Committee continues CHIP debate: reporting, tier 2 clustered housing and Education Fund share

The Verbonna House Committee on Commerce & Economic Development continued its discussion on Wednesday, April 23, 2025, of the CHIP program in S.127, focusing on reporting requirements for tax increment financing (TIF) projects, whether limited clustered housing should be allowed in tier 2 areas, and the share of incremental revenue returned to the Education Fund.

Committee members said they want clearer reporting from TIF/CHIP sponsors on housing outcomes — specifically the number of housing units developed and basic affordability indicators such as expected sale prices and rents — rather than only raw assessed-value changes. Members discussed whether the program should require program administrators to provide data-only reports or allow evaluative findings and recommendations in those reports.

The committee also debated the bill’s treatment of tier 2 land. Some members urged removing tier 2 from the bill; others proposed allowing clustered housing in tier 2 with density limits or other safeguards so development would not “fragment” conserved or agricultural lands. Committee discussion repeatedly referenced Act 181 and Title 10, noting the statute’s stated intent to encourage clustered subdivision design in less-developed areas and the broader regional planning work that will define final tier boundaries.

On Finance: members discussed mechanisms for handling excess increment when TIF revenues exceed debt payments. Several committee members described a range of options: require municipalities or sponsors to escrow a portion of excess revenue for infrastructure maintenance (one commonly cited figure was 15 percent), set a floor or cap on the share retained by municipalities (examples discussed included 70–85 percent retained versus 100 percent), or have excess flow sooner back to the Education Fund. Participants emphasized the need to ensure projects remain financially viable — for example, to protect bond payments if property values decline — while returning value to statewide education funding.

Administrative and market concerns featured prominently. Members said any change should be administrable for small towns, and several noted constraints outside the bill: high interest rates, construction costs, workforce shortages (engineers and builders), and the limited supply of buildable land in some rural communities. The committee discussed using regional partners — the Vermont Council on Rural Development (VCRD) and regional planning commissions were mentioned — to study clustered options or provide technical assistance for municipalities that lack capacity.

Procedure and next steps: staff will produce draft language for the committee’s review. Committee members said they expect to see a draft from the staff drafter "John" at the next meeting; the committee reconvened the next day to continue drafting. No formal motions or votes were recorded during the session.

Why it matters: the decisions will affect which towns can access CHIP/TIF financing for infrastructure and housing, the speed at which incremental tax revenue returns to the Education Fund, and protections for conserved and agricultural lands under Act 181.

What the committee said it will do next: staff will circulate draft bill language and clarify reporting expectations, options for tier 2 clustered housing, and administrative guardrails; committee members will seek input from regional planning commissions and other stakeholders before the next session.