Vermont municipal leaders tell Ways & Means CHIP could speed housing but requires clear guardrails

Samantha Sheehan, municipal policy and advocacy specialist for the Vermont League of Cities and Towns, told the House Ways & Means committee on May 7 that the Community Housing Infrastructure Program, or CHIP, could expand municipal capacity to finance housing projects without increasing local property tax rates.

"CHIP does not require an increase in municipal tax rates," Sheehan said, adding that the program would grow other nonproperty state and local revenues and increase the grand list over time to help fund infrastructure for housing.

Nut graf: Witnesses said CHIP could help towns that lack bonding capacity or cash reserves, but successful projects require long municipal lead times, clear housing infrastructure agreements and dedicated technical assistance. Committee staff and local officials urged strict limits on how much education property tax revenue the program could retain.

Sheehan walked the committee through typical municipal steps that precede a CHIP application: multi‑year municipal planning and zoning, public hearings on municipal plans and bylaws, feasibility studies, requests for proposals for developers, and the assembly of technical teams including attorneys, engineers and real‑estate advisers. She said towns would need to execute a housing infrastructure agreement with a developer that protects the municipal interest and provides remedies if developers fail to perform.

"This is like the golden ticket for the CHIP that protects the public interest," Sheehan said, describing the agreement as the principal municipal safeguard.

Sheehan described how the program would rely on tax‑increment mechanics: municipal listers revalue property as development proceeds, producing an incremental increase on the grand list; a portion of that new increment would be retained to repay infrastructure investment while a share would flow to the education fund. Under the bill as discussed, she said, 30 percent of the state increment would go to the education fund and 70 percent would help repay infrastructure costs, with an enhanced retention (e.g., 80 percent) proposed when projects include a defined share of affordable units.

Sheehan emphasized practical limits on where CHIP could be used, noting that "every city and town in Vermont can use CHIP, but not in every part of the city or town" because eligibility depends on local bylaws, designated areas and permitting. She also warned that municipal governments will shoulder permitting, reporting and auditing responsibilities during construction and for the life of the debt service.

Committee members pressed Sheehan on sequencing and permits. She said some initial, conceptual permits or zoning determinations are often needed to secure predevelopment financing and that municipalities commonly structure short‑term agreements in which developers carry early permit costs and are reimbursed later if financing is approved.

Sheehan addressed concerns that CHIP could subsidize projects that would have happened anyway, saying the best protection against foregone revenue is the "robust mandatory public process" that municipalities must follow, including planning, hearings, public records and votes. She added that municipalities have skin in the game because they may forfeit a portion of local increment to support a project.

Ending: Sheehan and other municipal representatives told the committee that CHIP could be a useful, flexible tool for towns with limited bonding capacity — especially flood‑impacted and cash‑strained communities — but asked lawmakers to build clear guardrails in statute and rely on municipal planning and housing infrastructure agreements to protect public interests.