State officials outline designation reforms, tax-credit demand and requests for staff and program increases

A Department of Housing and Community Development staff member told the Commerce & Economic Development Committee that the state is moving to simplify downtown and village designations, and that the department is seeking support for two ongoing staff positions and an increase in the annual tax-credit cap to meet rising demand.

The designation reforms enacted by Act 181 and related land-use work will shift the task of mapping centers to regional planning commissions, the staff member said, and the successor Land Use Review Board will recognize those maps. The change is intended to stop the state board from spending months drawing tight boundaries and to free the agency to focus on on-the-ground community development and technical assistance.

Why it matters: the designation program is tied to a suite of benefits aimed at downtown revitalization, including the Downtown & Village Center Tax Credit Program. As mapping responsibilities move to regional planning commissions, the staff member said more places will qualify automatically for designation benefits, which the department expects will increase demand for tax credits.

The department’s staff asked the committee to support two items in the governor’s budget: the conversion or funding of two positions to reduce turnover in the team that administers the designation and tax-credit programs, and additional tax-credit funding. Caitlin Corkins, who identified herself as a program administrator in the Department of Housing and Community Development, said the tax-credit program is currently funded at $3 million a year and the governor’s budget proposes increasing that to $5 million annually.

Corkins described the tax credits and how they are used: the program provides state income tax credits to offset state tax liability so property owners or developers can invest in building improvements. The program has multiple tiers: a historic rehabilitation credit that requires prior approval from the federal Rehabilitation Investment Tax Credit and provides a 10% state credit; a facade credit for exterior work at 25%; code-compliance credits that cover required upgrades (including larger items such as elevators and sprinkler systems) and represent a 50% credit for many eligible costs; and a flood-mitigation credit added in fiscal 2023 that is also 50% with a $100,000 credit cap.

Corkins said credits can be carried forward for up to nine years and can be sold or monetized to banks or insurers so organizations with little or no tax liability — including nonprofits — can use the program. That monetization can also be used to secure short-term financing for projects that otherwise would need reimbursement-only funding.

The program is oversubscribed, Corkins said, showing that in recent years requests have regularly exceeded available funding. She told the committee the program fields multiple millions of dollars in requests annually and that the department expects demand to grow once regional planning commission maps automatically add more centers to eligibility.

Examples the department provided: a large Brattleboro warehouse rehabilitation that combined federal and state credits on a roughly $10 million project and added 15 housing units; a mid-size downtown storefront rehabilitation in Thetford that used code and facade credits to bring an express-care health center and additional commercial space into use; and a small project in Northfield where under $25,000 in credits enabled a nonprofit to complete critical code work and lease space to a childcare center.

The department also described broader housing initiatives linked to designation and tax-credit work: a “Homes for All” toolkit and a workforce cohort to help small-scale local developers and tradespeople navigate site selection, permitting and building. The department said it has applied for HUD Community Development Block Grant funds and is participating in planning tied to $67 million in HUD disaster-recovery funds targeted to the 2023 floods in Washington and Lamoille counties; a portion of that money, the staff member said, could be used for planning and flood-mitigation work in downtowns and riverfront villages.

The staff member additionally highlighted a rural-capacity effort funded by a Leahy Institute grant and called MTAP, explaining the department will study models to connect local partners, public administration students and small towns with technical assistance and temporary capacity to implement projects.

Committee members asked timing and scope questions about the December mapping deadline, the role of the Community Investment Board (the former Downtown Development Board), and whether designation reporting and local grants would continue to be administered by state staff. The department said towns would continue to receive annual operating grants (for example, downtowns that receive $25,000 for staff capacity) and that the renamed Community Investment Board will shift toward a coordinating, policy platform role.

The presentation included an explicit request for continued committee support: stabilizing staff positions that the department said were currently limited-service roles and subject to high turnover, and backing an increased annual tax-credit cap to respond to a growing pool of eligible projects.

The department did not present any formal motion or vote during this meeting; committee members asked clarifying questions and reserved judgment for their appropriations work.

A follow-up: the department said it will continue outreach and a summit in Randolph to share recommendations from the rural-capacity review and will seek legislative attention later in the session.

Sources and quoted speakers are identified below.