, and administrative burdens for small projects.

Key changes described to the committee

- Definition of housing development: The amendment expands "housing development" to explicitly include renovation and rehabilitation, not only new construction. "They've added rehabilitation and renovation so that if you are taking a building and turning it into, a habitable, place that previously wasn't a habitable place, that could be a permissible use of tax exempt financing," John Gray said.

- "Improvements" narrowed to an exhaustive list: The House amendment replaces the prior broad, non-exhaustive definition of infrastructure with a specific, exhaustive list of permissible items (wastewater, stormwater, public roads, bridges, traffic signals, sidewalks, lighting, digital/telecommunications infrastructure, and others). Committee counsel warned that if an item is not in the list, CHIP financing would not cover it, a materially different approach from the Senate's broader bucket model.

- Cap on retained education increment: The amendment ties an annual cap to the aggregate "lifetime education property tax increment retention" that projects may retain. The cap in the amendment is $40,000,000 (aggregate lifetime retention across projects approved in a year). Legislative Fiscal Office modeling presented to the committee, as described by counsel, indicated that level of aggregate retention would correspond to about a 1' increase on the education property tax rate under the amendment's assumptions.

- Site boundary and increment effects: The House text removes language that previously allowed the housing development site to include "immediately contiguous parcels." That change will generally reduce the size of the parcel generating increment for a given project and, as counsel noted, could materially lower the increment available to finance infrastructure.

- Affordability incentive and covenants: The amendment establishes a mixed-income affordability incentive. Projects that meet a defined "mixed income housing" threshold (at least 20% of units meeting the mixed-income definition) can retain a larger share of education property tax increment (the amendment frames this as higher retention for projects meeting the affordability criterion). The House language also requires terms in housing infrastructure agreements that "ensure that any housing unit within the housing development be offered exclusively as a local primary domicile in perpetuity," language the committee discussed as creating a perpetual primary-residence restriction enforced via covenants or deed restrictions.

- Application and review changes: The House amendment adds a buffer test (similar to existing TIF buffer tests) in the application process, requires a municipal housing development plan to include a determination that the proposal furthers the subchapter's purpose, and sets a 45-day deadline for the implementing agency identified in the amendment (referred to in the committee as "Pepsi") to approve or deny a completed application.

What committee members flagged

Committee members repeatedly expressed concern that making the improvements list exhaustive would reduce local flexibility and that removing contiguous parcels would shrink the revenue base available to finance projects. Several members warned that the perpetual primary-residence language could impose unusual enforcement burdens on municipalities and owners. Members also questioned whether the $40 million cap is the right metric, noting the modeling assumptions behind it and that the annual fiscal impact of a penny of property tax has changed over time.

No committee action recorded

The committee did not take a formal vote on a committee motion during the May 27 meeting. Members agreed to continue work: the group scheduled further discussion for the following day and discussed options including nonconcurrence or a committee-of-conference amendment depending on subsequent floor action.

What happens next

Committee members said they would review the House amendment text, run fiscal estimates as needed, and reconvene to consider whether to propose an amendment or seek a committee-of-conference after further floor action on the larger housing and education bills.

Sources and attributable remarks in this article come from the May 27 committee meeting transcript and from John Gray, Office of Legislative Counsel, who briefed the committee on the House amendment to S.127.