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Ways & Means reviews draft 1.1 of CHIP program; asks for reporting, clarifies TIF limits
Summary
At a Ways & Means committee meeting March 9, staff presented draft amendment 1.1 to S.127 (the CHIP program). Lawmakers asked staff to add a reporting requirement, clarified roles between the review body and the CHIP board, and discussed how a $40 million cap and a $14 million annual impact translate under the bill’s financing assumptions.
Members of the Ways & Means Committee reviewed draft amendment 1.1 to S.127 on March 9, focusing on changes to the proposed Community Housing and Infrastructure Program (CHIP) and how tax increment financing (TIF) retention limits would operate.
John Gray, of the Office of Legislative Council, told the committee, “This is draft 1.1,” and explained the amendment combines the text of S.127 with previously discussed CHIP-specific language and the committee’s affordability definitions. Gray walked members through provisions on eligible improvements, application review, and the roles of the entity that evaluates applications and the CHIP board.
The committee centered its discussion on three issues: (1) a request that staff add a reporting and evaluation requirement to track whether public funds are being used for private infrastructure; (2) clarification of the review and approval sequence in which the evaluator reviews applications, the CHIP board reviews the evaluator’s recommendations, and the evaluator (as the TIF-approving entity) issues final TIF approvals; and (3) an explanation of the proposed TIF retention limits — a $40,000,000 total cohort cap that, under the bill’s financing assumptions and cohort timing, may produce a maximum yearly impact of about $14,000,000 in the peak year.
On reporting, Representative Gonzalo asked for a formal evaluation to see “to what extent this is being used to fund… a use of public funds for private interest.” Committee members asked that the draft require a report that describes the infrastructure funded through the program and evaluates whether projects are accessing other state resources (such as brownfield grants) before using CHIP funds. Gray said staff would add a reporting requirement and include the evaluation in the report back to the committee.
Committee members also debated whether to require application prioritization factors for the evaluator. The draft directs the evaluator to consider the program’s purpose, blight, regional equity, verifiable housing shortages and labor sheds when prioritizing applications; vacancy rates and proximity to job centers were removed from the required list but may still be considered at the evaluator’s discretion.
On roles and timing, Gray described the sequence in the draft: the evaluator reviews applications against process requirements, project and location criteria, and tax increment financing plans and then recommends qualifying applications to the CHIP board; the board will “review the council’s recommendation and determine whether the application satisfies the purposes of the subchapter,” and the evaluator remains the entity that ultimately approves TIF for qualifying applications. The draft requires the board to respond with approval or denial within a set period; committee members agreed to lengthen the response window to 45 days to accommodate scheduling.
Patrick Titterton of the Joint Fiscal Office provided a simplified numerical example to show how cohort timing and retention percentages affect fiscal exposure. Titterton said the program would be open for approvals for five years and that retained TIF is a percentage of the increment (the working example used a 60% retention rate). He explained that individual cohorts of projects retain increment for a financing window (the draft contemplates a maximum retention/servicing period of 20 years), and when multiple cohorts overlap the peak retained amount in a single year can be higher than a single cohort’s annual retention. Using the committee’s parameters, the model produced a peak-year retained increment of about $14 million even though the cumulative cohort cap discussed in the draft is $40 million.
Committee members asked for a simple handout showing the spreadsheet calculations for floor-floor explanations to aid floor debate. Representative Holcomb and others urged that bill language and supporting visuals emphasize the “1¢” framing (the penny on the tax rate concept) to make the fiscal trade-offs clearer to nontechnical audiences.
Members also raised questions about how primary-residence verification would be enforced for units developed under the program. Gray described a housing infrastructure agreement that would include covenants requiring units be offered for primary-occupancy; enforcement would be contractual rather than accomplished by a new government certification unit. The draft allows contractual covenants and third-party housing groups or nonprofits to assist with compliance checks rather than creating a new enforcement office.
No formal vote was recorded on the committee floor. Committee members directed staff to post the updated draft (1.1) on the committee page, add the reporting/evaluation requirement, adjust the CHIP board response window to 45 days in the draft, and provide the simplified fiscal spreadsheet in advance of the next meeting.
The committee asked staff to circulate the revised text and spreadsheet before Tuesday’s meeting so members can review the changes and be prepared to finalize any remaining edits.
