House Commerce Committee advances amendment to S.127 to reshape housing infrastructure TIFs

Montpelier ' The Vermont House Committee on Commerce and Economic Development reviewed and moved forward with an amendment to S.127 on May 21, 2025, that replaces existing tax-increment financing (TIF) provisions for the state's housing infrastructure program (CHIP) and sets new application, oversight and prioritization rules.

The amendment replaces sections of S.127 that established CHIP's original structure, removes a separately constituted CHIP board, sets a $40 million aggregate lifetime cap on CHIP allocations with a possible one-time or annual increase mechanism, and directs the state agency that will administer applications to adopt rules prioritizing projects based on vacancy or dilapidation, regional equity, verifiable housing shortages and labor sheds.

The proposal's sponsor and legislative counsel described the amendment as a targeted revision to sections 25 through 27 of S.127, not a complete overhaul. "The purpose of the program is to encourage the development of new primary residences for households of low and moderate income," Senior Counsel John Ray said during the committee hearing. He told the committee that the amendment updates language to refer to "mixed-income" developments (noting in the discussion that the household incomes are not themselves mixed) and preserves flexibility for covenants that target different income levels.

Key provisions explained at the hearing include: a 45-day deadline for the administering agency to approve or deny a completed application; a $40 million aggregate cap on CHIP funding with a path for the governor to request up to a $5 million increase from the Joint Fiscal Committee, which must review the state's fiscal condition and supporting documentation; and removal of a separate CHIP board in favor of adding two housing-expertise voting members and one nonvoting housing-sector representative to the standing council that will review CHIP applications.

The amendment also moves toward statewide availability of CHIP, explicitly expanding the program's purpose language to apply across "all Vermont counties," a change counsel said could affect prioritization under ensuing rulemaking. Counsel stated that the administering council must adopt rules to prioritize applications if the cap is reached, and that the listed prioritization criteria (vacancy/dilapidation, regional equity, verifiable shortages and labor sheds) are mandatory topics for those rules.

Committee members pressed on implementation details and limits of rulemaking authority. Counsel said rulemaking must be consistent with the statutory "but-for" test (the amendment's eligibility test) and cannot contradict statute, but that the council has broad, reasonable authority to adopt implementing rules. Committee members also asked whether rulemaking could include small-scale infrastructure (for example private driveways or electrical service) and whether the statutory list of "improvements" should explicitly include rehabilitation or reconstruction; counsel recommended adding language to align CHIP's definition with existing TIF district language and to include rehabilitation or reconstruction to avoid ambiguity.

Members raised concerns about capacity and equity. Several committee members said the $40 million cap, even with the possible $5 million JFC increase, risks favoring municipalities with staff and developer pipelines over small, rural towns; others said rulemaking and the need to adopt detailed procedures could delay project starts. At least one member said they would not support the amendment as written but acknowledged moving it forward could enable further work in conference committee.

The amendment also aligns the sunset date for TIF district application authority with CHIP application deadlines; committee counsel said TIF district application authority in Title 32 is extended to Dec. 31, 2051, to match the CHIP application cutoff in the amendment.

On process, counsel noted that the amendment removes a requirement that draft rules be prefiled for Joint Fiscal Committee review 45 days before rule filing, shortening the review pathway; instead, chairs of relevant legislative committees will receive proposed rules and may provide input on legislative intent. The committee agreed to advance the amendment for further consideration and possible inclusion in conference negotiations, with at least one member explicitly dissenting from final support.

Next steps identified at the hearing include drafting a technical fix to add "rehabilitation/reconstruction" to the list of allowable infrastructure improvements and continuation of rulemaking once the statutory language is enacted. Committee members repeatedly urged attention to municipal and regional capacity for application preparation and project delivery and recommended that the administering agency work with regional planning commissions and other partners to create application templates and boilerplate covenants for smaller projects.

The committee discussion made clear that the amendment is intended to broaden CHIP's reach while imposing a cap and procedural safeguards; members disagreed about whether those limits are prudent or will slow needed housing production. The amendment will move forward to the next legislative steps with committee members and counsel planning further adjustments in conference and rulemaking.