House Commerce Committee split over whether to include Tier 2 areas in CHIP housing-infrastructure plan

The Vermont House Committee on Commerce & Economic Development spent its April 23, 2025 meeting debating whether the proposed CHIP (housing infrastructure) program should initially exclude Act 181 "tier 2" areas from eligibility, with members split over politics, capacity and the program's ability to deliver funding for rural housing.

The disagreement centered on two competing goals: craft a bill that can pass the House and move quickly, and design a program that reaches rural towns that lack tier 1a or 1b designations and so could otherwise be shut out of state infrastructure financing. Committee members said they had heard concern from the House Environment Committee and others that including tier 2 now could lead to sprawling development or fail to clear other committees.

Why it matters: CHIP is intended to help financing "pencil out" small-scale housing projects in towns that lack sewer, water or other infrastructure. Excluding tier 2 would narrow where money can be used and, according to several members, would keep many rural communities from accessing the program. Supporters of a phased approach said delaying tier 2 entry until the program is operational — or adding a study and triggers before tier 2 becomes eligible — could balance political feasibility with the longer-term goal of statewide access.

Committee members reported relying on testimony from municipal and regional planners and from a guest (identified in committee discussion as Ellen) who outlined how Act 181 maps and tier definitions interact with regional planning work. Several members said that Act 181’s tier maps and required regional planning work were intended to concentrate growth in designated areas, and that some towns will have little or no tier 1a/1b area when maps are finalized.

Funding and feasibility concerns were a recurring theme. Members referenced a conversation with Liz Royer of the Vermont Rural Wastewater Research Station indicating cuts to USDA rural development programs; engineers cited in the discussion estimated wastewater extension costs as high as $2,000,000 per mile, while committee members noted a roughly $9,000,000 fund referenced in testimony would not cover those costs at scale. Members further observed that many likely projects in rural towns will be small (frequently under 10 housing units) and therefore may still face financing challenges even with CHIP assistance.

Policy trade-offs discussed included: (1) keeping tier 2 out of the initial rollout to improve committee and floor support, with language to phase it in later; (2) including tier 2 but adding guardrails and reporting requirements; or (3) keeping tier 2 but providing statutory protections to limit any impact on the statewide education (Ed) Fund (for example, treating incremental taxable value in the same way TIF generally does to avoid Ed Fund losses). Committee members also discussed Act 250 review triggers tied to tier 2 and how that would affect permitting and project timelines.

The committee also debated how broadly to define "improvements" that CHIP could fund. Some members urged a shorter, explicit list (water, wastewater, sidewalks, roads, stormwater, digital connectivity) to limit the need for lengthy rulemaking and to focus funds on essentials that enable housing. Others warned that a narrow list could exclude legitimate site-specific needs such as brownfield remediation, flood-mitigation grading, or other items that developers and municipalities routinely cite as necessary to make small developments viable in rural settings. Several members recommended seeking input from practitioners (one participant referenced in testimony as Mr. White) to ensure any statutory list does not preclude projects the program is meant to enable.

Participants agreed that rulemaking by the administering agency would clarify many questions but that rulemaking can delay implementation. Some committee members expressed a preference for language that narrows eligible improvements in statute to speed deployment; others said that retaining a broader statutory definition and using expedited rulemaking would better serve varied rural needs.

Next steps reported at the end of the session: the committee planned to reconvene after the floor; Sophie — identified in committee discussion as having prepared case-law research — was scheduled to brief members next. Committee staff were finalizing a spreadsheet of outstanding items for follow-up.

No formal motions or committee votes on CHIP eligibility, tier inclusion, or the definition of eligible improvements were recorded in the transcript of this session. The committee discussed options for phasing tier 2 in or adding study/reporting requirements, but did not adopt statutory language during the recorded discussion.