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Vermont municipalities are facing significant financial challenges in expanding public infrastructure, particularly in support of housing development. A recent survey by the Vermont League of Cities and Towns found that 35 municipalities have plans to build or expand municipal water and sewer systems, with total projected costs reaching approximately $393.9 million. However, only $151.9 million in funding has been secured, leaving a $240 million shortfall that could delay or hinder infrastructure projects necessary for housing growth.
Proposed Financing Mechanisms in S.127
S.127 introduces two key programs aimed at assisting municipalities in financing critical infrastructure improvements:
Community Housing Infrastructure Program (CHIP): This program, administered by the Vermont Economic Progress Council, would enable municipalities to self-fund infrastructure investments through projected property tax revenues. By leveraging future growth in taxable property values, CHIP aims to provide financing options without requiring new state or local appropriations. This approach could be particularly beneficial in Vermont, where more than 200 villages lack wastewater systems and over 100 do not have public water systems.
Tax Increment Financing (TIF): The bill also proposes a project-based TIF program that would allow municipalities to retain 100% of incremental municipal property tax revenues and 80% of incremental education property tax revenues for up to 20 years. These funds would support infrastructure projects related to housing development. The fiscal impact on the Education Fund remains uncertain, as it depends on the scope of projects, debt incurred, and the extent to which TIF-funded developments would have proceeded without this financing tool.
Implications for Development
If implemented, these programs could expand municipal financing options, helping local governments address infrastructure constraints that have historically limited housing development. While the potential impact on the Education Fund and other tax revenues is still being assessed, these tools align with broader efforts to support infrastructure growth in Vermont’s municipalities. As the state seeks to address housing demand, the effectiveness of S.127’s financing mechanisms will depend on future tax revenue growth, municipal participation, and project execution.