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Vermont Bond Bank proposes assessment‑district revenue bonds and small technical fixes to S.127’s infrastructure fund
Summary
Michael Gaughan, executive director of the Vermont Bond Bank, told the House Commerce & Economic Development Committee that S.127’s Vermont Sustainable Infrastructure Fund needs minor technical clarifications and that the state should authorize assessment‑district revenue bonds secured only by benefiting properties.
Michael Gaughan, executive director of the Vermont Bond Bank, told the House Commerce & Economic Development Committee on April 16 that the bill’s Vermont Sustainable Infrastructure Fund could be effective but requested two technical clarifications and proposed a complementary financing tool for small or targeted projects.
Gaughan asked that the bill identify a successor index or metric in the application criteria in case the currently cited vulnerability/capacity index changes or is discontinued. He also recommended explicit authority for the fund to make interfund loans to stretch capital and lower interest costs across programs.
Complementary tool: Gaughan described a proposal to enable special‑assessment districts to secure municipal debt exclusively with the assessments on the benefiting properties. Under the Bond Bank’s proposal, that revenue bond could be approved by the municipal governing body rather than by a municipality‑wide referendum because the obligation would not be a general obligation of the whole town but limited to the assessment district.
Why it matters: Gaughan said the assessment‑district revenue bond approach could unlock projects where there is a narrow but necessary local match and where a full municipal referendum has proved a barrier. He emphasized the tool would be additive, not a substitute for CHIP, and said the Bond Bank could work with the committee to draft statutory language and guardrails.
Risk and credit considerations Gaughan stated: - Concentration risk: fewer properties repaying the bonds lowers credit diversification, so terms and underwriting would reflect that concentration. - Risk tolerance and term matching: the Bond Bank would match financing terms to the asset financed and would consider the fund’s greater tolerance for patient repayment streams. - Sponsor vs. municipal borrowing: Gaughan said allowing a sponsor (developer) to hold initial debt can accelerate projects, but typically municipal borrowing yields lower interest rates; each case carries tradeoffs.
Ending: Gaughan offered to provide draft language and to coordinate with legislative counsel, the bond bank’s counsel and municipal officials; he described the proposed changes as modest technical fixes and a practical, rural‑focused financing tool to add to the state’s toolbox.
