Appropriations committee hears $9.1 million proposal to seed Vermont Infrastructure Sustainability Fund for housing-related infrastructure

The House Appropriations Committee on Feb. 27 heard a proposal to create the Vermont Infrastructure Sustainability Fund, a one-time $9.1 million appropriation to the Vermont Bond Bank intended to provide low-interest revolving loans to municipalities for infrastructure projects that have a direct nexus to housing production.

Commissioner Alex Farrell of the Department of Housing and Community Development and Vermont State Treasurer Mike Pieciak described the fund in a joint presentation to the committee and said the program was developed in collaboration with the Agency of Natural Resources and the Vermont Bond Bank. Farrell said the fund aims to lower the up-front infrastructure barrier that stalls housing projects. “there's recognition that right now, it's 1 of the biggest hurdles to getting many, housing projects off the ground is the initial infrastructure investment,” Farrell said.

The fund would cover transportation-related infrastructure (for example sidewalks), and water and wastewater extensions or upgrades when those improvements are tied to meeting regional housing targets, according to Farrell. He told the committee the proposal is intended to operate as a revolving loan fund and that the state could use the $9.1 million as a loan-loss reserve to “stretch that much further” than using the dollars as direct loans: “We would hope, to to perhaps use this 9.1 as loan loss reserve so we could actually stretch that much further,” Farrell said.

Why it matters: Developers and municipalities frequently must pay millions of dollars of upfront infrastructure costs before housing units can be built; those costs increase per-unit housing prices, committee members were told. The proposed fund is designed to reduce that barrier and to be combined with other sources such as state revolving funds, federal grants or local bond issues.

Committee members asked detailed operational questions that remain unresolved in the materials presented. Representatives asked how the fund would differ from existing state and federal infrastructure programs, whether it could fill gaps left by the Clean Water and Drinking Water State Revolving Funds, and whether funds could be used outside designated growth areas. Farrell answered that some projects are hard to finance through the state revolving funds because of municipality size or project stability and that this fund is intended to complement those sources. He said the proposal’s design is intentionally flexible and that “those smart growth principles would still be embedded in project selection.”

Treasurer Pieciak described conversations between the treasurer’s office and the bond bank about leveraging the $9.1 million. The treasurer’s office identified the appropriation as a candidate for use as a loan-loss reserve or to “buy down” interest rates so that the same dollars could support a larger total amount of lending. Pieciak said the size of the state’s cash balance and the treasurer’s existing lending cap influence how the office might partner with the bond bank, and that more detailed structuring conversations were pending with the bond bank’s staff.

Operational questions raised by committee members included: - Whether the bond bank would administer the program and what administrative or underwriting fees would apply; committee members were told the Vermont Bond Bank would administer the program under a grant agreement with the agency, and that typical administrative fees are built into loan pricing, but exact fees are "to be determined." - Project caps and scale: committee materials propose a project cap that committee members noted could be up to $4,000,000 for a single award in some hypothetical terms; the panel was told the goal is not for this fund to be the sole source of financing but to be combined with other sources. - Timing and readiness: Farrell said the program could be stood up quickly once agreements are finalized and the appropriation is authorized; he suggested the program could be active within a matter of months.

Examples cited in discussion included Country Club Road, Winston Prouty and Prospect Heights as projects that have faced large infrastructure costs; committee members also discussed Stonecrop in Middlebury, where Middlebury College provided infrastructure financing in that instance. Committee members asked whether the fund could support single-family projects in areas without formal designation; Farrell said the fund could serve single-family projects but that smart-growth principles would inform selection.

Committee members asked for more detail from the Vermont Bond Bank about leveraging strategies and underwriting. Michael Gaughan of the bond bank was identified in the testimony as the likely bond-bank contact to provide further specifics. The committee also heard that the program design language is currently included in a House General and Housing Committee bill.

No formal votes were taken by the Appropriations Committee during the testimony. Committee members and presenters agreed further follow-up was needed on program design, fee structure, administrative capacity and exact interaction with other state and federal funding streams before the panel could recommend appropriation or implementation steps.

The presentation closed with committee leaders asking the agencies and the bond bank to return with more detailed program design and cost estimates.