Committee reviews CHIP amendment that removes board, broadens eligibility and places cap on TIF retention

Legislative counsel John Gray told the House General and Housing Committee on May 22 that an amendment to the CHIP (housing infrastructure) proposal—offered as an amendment to the Ways and Means amendment—strikes out the tax increment financing pieces of the Ways and Means language and replaces them with a consolidated CHIP text covering definitions, project criteria and rulemaking.

The change removes a separately created CHIP board and directs the agency that approves CHIP applications (referred to in the transcript as “Pepsi”) to perform approvals and rulemaking. "The board concept has been removed entirely," Gray said, and the amendment instead adds housing expertise to the existing approving council’s membership for CHIP decisions.

The amendment replaces earlier phrasing that referenced "middle income housing" with "mixed income" developments in the definitions, and expands the program purpose to make CHIP eligible for both rural and urban areas statewide. Gray said that change is "more tonal than substantive," but that the stated purpose will be part of the agency’s rulemaking priorities.

Committee discussion focused on several substantive mechanics: the "but for" test that applications must satisfy (whether proposed infrastructure improvements or the housing development itself would occur in a significantly different or less desirable way without CHIP), the removal of location-based eligibility so projects could be sited anywhere in the state, and a new 45-day deadline for the approving agency to approve or deny a completed application. Gray explained the but-for test asks whether the infrastructure "would not have occurred as proposed in the application or would have occurred in a significantly different and less desirable manner." He added the statute gives the agency scope to consider how the lack of tax increment financing would change the size or mix of the proposed housing.

The amendment also adds an explicit lifetime cap on the amount of education property tax retention that CHIP projects may consume: $40,000,000 total with an annual opportunity to increase the cap by up to $5,000,000 if the governor applies and the Joint Fiscal Committee (JFC) approves. Gray said the cap counts the lifetime (debt service principal and interest across the bond term) impact of approved projects on the education fund and noted the retention period in the amendment is 20 years for each project’s tax increment retention. "Betsy may increase the limit by not more than $5,000,000 upon application by the governor to and approval of the Joint Fiscal Committee," Gray said, describing the amendment text.

To maintain housing expertise after the removal of the separate CHIP board, the amendment adds two voting members—the executive director of the Vermont Housing Finance Agency (VHFA) and the executive director of an entity transcribed as "BHCB"—and a nonvoting member, the commissioner of the Department for Housing and Community Development (DHCD), specifically for CHIP decisions on the approving council. Gray said those members would sit "exclusively for the CHIP program."

Committee members raised practical questions about administration and enforcement. One member said the requirement that units be offered as a primary residence "in perpetuity" worried them; Gray and others explained that perpetuity typically is implemented by deed restriction or covenants and that enforcement would rely on available remedies rather than ongoing active policing. Another member pressed on prioritization and the new 45-day approval deadline, asking how the approving agency would reconcile a prioritization process with a firm approval clock if multiple applications were pending and the cap approached.

Members also debated the effect of the 60 percent/threshold incentives in the broader bill language and whether lowering thresholds would undercut the bill’s goal of encouraging mixed-income or affordable units. Several members said they supported the amendment as an improvement over the Ways and Means amendment and wanted the bill to proceed to conference; others said the package did not do enough for small towns or the missing-middle housing they represent.

The committee took a nonbinding straw poll on the CHIP amendment as it would amend the Ways and Means amendment. The clerk reported the straw poll result as eight in favor and two opposed. Committee leadership said the rural caucus would offer its own amendment at noon and the committee would take a straw poll on that amendment later.

The committee discussion noted rulemaking and administrative review steps that will follow should the amendment advance. Gray and members referenced the Legislative Committee on Administrative Rules (LCAR) as the forum where agency rules implementing CHIP would be reviewed, and several members said they expect legislative oversight or testimony on any proposed rules once the agency publishes them.

Committee members repeatedly emphasized this is a high-stakes policy experiment—aimed at financing infrastructure that enables new housing—but one that must be monitored. Several members said they would press for continued legislative review of the agency’s proposed rules and for future adjustments if the program’s outcomes or effects on the education fund differed from expectations.

The Committee paused for a break and scheduled return for the rural caucus amendment presentation at noon.