Committee reviews draft project-based TIF to fund housing infrastructure; debate on affordability test, scope and administration

John Grama, legislative counsel for the Vermont Legislature, reviewed draft 2.2 of a bill proposing a project-based tax increment financing (TIF) program designed to finance infrastructure that supports housing development.

The draft tightens the definition of “improvements” to require that infrastructure "serve a public purpose" and adds a purpose section saying the program will "stimulate the development of affordable housing." Grama told the committee the public-purpose language is intended to prevent improvements paid with public dollars from being used exclusively for private benefit: "this update to the definition of improvements is just to ensure that there's a public purpose constraint so that any improvements developed through the program do serve public purposes and are not exclusively for private use," he said.

Why it matters: the change would steer incremental tax revenues toward projects that demonstrably advance housing goals rather than purely private projects. Committee members and outside stakeholders spent most of the session debating what "affordable" should mean, how to test whether tax increment is actually enabling housing that would not otherwise be built, where projects should be eligible, and who should approve applications.

Major policy points discussed

- Affordability and the "but-for" test: Senator Ron Hinsdale’s idea of an affirmative economic test reappeared in the draft. The draft’s project-criteria language would require that (a) at least 50% of a project’s gross floor area be dedicated to housing, and (b) the projected housing would not have included units affordable to households at or below 200% of AMI "but for" the use of incremental tax revenues. John Grama explained that the second condition is intended to…