Senate committee reviews H.775 proposal to let towns use special-assessment revenue bonds and backstop modular housing orders
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Summary
Witnesses told the Senate the bill would allow municipalities to issue revenue bonds secured only by special-assessment district revenues, create guardrails (commitment letters, rating or bank letter), let the treasurer backstop bulk modular orders, and encourage pilots for off-site construction; supporters cited lower rates and examples from other states.
The Senate Economic Development, Housing & General Affairs committee on April 7 considered H.775, a package of financing tools intended to help small communities pay for the infrastructure needed to support housing development and to accelerate off-site (modular) construction.
Michael Gaughan of the Vermont Bond Bank told the panel the bill would authorize municipalities to issue revenue bonds payable solely from special-assessment district revenues rather than general-obligation bonds that rely on the full tax base. He described three prequalification guardrails in the draft language: a commitment letter from the bond bank, an investment-grade rating requirement, or a commitment from a regulated bank or credit union. "We think that provides some guardrails on this," Gaughan said, adding that 39 states have used similar tools and that, in recent years, roughly $17.3 billion had been mobilized through comparable programs.
John Gray of the Office of Counsel clarified that the proposal does not change the statutory procedures for imposing special assessments: the existing vote and consent processes to create an assessment district remain in place; the new language simply allows the revenue from those assessments to underwrite bonds that are not general obligations of the municipality.
Treasury and administration staff described an off-site construction accelerator and a catalog of standardized designs (including 802 homes) intended to aggregate small orders so manufacturers will offer lower prices. The office asked the committee for flexibility on reporting deadlines and said pilots are already underway but that the statute cannot compel developers to use modular construction; the bill would require a lessons-learned report if modular demonstration projects proceed.
Why it matters: proponents said revenue bonds tied to special-assessment districts can lower borrowing costs for projects that benefit a limited set of properties (water, sewer, roads, stormwater, sidewalks). Gaughan said the bond bank can offer low rates (he cited an example rate of about 2.75% for a small special fund), which he contrasted with prevailing mortgage or private financing rates in the market.
Committee members pressed on who must approve initial assessments (majority of municipality or unanimous consent of affected property holders), who pays if development is speculative, and whether the tool is limited to residential infrastructure. Counsel reiterated the special-assessment statute’s coverage of public improvements that benefit a limited area and confirmed the revenue-bond language would prohibit bondholders from compelling municipal tax levies beyond the assessment revenue stream.
Next steps: committee members invited follow-up and asked staff to send statutory citations cited in the hearing; they also discussed timing of pilot reporting and the potential to fold additional pilot language into the bill if the committee chooses.
