Senate committee debates project‑based TIF bill (CHIP); split on affordable housing requirement

The Senate Committee on Economic Development, Housing & General Affairs on Monday reviewed draft 3.2 of the Community and Housing Infrastructure Program, a project‑based tax increment financing (TIF) proposal commonly called CHIP, and debated whether the program should require a share of units to be affordable and how to define affordability.

The draft, presented by counsel John Ray, would allow municipalities to capture tax increment for infrastructure tied to housing development and other improvements. Committee members and stakeholders focused discussion on three core policy questions: whether affordable housing should be a mandatory project criterion, how to define “affordable,” and what share of a project must be housing versus mixed use.

The committee’s discussion matters because the bill would create a new mechanism to finance infrastructure using future tax increments. That affects municipal borrowing, the share of education property tax retained, and how developers and municipalities negotiate contract safeguards and project boundaries.

John Ray, counsel to the committee, said the text contains placeholder language to show how an affordable‑housing criterion might read and that the draft borrows existing Title 24 definitions for affordability. “What you see here, this wall of yellow text that’s on the first page, this is placeholder language,” Ray said, describing the inserted statutory language as illustrative rather than final.

David White argued against embedding an affordability mandate in the bill. “I would like to make the pitch that you do not include an affordable requirement within this bill,” White said, saying strict affordability requirements could discourage developer participation and make projects harder to build.

Several nonprofit housing representatives urged a stronger housing requirement. Donald English of Champlain Housing Trust said the measure “should be a housing proposal” and voiced support for the 50% housing threshold that appeared in earlier drafts. A private‑sector participant identified as Corey said projects should include “an element of housing” and favored flexibility so projects can pencil out.

The draft’s affordability definitions and thresholds were a focal point. The bill adapts Title 24 language to treat owner‑occupied and rental housing differently (owner‑occupied affordability tied to households spending no more than 30% of gross annual income, using a 120% median income benchmark in the draft) and would define an “affordable housing development” as one in which at least 20% of units — or a minimum of five units — meet the affordability test. Committee members discussed alternate approaches, including using a higher income cutoff tied to the federal poverty guideline used in child‑care subsidy policy (presented in discussion as 575% of the federal poverty guideline). Jessica Hartley identified herself and provided one numeric illustration: “For a family of 4, 575 percent of the federal poverty guideline is $184,000,” a figure offered to show how a higher threshold would include more middle‑income households.

Members debated the share of a project that must be housing. The draft suggested a 50% aggregate gross floor area requirement for housing in the development; some participants proposed lowering that figure (options discussed included 40%, 25% and leaving the statute flexible) to accommodate mixed‑use projects that officials said may be necessary to make financing work.

The draft expands permitted uses of increments for infrastructure beyond utilities to explicitly include digital infrastructure, transportation, public recreation, commercial and industrial facilities, and private on‑site or off‑site septic and water systems to accommodate rural communities that lack municipal water and sewer. Committee counsel said earlier drafts allowed such private systems but a “public purpose” constraint had been suggested; several members spoke in favor of restoring language allowing private septic and water where those systems serve a public good by enabling housing.

On contract and project safeguards, the draft adds the housing development itself to the housing infrastructure agreement so the agreement can include conditions related to the developer’s obligations. The text proposes performance assurances “to reasonably secure the obligations of all parties under the housing infrastructure agreement,” wording counsel said is intended to protect municipalities and other parties in the event of developer nonperformance.

Other technical changes discussed include: extending the period during which increment can be applied to debt service from three to four years for one provision and extending the debt incurrence window to five years with a possible three‑year extension in another; a provision that would bar parcel dissection to preserve the original taxable value assignment to a housing development site; and permitting direct payment of increment to project financing in Section 19‑10(c). Committee members also flagged a timing concern: the draft starts the 20‑year education increment retention period when the debt is incurred, which could shorten the effective retention because construction can take two to three years before new taxes appear on the rolls.

Committee members removed a prior staff‑approval route so projects must now receive board approval rather than some applications being eligible for administrative (staff) approval, counsel said. Alex Barron, Commissioner of the Department of Housing and Community Development, endorsed using Regional Planning Commission letters as an interim measure while tiered location criteria are finalized, which counsel said could allow the program to accept applications in July.

No formal votes were recorded during the meeting; members signaled that the draft contains a mix of policy choices that the committee needs to resolve before advancing the bill. Counsel said additional technical and policy edits remain and that members will hear from developers and other stakeholders in follow‑up sessions.

The committee scheduled further conversations and indicated staff and counsel would work with interested parties to reconcile the draft’s housing share, affordability definitions and the timing of increment retention before the next markup or vote.