WLR March 31: Break It or Buy It – Education Reform, Public Infrastructure Financing, and More

Last week, the Senate passed its omnibus housing bill, S.127 on its third reading – a momentous milestone for this long-proposed, often debated, but never passed proposal. 

This simple concept behind this bill has been called many things, including project-based TIF, mini-TIF, and performance-based contracts. Finally, it has cleared a legislative chamber with broad multi-partisan support under its new moniker: the Community and Housing Infrastructure Program, or “CHIP” for short.  

CHIP would allow municipalities to fund the water, sewer, and other public infrastructure investments needed to build new housing with the future property tax revenues from that development. As passed by the Senate, CHIP would allow up to 80% of incremental revenue from state education property taxes, combined with 100% of incremental revenue from municipal taxes, to pay down the infrastructure debt. The original taxable value of the property would continue to provide municipal and state tax revenues – plus 20% of new taxes for the Education Fund. 

To receive the necessary approval from the Vermont Economic Progress Council (VPEC), eligible projects would have to:  

Eligible municipal costs that can be paid for with tax increment revenues include:  

There are a number of exciting and potentially impactful proposals to support new housing in each chamber's housing bill this year, but CHIP is a singular priority for VLCT and many of our allies and colleagues in the State House. Our fall 2024 membership survey identified over $240 million in outstanding public costs just to build water and sewer projects already planned for in cities and towns across Vermont. As you know, recent reforms to the state’s land use permitting regime, Act 250, have bound future housing density to municipal water and sewer systems.  

The writing is on the wall. CHIP isn’t the best idea for how to pay for public infrastructure coming out of this session – it's the only idea. Without this new financing authority, municipalities would have to raise property taxes and rates and/or compete against each other for diminishing state and federal funds just to build basic infrastructure.  

Help us get CHIP across the line by contacting your local representatives and the key House committees – Ways and Means, General Affairs and Housing, and Environment – to share your support for S.127 and the Community and Housing Infrastructure Program (CHIP).  

The back-and-forth over the annual FY25 Budget Adjustment Act (BAA) continues. Late Friday afternoon, after a failed Senate vote to suspend rules and accept the House’s revised version of the BAA, Governor Scott issued an Executive Order to extend the GA Motel Program for households with children and medically vulnerable adults through June 30, 2025. This will extend the cold weather exemption for about 400 of the 1,400 households currently in the GA Motel Program. Households that don’t meet these criteria will lose state assistance on a rolling basis as they reach their maximum benefit of 80 days.  

VLCT has long called for additional funding to support municipalities in managing the effects of unsheltered populations and state shelter programs on local communities. The BAA as passed by the House does not include new funding for municipalities or for additional emergency shelter – it is headed now to the Senate Committee on Appropriations.  

Aside from policy disagreements on how to fund and manage the GA Motel Program, the BAA is a necessary step for the State to true up its mid-year accounting. As we enter the fourth quarter of fiscal year 2025, there is percolating concern about how another failed (vetoed) budget adjustment could hurt the State’s credit rating.  

The House’s version (H.493) of the annual appropriations bill, nicknamed the “Big Bill”, is up for its third reading having received deep cuts to critical VLCT priorities. The Senate Appropriations committee will start its own mark-up next week, which could be our last chance to fight for these vital programs. 

We know that this is a difficult budget year and that stabilizing property taxes is a top priority for VLCT members. We entered this session with a tailored list of budget priorities that reflect the most critical public services provided by Vermont municipalities paid for from state coffers. Here is a summary of our top priorities for the Senate Appropriations Committee:  

The newest draft of the House Ways and Means Committee’s Reappraisal Bill (which doesn’t yet have an assigned number) includes some minor tweaks to clarify the roles and responsibilities of listers, assessors, and the Director of Property Valuation. It also has one favorable addition for municipalities.  

In response to testimony from VLCT and others, and acknowledging the rising annual expenses related to grand list maintenance, the committee increased the proposed per parcel fee to $9.50 with a new minimum annual payment to towns of $10,000. These funds could be used by municipalities to pay listers and assessors; to purchase and upgrade software, hardware, and data storage; or to reimburse other incidental costs related to property revaluation.  

Other recent changes to the bill supported by VLCT include the addition of a stakeholder group to advise the Division of Property Valuation and Review (PVR) on new reappraisal guidelines and also the extension of the transition period through January 2030 to accommodate municipalities currently under reappraisal order. New reappraisal orders would cease in January 2027.  

In accordance with recent committee discussion, the Reappraisal Bill is expected to be folded into a single mega-bill along with the Ways and Means proposals for new property classes and education finance reform. This legislative strategy to knit together reappraisal, state taxation by property class, and the governor’s proposed base funding formula for education financing would create a vitally important policy package for the House – albeit one with a harried path forward through the remaining committees of jurisdiction and the ...ahem... entire Senate.  

Taken all together, these three bills read as a logical property tax reform package but with a “mad libs” vibe. Key factors including effective dates, pupil weights, and the number of school districts and assessment districts remain up in the air.  

Late last week, House Education Chair Peter Conlon announced a revised strategy to delegate the redistricting of Vermont’s 119 existing school districts to a summer stakeholder group. The committee bill, newly named H.454, would establish a stakeholder group to be tasked with drawing at least three new maps, with districts no smaller than 4,000 students each, for the legislature to consider next session. The earliest date for implementation would then be 2029. The bill also sets minimum classroom and school sizes, effective in 2027. Schools operating grades 6 through 12 would need at least 450 students.  

Over on the Senate side, new Education Chair Seth Bongartz has declared that class size doesn’t matter – but the district maps do. The Senate committee is working on a bill and series of draft maps, the latest of which would create nine regional districts. The Senate draft also creates a public-school choice lottery (as proposed by Governor Scott) and has special provisions for designated independent schools. Conversely, the House bill treats school tuitioning much as it happens now – but in the case of future school closures, district boards would have to designate up to three schools to accept students.  

It is unclear how these diverging visions will come together, but more importantly, when? 

For his part, Governor Scott released a statement saying: “I will not support adjourning this session without a bill to transition to a new funding system, establish a new governance structure that unlocks transformation, and includes a specific implementation timeline.” 

This may be the first time anyone can remember when Vermont’s students recess for summer before lawmakers do.  

Editors Note: The links above to newly named H.454 and "a bill" are current as of the publication date. You may want to search the legisaltive website for more updated versions if you're reading this after 4/1. 

VLCT has achieved over 20 bill introductions or amendments to advance municipal priorities and is working hard to get these key provisions across the line. There will be many more opportunities for you to help Josh and Samantha in VLCT’s advocacy work. Remember to register and attend our bi-weekly Advocacy Chats, which are held via Zoom every other Monday at 1 PM.