State officials present SPARC proposal to scale down tax-increment financing for rural housing

Joan Goldstein, commissioner of the Department of Economic Development, told a joint hearing of the House Committee on Commerce and Economic Development and the House Committee on General & Housing that the administration is proposing a scaled-down tax-increment financing tool called SPARC (Strategic Projects for Advancing Rural Communities) to help smaller Vermont towns support housing and related infrastructure. "The title of our presentation is Strategic Projects for advancing rural communities. We've been calling this SPARC," Goldstein said, describing the proposal as a way to let municipalities transfer incremental tax revenue to a private developer under a negotiated community agreement.

The proposal would let a municipality grant some or all of the incremental property tax revenue generated by a new project to a private builder or community investment partner rather than use the increment only to pay public infrastructure bonds. "The municipality is not taking risk because they're not gonna pay anything until after the development is done and after the increment is being collected," Goldstein said, adding that the program is designed for single projects or small parcels rather than the large multi-parcel TIF districts used by larger cities.

Jessica Hartley, identified as executive director of the Vermont Economic Progress Council (VEPC), said SPARC would formalize a "community agreement" model used in other states such as Maine. "Community agreements are new, in terms of SPARC," Hartley said. She described them as negotiated contracts between a municipality and a developer that can include rebates of incremental tax revenue to cover infrastructure or private development costs once the project is complete.

Hartley and Goldstein offered a project example provided by a town that included a $30 million construction estimate and about $4.8 million in water, wastewater and road costs. In that example, VEPC-calculated annual incremental tax revenue of roughly $404,000 would, under a hypothetical 90% rebate over 20 years, return about $7.2 million to the developer, which the presenters said could cover the $4.8 million infrastructure cost and reduce the developer's net cost of the housing portion.

Lawmakers and state analysts pressed presenters on multiple policy and fiscal points. John Gray of the Office of Legislative Counsel flagged differences between the presentation and draft statutory language he had reviewed. "I don't see any requirement for a rebate component to the administration proposed language," Gray said, warning that the draft could allow public dollars to flow directly to private development absent tighter statutory constraints on what a community agreement may authorize.

Ted Barnett of the Joint Fiscal Office said the office could not produce a fiscal estimate without more detail about program size and parameters. "JFO is unable to provide a fiscal estimate," Barnett said, noting that statewide equalized grand-list growth has been high in recent years and that foregone revenue risks to the statewide Education Fund would depend on how Spark sites are defined and how much incremental value they capture.

Committee members asked about safeguards for small towns with limited administrative capacity, how banks would treat developer financing that relied on a future increment, whether and how a community agreement could enforce long-term affordability or sales price limits, and the program's interaction with the existing statutory cap on new TIF districts. Presenters said VEPC would review and approve community agreements and that technical-assistance costs (for accountants or attorneys) could be treated as eligible costs under the program, but they did not offer binding answers on some contract, financing and enforcement mechanics.

Goldstein said the administration would seek changes to the TIF statute to allow SPARC to coexist with existing districts and to lift numerical caps on new districts so smaller towns could access the tool. She acknowledged the tradeoffs lawmakers raised around the "but-for" test—whether the project would occur absent the incentive—and the short- versus long-term effects on the Education Fund.

No formal action or vote occurred; committees scheduled additional joint follow-up. John Gray recommended further review of the draft statutory language and said rulings and rules governing community agreements and financing would be determinative. Barnett urged clearer data on expected program scale to permit any fiscal estimate.

The hearing record includes public discussion of SPARC's stated goals—encouraging housing construction, supporting flood-impacted communities, and allowing small municipalities to pursue targeted projects—and a range of open questions lawmakers said they expect to resolve with additional briefings and possible statutory edits.