State auditor: S.127’s CHIP approach shifts risk to towns and lacks affordability safeguards

Vermont State Auditor Doug Hoffer told the House Committee on Commerce & Economic Development on April 16 that the version of S.127 creating the CHIP (a project‑specific tax‑increment tool) is “a radical departure” from traditional TIF and shifts risk from private developers to host municipalities.

Hoffer said the bill, as drafted, contains no requirement that housing built under CHIP be affordable and no statutory means test to show a developer needs taxpayer assistance. “There is no presumption that every developer that comes forward with a proposal needs taxpayer assistance, and that's what this is,” Hoffer said. He added that the bill’s plan requirement does not specify how towns will ensure new units remain primary residences.

Why it matters: Hoffer warned the committee that if the incremental property tax revenue generated by a CHIP project is insufficient to cover debt service, the municipality is explicitly responsible for the shortfall. He said that outcome would be “a blatant transfer of risk from the developer to the town.” The auditor also flagged administrative and fiscal unknowns: the Joint Fiscal Office (JFO) could not produce a fiscal note because the bill lacks information needed to model how many projects would apply or what infrastructure would be required.

Key points Hoffer raised: - No affordability mandate or means test: The draft removes references to “affordable housing” from earlier drafts, so municipalities and voters could approve projects that produce only market‑rate housing. - Municipal responsibility for debt: The bill’s language, Hoffer said, makes the town responsible for all debt whether or not the new increment meets debt service. - Uncertain fiscal exposure: JFO could not estimate statewide costs; Hoffer cited a working estimate that the Education Fund (Ed Fund) exposure could be $5 million to $7 million annually but stressed the estimate was uncertain. - Reporting and oversight gaps: CHIP requires a 10‑year look‑back report, which Hoffer called too late to protect taxpayers; he recommended earlier and more frequent reporting and rulemaking before the program takes effect. - Enforcement conflict: Hoffer recommended that enforcement authority not rest with the promotion agency (the Agency of Commerce and Community Development) and suggested shifting enforcement to the Tax Department to avoid a perceived conflict of interest.

Hoffer also described past TIF problems his office has audited — including situations in Burlington and St. Albans — to illustrate how municipal missteps, ambiguous statutory language and weak oversight can produce long‑term fiscal consequences. He urged the committee to require that rules be adopted before the bill takes effect and to add clearer reporting and public‑benefit requirements.

Committee discussion after Hoffer’s testimony focused on tradeoffs between using the Education Fund as a financing source and other models such as direct grants, and on where CHIP projects should be prioritized geographically. Committee members asked about the scale of municipal infrastructure needs; Hoffer said the program should be reworked to ensure a clear public‑benefit test before taxpayer dollars are committed.

Ending: Hoffer closed by urging rulemaking and clearer public‑benefit language, saying without rules “everything is ad hoc” and that the committee should not let the program proceed without them.