Lawmakers, state agencies debate CHIP infrastructure financing, affordability and oversight

The House Ways & Means Committee heard detailed testimony May 7 on the Community Housing Infrastructure Program, or CHIP, a proposed tax-increment financing tool to help municipalities fund water, sewer, transportation and other infrastructure that supporters say is blocking housing development.

Committee members and agency leaders said CHIP could expand housing supply across Vermont, but they disagreed about how prescriptive the program—s affordability and project-eligibility rules should be and warned about administrative and monitoring burdens.

Alex Farrell, commissioner of the Department of Housing and Community Development, told the committee that decades of underbuilding left the state short of housing and that CHIP is meant to incentivize infrastructure so other housing programs can follow. "So that's my case for making sure tier 2 is is fully included, in this," Farrell said, arguing tier 2 eligibility is needed so smaller and rural municipalities without existing infrastructure are not excluded. He cautioned against making long-term income-restrictions a mandatory condition of CHIP, saying a requirement would create "a substantial monitoring and compliance burden." Farrell said CHIP should be broadly usable for many housing types and serve as an infrastructure-first tool that other state programs then layer on.

Jessica Hartley, executive director of the Vermont Economic Progress Council (VEPC), said VEPC can administer CHIP but recommended targeted technical changes to the bill. Hartley told lawmakers the bill, as drafted, limits VEPC—s ability to enforce perpetual income-based restrictions and that the requirement that all permits be secured at application could discourage smaller or early-stage projects. She recommended restoring or clarifying tier 2 language to allow smaller, rural towns to access the tool and asked authority to handle "substantial changes" to projects if floor-area allocations shift during development.

Maura Collins, executive director of the Vermont Housing Finance Agency, emphasized the scale of the housing shortfall and urged guardrails that preserve the law—s purpose while not making the tool unusable. "We need 24,000 to 36,000 homes in the next 4 years," Collins said, and she urged that a majority of CHIP—s public benefit be directed toward housing while cautioning that long-term affordability requirements impose administrative costs and can limit project feasibility.

Brett Long, interim commissioner at the Department of Economic Development, asked lawmakers to weigh the fiscal cost of not building housing: "What has been the cost to the Ed Fund of not building that housing over the last 10, 20 years?" Long said, urging the committee to consider both benefits and trade-offs when setting program limits.

Technical and program details discussed included a statutory proposal to route an appropriation to the Vermont Bond Bank to create a revolving Vermont Infrastructure Sustainability Fund (Farrell said he had seen a $7.5 million figure referenced for that appropriation), a 70% gross floor-area threshold for housing in some proposals, and the possibility that projects below a specified housing threshold would be reviewed by a new CHIP board. Hartley said VEPC currently produces an extensive annual TIF report and that CHIP would include annual reporting, a 10-year report and monitoring visits; she recommended flexibility so projects are not penalized when construction costs or market conditions force plan changes.

Several lawmakers raised concerns about the potential fiscal effect on the state Education Fund if many communities used tax increment financing, and asked whether CHIP would simply subsidize projects that would have happened anyway. Hartley and others said that the long-term data show new construction and grand-list growth have been stagnant for decades in many places, and VEPC staff argued that the "but-for" test (requiring proof the project would not happen without CHIP) had been relaxed in committee because of the measured statewide housing shortage.

There were no legislative votes during the hearing. VEPC agreed to provide written answers to specific technical questions and to return with annual updates and a longer review at the time frame prescribed in the bill. Committee members indicated they would weigh amendments that clarify affordability definitions, tier eligibility and reporting requirements before advancing the measure.

The committee recessed after the testimony and signaled it would continue deliberations as staff and agencies provide the requested technical language and capacity estimates.