Municipal leaders press Legislature for infrastructure financing, tax-increment tools and tighter permit-appeal rules to unlock housing

Members of the House Committee on General and Housing heard Feb. 6 from the Vermont League of Cities and Towns that local governments need new financing tools and clearer appeal standards before the state’s land-use reforms will produce the housing lawmakers intended.

Josh Hanford, director of intergovernmental affairs for the Vermont League of Cities and Towns, and Samantha Sheehan, the league’s municipal policy specialist, told the committee most of the state’s new housing capacity under Act 181 is tied to municipal water and wastewater and that “building new water and sewer is expensive. Extending, it's expensive. Maintaining, it's expensive,” Sheehan said.

Why it matters: Act 181 and related changes direct more housing to areas with public water and sewer. VLCT officials said many communities either lack that infrastructure or cannot afford the line, pump or connection upgrades needed to serve denser development — and that leaves promising housing proposals stalled.

VLCT outlined two broad ways to help towns pay for the public infrastructure projects that make new housing feasible: a state-enabled tax-increment style program or the authority for municipalities to use performance-based contracts and tax-stabilization agreements. Hanford described the basic fiscal logic to the committee: “It's a reality that to save taxpayers and ratepayers money, we need to grow the grand list.”

On tax increment: VLCT officials said they broadly support programs modeled on tax increment financing (TIF) but urged statutory design choices to make the tool usable for small and rural projects. They cited a proposed split promoted by advocates—often described to the committee as an “80/20” approach in housing proposals—as one example of a formula that would direct most new tax revenue to project debt while leaving some revenue to municipalities and the education fund. Committee members and VLCT staff contrasted that with typical state TIF programs, which in discussion were described as currently allocating roughly 70% of increment to bonds while leaving 30% to other funds.

Hanford and Sheehan also described an alternative: tax stabilization agreements that hold a project’s tax burden steady for a defined period so developers can underwrite financing with predictable costs. Sheehan explained the concept as “kind of the flip of a TIF” and said municipal-only freezes are not enough — a stabilization that includes the state education tax would be required for many projects to pencil out.

Appeals and standing: Committee members asked about permit appeals and whether raising the legal standard for appellants or narrowing standing would reduce delays and costs. VLCT said municipalities want to limit repeat appeals after communities have already amended plans and ordinances through public process. The committee pressed specifics: one member suggested “90 days is an appropriate timeline to reserve, resolve appeals,” and VLCT said it supports measures that limit the number of people with standing to appeal and that require exhaustion of administrative remedies before court challenges.

Program design and technical assistance: VLCT emphasized that any TIF- or contract-based program must be paired with technical and financial assistance for smaller towns and recommended removing ‘‘but-for’’ tests that require proof a project would never happen without the increment. VLCT also asked the Legislature to modernize municipal finance tools — for example, to permit longer emergency borrowing, unrestricted reserve accounts and other current best practices — noting municipalities are constrained under Vermont’s Dillon’s Rule framework.

Examples and scale: Committee members pressed for real-world examples. VLCT gave several: some towns face multi‑million‑dollar line or pump upgrades to connect proposed 30‑unit buildings (one example cited a potential $5,000,000 pump-and-line upgrade). VLCT also referenced Burlington’s Cambrian Rise development as a case where a negotiated development agreement included intersection improvements tied to the project.

What’s next: VLCT officials said they support many elements of the governor’s housing package but urged lawmakers to flesh out formulas, eligibility, technical assistance and statutory limits on appeals to ensure the programs work in small, rural communities as well as in larger towns.

Ending note: Committee members signaled more hearings and technical sessions will follow to resolve percentage splits, eligibility and implementation details so infrastructure funding and permit reform can advance in ways municipalities can use.