Bond Bank backs $9.1M sustainable infrastructure fund to lower municipal infrastructure costs

Michael Gaughan, executive director of the Vermont Bond Bank, told the House Committee on General & Housing on Feb. 19 that the Bond Bank supports the governor’s proposal for a Vermont Sustainable Infrastructure Fund and urged the committee to consider the $9,100,000 request included in the governor’s budget.

Gaughan described three deployment options: direct lending to low‑capacity communities for small infrastructure projects, using the fund to write down interest rates on pooled loans so projects become feasible, and using a portion of the fund as equity or credit enhancement to improve financing terms for riskier projects. "The bottom line is that in all cases, it would result in, an interest rate subsidy of one type or another," he said.

He told the committee the bond bank’s conventional pooled loan program is capitalized through tax‑exempt municipal bonds that support roughly $630,000,000 in loans. The proposed fund would allow the bond bank to reduce effective borrowing costs in cases where even the pooled rate is not sufficient to make a project feasible and to support projects financed by special assessments or narrower revenue sources.

Gaughan said $9,100,000 can fund many small municipal projects (he cited examples in the hundreds of thousands of dollars) and emphasized the fund’s role in keeping project tax burdens lower so development can proceed or produce more affordable outcomes. He also noted federal policy uncertainty as a risk to municipal bond markets and said the fund could provide a defensive tool should national changes affect tax‑exempt muni bond treatment.

The testimony did not include a committee vote. Gaughan said the Bond Bank can scale its impact if the funding request grows and that the fund would work alongside other state tools to support infrastructure for housing development.