Legislators weigh CHIP/TIF plan amid warnings it could shrink education tax base
Loading...
Summary
Witnesses and committee members at the Ways and Means session debated a proposed CHIP tax-increment financing provision, with school board member Neil O'Dell and legislative economist Tom Cavett warning it could reduce the statewide education tax base and increase volatility for local school budgets.
The Vermont House Ways and Means Committee continued work May 8 on legislation tied to the education fund and housing incentives, hearing witnesses who warned a proposed CHIP tax-increment financing (TIF) approach could reduce the education tax base and increase local tax volatility.
Neil O'Dell, a Norwich school board member, told the committee that the combination of recent state changes and the CHIP proposal is straining his district. "With the stroke of a pen, with act 1 27, you and the governor changed our student count in Norwich," O'Dell said, and he added that an immediate drop in his district's weighted student count forced a large local tax increase. O'Dell also said, "The impacts on the education fund could remain for decades" if the CHIP TIF caps education revenue for areas over long periods, and he warned the senate version would make his district lose "$4,000,000."
Tom Cavett, the committee's legislative economist, told members he had not examined every detail of the bill but warned of a "very significant net fiscal cost to this particular proposal." Cavett said TIF is designed to stimulate development in blighted urban areas and "is not really well suited in areas that are not blighted," arguing that most housing demand in Vermont will be satisfied by market responses and that a broad TIF program risks subsidizing development that would have happened anyway. "The increment will basically be a reduction in the tax base for the education fund. Full stop," Cavett said.
Why it matters: the education fund finances K–12 foundation payments and is funded primarily by statewide property tax yields. Witnesses told the committee that excluding future growth from the grand list via TIF-like increments lowers the tax base and, absent compensating revenue, pushes the statewide property tax rate higher. Members repeatedly returned to the fiscal uncertainty in Joint Fiscal Office (JFO) estimates and the difficulty of applying a strict "but-for" test to show that subsidized projects would not have occurred without CHIP support.
Committee discussion focused on guardrails and program design. Several members suggested moving prioritization and detailed criteria into agency rulemaking so the program could target low-growth or high-need places, prioritize affordable units, and include annual reviews or caps to limit long-term fiscal exposure. Members debated tiers, eligible parcel definitions (contiguous vs. noncontiguous), whether commercial space should be allowed up to the proposed 40 percent, and how to verify but-for economic impact. One member recommended an annual audit or cap, saying that without regular review "this could rack up a lot of expense in a fairly short period of time."
Witness testimony and committee remarks also referenced past policy changes. O'Dell cited Act 127 and its effect on pupil weights; Cavett pointed to recent market dynamics, noting more than "$650,000,000 in residential and private commercial construction in the state last year," and used a Burlington example (125 Cambrian Way) to illustrate market-driven development that received no subsidy. Committee members described earlier programs and presentations, including a Community Investment Program (CIP)-style ARPA proposal aimed at places with stagnant grand-list growth and the role of JFO in producing fiscal forecasts.
No formal motion or vote was taken. Committee leadership said members aim to produce draft amendment language for the next meeting and continue the conversation at a follow-up session. The committee scheduled additional work sessions to refine draft amendments and consider rulemaking language, caps, and prioritization criteria.
What to watch next: the Ways and Means Committee plans to reconvene and review draft amendments; JFO fiscal estimates and any proposed caps or annual review language will be central to whether the committee advances a CHIP TIF provision. If adopted, committee members said they want clearer prioritization toward affordable housing and protections for the statewide education fund.
