This story, by Report for America corps member Carly Berlin, was produced through a partnership between VTDigger and Vermont Public.
Jonah Richard wants to build a new neighborhood in Bradford, an Orange County town of about 2,800. Richard envisions 15 small “starter home” cottages tucked off the town’s main drag. His hope is to sell them at a price point that has become vanishingly rare in Vermont: under $300,000.
But it would only work, he says, with water and sewer system financing from an initiative under consideration at the Statehouse — the Community and Housing Infrastructure Program, or CHIP.
“Without CHIP, this project doesn’t move forward. With CHIP, it does,” said Richard, founder of the Upper Valley-based developer Village Ventures.
If the proposed program can bring in half a million dollars to help cover infrastructure costs — about 10-15% of the project’s total estimated price tag, Richard said — it could make the neighborhood, currently in its pre-development stage, pencil out.
CHIP is essentially a small-scale version of Vermont’s longstanding tax increment financing program, or TIF, which allows municipalities to borrow money for public infrastructure like roads, sidewalks, and wastewater projects in an area where they want to see growth — with the expectation that new infrastructure will spur new development. The increased tax revenue from the new development then pays off the debt for the infrastructure.
The complexity involved in managing large TIF districts means that only Vermont’s larger cities and towns have used them. CHIP is designed to use the same tax increment financing concept, but at the scale of a single property.
“CHIP allows communities — especially, I think, our smaller communities — to say, ‘What’s that one project? What’s that one piece of infrastructure that we could put in, that we would bond for once, that could be a catalyst for housing development?’” said Megan Sullivan, a lobbyist for the Vermont Chamber of Commerce and a former executive director of the Vermont Economic Progress Council, which oversees the TIF program.
Developers big and small have voiced their support for CHIP, and the new housing advocacy group Let’s Build Homes, of which Richards is a board member, has thrown its full weight behind it. Gov. Phil Scott’s administration proposed a similar program at the outset of this year’s legislative session and officials have indicated their continued support. The housing package that contains CHIP cleared the Senate last month and is currently making its way through the House.
Advocates for Vermont municipalities say the program offers a critical new option for cities and towns to spur housing development and grow their grand lists.
Right now, to fund new infrastructure, municipalities have to raise property taxes or water rates, said Samantha Sheehan, a lobbyist for the Vermont League of Cities and Towns. Or municipalities can go to the state for a grant — an option that only exists when funding is made available through the state budget.
The other way municipalities get new infrastructure, Sheehan said, is when housing developers pay for it themselves — and bake the cost of infrastructure into the price of housing.
“That raises rents or homeownership for whomever moves into that housing development first,”
Sheehan said. CHIP aims to move away from that model.
CHIP is not the first “project-based TIF” program to circulate around the Legislature in recent years, Sullivan said. Prior versions haven’t made it to the finish line because of concerns that plague the TIF program more broadly: that development that has occurred in TIF districts would have happened even without the financing mechanism, and therefore hasn’t justified the foregone property tax revenue to the state’s overstretched Education Fund.
CHIP has garnered similar critiques. State Auditor Doug Hoffer, a frequent critic of Vermont’s TIF program, has become the CHIP initiative’s most vocal detractor in recent weeks. In an interview, Hoffer emphasized that the Legislature’s nonpartisan financial analysts have not been able to determine the fiscal impacts of CHIP due to a host of unknown factors: the scope of the program’s eventual utilization, the size of future projects, and “the amount of development that would occur absent the program,” according to a Joint Fiscal Office memo from early April.
Hoffer also challenged whether the CHIP program as currently envisioned would provide an adequate public benefit, if it ultimately gives an incentive to the builders of market-rate homes. He argued that CHIP should include an affordability requirement for the housing it helps finance.
“Otherwise, you’re going to have developers doing what they do. They’re going to seek to maximize profit — and that’s capitalism,” he said. “But if that doesn’t serve a really serious public need, then I’m asking myself, why do we need this program?”
Affordable housing funders have echoed the need to incentivize income-restricted housing as part of the program. Because financing capacity would be a function of property value, higher-value homes would bring the largest benefits under the CHIP program, Gus Seelig, executive director of the Vermont Housing and Conservation Board, told lawmakers on Thursday.
“It pushes against building more modest homes because it’ll produce a smaller tax base upon which you’d be able to pay off the infrastructure,” he said.
We need housing types of all kinds that are built in every community at the density that’s appropriate for that community.Samantha Sheehan, lobbyist for Vermont League of Cities and Towns
But other proponents of CHIP have argued that its flexibility is key to its ultimate success.
“The reality is that in order to achieve 36,000 homes in five years, we need policy that is housing-type agnostic,” Sheehan said, referring to a recent statewide housing needs assessment. “We need housing types of all kinds that are built in every community at the density that’s appropriate for that community.”
The House Committee on Commerce and Economic Development is currently considering changes to the bill, like honing in on what types of infrastructure improvements can qualify, where CHIP projects will be allowed, and how much housing a proposed project must have, versus commercial space.
“We want to make sure that we’re doing due diligence — we have, you know, good guardrails around the program. But not hampering it so much that they won’t be able to do anything,” said Rep. Michael Marcotte, R-Coventry, the committee’s chair.
