Appropriations committee reviews amendment to S.127, shifting CHIP to statewide mixed-income tool with new timelines and funding cap process

The House Appropriations Committee reviewed draft 1.3 of an amendment to S.127 — the housing bill that includes the CHIP program — on May 21, 2025, focusing on changes to the program’s scope, application process and funding limits.

The amendment makes the program explicitly statewide, replaces “middle income” language with “mixed income,” removes location restrictions that would have limited where CHIP projects may be sited, eliminates a separate CHIP board and sets new deadlines and funding-cap procedures. John Gray, legislative counsel, summarized the administrative changes and timeline: “The board has been stripped out of this,” and, later, he said the administering council “shall approve or deny not later than 45 days following receipt of a completed application.”

Why it matters: proponents and committee members said the rewrite is intended to make CHIP a flexible financing tool for infrastructure that supports housing — including in rural areas — while keeping guardrails on how retained tax increment is used. Representative Charlie Kimball (Windsor-5), one of the amendment sponsors, said the cap increase language responds to concerns “that the cap was not high enough.”

Major changes explained

Scope and purpose: The amendment’s purpose language is revised to say CHIP is meant to “encourage the development of new primary residences for households of low and moderate income” across both rural and urban areas in all Vermont counties. The draft replaces the phrase “middle income” with “mixed income” and links the mixed-income incentive to housing subsidy covenants defined in Title 27.

Application process and deadlines: The amendment removes a proposal that had created a separate CHIP board and instead places application review with the council that administers related tax-incentive programs. The amendment requires the administering council to approve or deny completed applications within 45 days.

Location criteria removed: Earlier drafts included location or settlement-area criteria (for example, proximity to designated centers or a half-mile rule). Those location restrictions were removed in draft 1.3, meaning applicants can pursue CHIP projects anywhere in the state, subject to other regulatory approvals.

Funding cap and variability: The bill retains a $40,000,000 lifetime cap on the amount of education-property tax increment that may be retained for CHIP projects, and it adds a mechanism — modeled on existing practice for other tax-incentive programs — allowing the cap to be increased by up to $5,000,000 upon an application by the governor and subsequent approval by the Joint Fiscal Committee. The amendment requires supporting documentation for such an increase, including revenue forecasts and budget projections.

But-for (‘‘buffer’’) test and rulemaking: The statutory but-for test (designed to determine whether a project would not occur, or would occur in a significantly different form, absent incremental revenue) remains central. The amendment directs the administering council to engage in rulemaking and specifically to: (1) incorporate vacancy or dilapidation in prioritization criteria, (2) consider labor sheds when assessing proximity to job centers, and (3) supplement the but-for test with housing-specific considerations during rulemaking.

Mixed-income requirement and retention rates: The draft defines a mixed-income housing development as one in which at least 20% of units are subject to a housing subsidy covenant of perpetual duration under Title 27. The amendment ties a higher share of retained education-property-tax increment (80%) to projects that meet the mixed-income requirement and sets a 60% retention level for standard (non‑mixed-income) CHIP projects; existing TIF retention arrangements under Title 32 remain separate.

Debt incurrence, sunsets and board membership: The draft clarifies when a housing development site terminates — when indebtedness is retired or the debt-incurrence period ends — and allows the administering council to extend the initial incurrence period by up to three years (creating up to an eight-year window in practice). It also adds housing expertise to the administering council in a limited, program-specific way: the amendment adds two voting members (executive directors of the Vermont Housing Finance Agency and the Vermont Housing and Conservation Board) and one nonvoting member (the commissioner of the Department of Housing and Community Development) for CHIP reviews only. The amendment sets the final application date and related sunset language at Dec. 31, 2031.

Questions raised and implementation considerations

Committee members pressed for detail on how ‘‘mixed income’’ will be applied in practice, how small or rural municipalities can get application assistance, and whether the perpetual duration requirement for housing covenants is appropriate. Committee members noted that small towns may need technical assistance to assemble applications and negotiate housing infrastructure agreements. Representative Charlie Kimball said small towns could work with regional planning commissions or housing organizations and that some related application or administrative costs may be treated as eligible uses of increment under the proposal.

Action taken

The committee took a straw poll on draft 1.3 of the amendment and agreed to report the amendment the following day; the clerk called the roll on the amendment as recorded in the transcript. The committee did not set a rulemaking completion date in statute; the draft instructs the administering council to undertake specified rulemaking but does not fix a statutory deadline for the rules.

What’s next

The committee will report the amendment and the bill (S.127) will move through the legislative process; members noted additional technical edits could be made in conference. Several committee members said the sunset provision forces a later review and that smaller communities will likely press for state assistance to prepare CHIP applications.

Sources: Meeting transcript, House Appropriations Committee, May 21, 2025; references in the draft amendment to Title 27 (housing subsidy covenants) and Title 32 (TIF districts).