Senate committee backs language to let Bond Bank use revolving infrastructure fund to lower borrowing costs; keeps community-ranking metric

The Senate Economic Development, Housing & General Affairs Committee on May 2 reviewed new language that would let the Vermont Municipal Bond Bank use a revolving sustainable infrastructure fund in conjunction with its pooled loan program to reduce borrowing costs for local infrastructure projects.

Committee members heard from Michael Gaughn, executive director of the Vermont Bond Bank, who described the change as legal clarity to allow the bank to use the revolving fund in combination with existing bond-funded programs. "We envision sort of using some of this revolving loan fund to bring down the interest rate on that pooled loan program," Gaughn said, adding the bank could make an "interfund loan" to its bond fund and then lend into a project at a very low rate — "maybe 0% or 1%" — to lower aggregate costs for borrowers.

The committee also debated whether to require applicants be ranked using the Vermont Community Index or a similar index maintained by the administration. Cameron Wood of the Office of Legislative Council summarized that the House removed a community-ranking criterion from its version of the bill; committee members asked how the bond bank would use the index, how current the index is and which agency should manage it.

Douglas Martin, chief recovery officer, said the Vermont Community Index was created in 2023 and can be updated quickly using census and other public data, with a few manually gathered elements such as local staffing. "The index is intended to give you a read on how much stress is on a community from a financial perspective and how capable they are as a community of meeting those needs by themselves," Martin said.

Committee members expressed a mix of caution and support: several said they would leave the ranking language in the bill so the bond bank could consider it, and they asked that the index be vetted and updated regularly. Members agreed to change one drafting detail — replacing an explicit reference to the Department of Finance and Management with the Agency of Administration — so the administration rather than a single department would be the locus of any indexing updates.

No formal roll-call vote was taken in the hearing; members recorded informal support for adding the flexibility language to allow the Bond Bank to pair the revolving fund with other programs and for retaining the index language subject to future vetting. Committee staff said they will provide an updated draft incorporating the agreed drafting changes.

Why this matters: The change aims to stretch limited capital for municipal infrastructure by using revolving dollars to lower lending costs, and the community index would steer support toward places with higher need and less local capacity. Lawmakers and staff flagged transparency and currency of the index as issues to monitor going forward.

Ending: Committee members directed staff to prepare revised language for the committee's next meeting and to invite administration staff and stakeholders to demonstrate and discuss the index updating process.