Vermont Legislature SmartTranscripts:

[Marc Mihaly (Chair)]: Can you Relax. Welcome back everyone. It is still the January 29, and this is the House, Emilie and Housing Committee, and our next witness appears to have absconded. Yes. Periods. Our next witness is David Hall, and we're back now, we've been moving around, we're back on seven fifty seven, which is an act relating to manufactured homes and limited equity co ops, and David Hall is our next witness. He is Director of Business Services at the Secretary of State. And David, thank you for coming back, tell us your name for the record and take it away.

[David Hall — Director of Business Services, Vermont Secretary of State]: Sure, thank you for having me. For your record, as you said, my name is David Hall. My affiliation is the Director of Business Services Division Secretary of State's Office. It's been a difficult adjustment to not sit down and automatically say David Hall is the counsel, so I'm glad I got it right this time. It's only been two years. I am here to help in any way I can, answer questions, help you identify and then move toward a solution for whatever problems you're trying to solve. Obviously it seems like increased housing availability, mobile home accessibility, learning and equity cooperatives, and that of course has a nexus to my division. I thought it might help though to take a really big step up and frame what I think are three levels of issues that are involved here, because I think it's super important to keep us grounded in what's the problem, what's the solution, right? So the three levels as I see them, and the one that relates first and foremost to me are data and terminology and administrative levels, right? So the thing that we do is we register businesses, and to do that you have to check boxes and jump through hoops and meet requirements that are specified in law, and then our office, if you do the right magic, spits out a form and you've got boom, an entity, right? That's what we call that, what that process is, is what I do, it's what the statutes determine or demand for us to check all the right boxes and do all the right magic. So that's a very practical administrative bucket. The middle one is statutory and organizational in the sense that the state through its statutory framework authorizes certain types of entities. And we call those by different names, but the names really are a shorthand for structure. So when we say I have an LLC, I have a nonprofit corporation, I have a business corporation, those are all different types of entity that are authorized by law. And when I say I have an LLC, it means certain things. It means I don't have shareholders. I'm in most cases out to make a profit. I have members, they run the thing, I have a lot of flexibility. I form it by filing articles of organization. It's very fluid in its structure. As compared to a business corporation, I have shareholders, in most cases I have a board of directors, I have the officers that I've specified. I have to have a president, a treasurer, and a secretary, and we have to have shareholder meetings and board meetings, and we have to give adequate notice based on what the statute says, blah blah blah. Versus I am a state authorized nonprofit corporation, which means I'm organized for some public or mutual benefit purpose. I don't have shareholders, I don't have equity interests, I have members who help participate in the activities that support this public purpose, whatever it is. We have a board of directors, we have to have director meetings, shareholder meetings. When this thing dissolves by statute, it has to give its assets to another non profit purposed entity. All of those structural themes are governed by statutes that this state has adopted, most states have adopted, and it really is about how you form it, how you operate it, how you dissolve it, and what happens if each of those stages of its corporate life. There's a third bucket, and that is the taxation bucket. And while they can be related, they are not the same thing. If you form a nonprofit corporation with the state of Vermont pursuant to Title 11B, you have got a Vermont nonprofit corporation. That does not mean that you're a tax exempt organization for purposes of the IRS regulations, five zero one(three) tax exempt status, blah blah blah. Likewise, you could form an LLC, and if you set it up the right way, you could go to the IRS and become a tax exempt nonprofit organization. So the term matters, profit nonprofit, the term matters in different ways in each of these three areas, right? And I think that's super important to remember. So let me tell you what I see as potential issues as respect to limited equity cooperatives in each of these areas, and then I think I have a couple of solutions if I think I'm trying

[Cameron Wood — Office of Legislative Counsel]: to solve the right problems.

[Marc Mihaly (Chair)]: Let me clarify one thing. Right now, one, you may know this, you may have talked with counsel, but this bill is intended to focus on a subclass of limited equity co ops that are mobile home communities or manufactured home communities, and it will be changed to make that clear. We are not interested in dealing with the larger class of limited equity co op.

[David Hall — Director of Business Services, Vermont Secretary of State]: Fair, I'm not sure, I mean, I appreciate that, thank you for the clarification, I'm not sure it changes what I was gonna it's funny to know that, okay. And let me, so with that knowledge, let me sort of do a graph in your head of where things stand. So we have this big overarching subject matter called business corporation. I'm talking about the structure of the statutes at this point. And then the way this is broken out is there are election types or subtypes of that. And one of those is a housing cooperative corporation. And that means you've got the basic mechanical and structural parameters for a corporation and engrafted onto that. We do these other things and that makes us a housing cooperative corporation. So we're not just your regular old business corporation anymore, we're now a housing cooperative corporation. There's even a subset of that, which is this limited equity co op. That is designed as it sounds to limit your equity, to restrict certain procedures so that it structurally has a better chance, honestly, of qualifying for nonprofit status. And then if you want to take a further subset of that, right now, there's no statutory difference, whether it's a mobile home or it's anything else or manufactured home or anything else, that would all fall fall under that sub sub

[Marc Mihaly (Chair)]: umbrella LEC, right, we understood that much, Excellent. We So

[David Hall — Director of Business Services, Vermont Secretary of State]: on my side in this first bucket, the administrative structural formation records data terminology piece, Historically, I think the problem that, and it's kind of a simple problem, I think it's a problem of terminology. And in specifically, what I mean by that is my division used to call if you form something under 11 a or its predecessor 11 VSA chapter 17, if you form something under that, my division called it a profit corporation. It's really a business corporation, and even that is sort of a new fangled term that used to just be corporation. Right? And and it's since, like, 1913. And then sort of the world moved ahead, and we recognize there are important structural differences between business corporations and nonprofit corporations. Model Business Corporation Act was promulgated by the bar. Model Nonprofit Act was promulgated by the bar. States adopted these, and they sort of live now in parallel spaces. The term is important. To call something a business corporation versus a profit corporation, I can see where that's problematic. And I think for the few limited co ops that are in the record and their paperwork says profit corporation, that could be a problem for them. And I think that's something that if there's one or more of them out there in the world that want to work, if you want to put some session law into the bill to say, Secretary of State, you shall work with these to ensure that the record reflects they're referred to as corporations, business corporations, not private corporations, it's causing them problems. I mean, that's fine.

[Marc Mihaly (Chair)]: Go ahead.

[Ashley Bartley (Vice Chair)]: Sorry. So I'm just I think I'm confused.

[Unidentified Committee Member]: So you're saying if you're actually a nonprofit corporation, you might be called a business corporation and So you should be

[David Hall — Director of Business Services, Vermont Secretary of State]: the the so the the very specific issue I wanna hone in on is the difference in the term business corporation versus profit corporation. Same thing, really, at the end of the day, but the term to the world, if you see the words profit corporation, you think, oh, well, that's a profit corporation, and that can't be nonprofit because it That's says not right. You could be structured in that same way and still go to the IRS and still articles mean we are we are formed, operating, and organized on a nonprofit basis, and we we should qualify.

[Unidentified Committee Member]: But Are you just a bad corporation?

[Ashley Bartley (Vice Chair)]: It's it's not making money?

[David Hall — Director of Business Services, Vermont Secretary of State]: No. No. No. No. No. No. No. Value judgment whatsoever. No. But it's the difference between like I said, I wanna keep us on the bucket. What structure did you pick versus what is your tax pursuit?

[Marc Mihaly (Chair)]: Right. But let's just talk structure for a minute. K. Sure. Okay. Of all, you said historically, I just wanna get to our point here because we have about seven minutes before we've got to move on to our counsel because he is only available to us until Okay. So historically, for whatever reason, they were treated as a profit corporation. Now how do you treat them?

[David Hall — Director of Business Services, Vermont Secretary of State]: Are you referring to limited equity corrupts? They've always in Vermont law been organized as a subset of corporation? Of a? Business corporation.

[Marc Mihaly (Chair)]: Of business. And what was that subset called?

[David Hall — Director of Business Services, Vermont Secretary of State]: It's always been called business corporation, housing cooperative corporation, limited equity co op.

[Marc Mihaly (Chair)]: In the secretary of state.

[David Hall — Director of Business Services, Vermont Secretary of State]: In the statute, in the statute. Now the terminology difference I'm talking about as secretary of state is the difference between business corporation and profit corporation.

[Marc Mihaly (Chair)]: Yeah, well, and the secretary of state.

[David Hall — Director of Business Services, Vermont Secretary of State]: That was just terminology usage. And when we built this new system in 2024

[Marc Mihaly (Chair)]: Yeah.

[David Hall — Director of Business Services, Vermont Secretary of State]: We refined our forums and our processes. The terminology we now use is business corporation, which reflects the title of 11 a, I think accurately

[Marc Mihaly (Chair)]: reflects what it is. So just a business corporation, so you no longer differentiate between nonprofit, for profit, limited equity co ops, it's just listed as they're all listed as business corporations.

[David Hall — Director of Business Services, Vermont Secretary of State]: You get all the above. So the workflow you would go into is the domestic business corporation. You check a box that says, I I'm gonna make the election type housing cooperative corporation. And then as you continue through the workflow, you check another box to say, this is a limited equity cooperative. Okay. So it's identified as what it is. Exactly. That's correct. So yes. I and I I'm I'm sorry. I was trying to address the historical problems. I understand. Ones Yeah. Versus which thanks for bringing us to the present. Yeah. From here forward or from 2024 forward, I think the terminology is correct, it's not the problem.

[Marc Mihaly (Chair)]: Yes, go ahead.

[Gayle Pezzo (Member)]: So the list that the Secretary of State has, with I believe it's 19 or 20 of the manufactured home, LEC's, Some of them, they're identical models, some of them say domestic nonprofit and some of them say domestic for profit. So that's the target. I mean, that's what I want to understand and that's why it's in the bill as far as making that not all of those particular entities nonprofit.

[David Hall — Director of Business Services, Vermont Secretary of State]: So this is really critical. I mean, it would be, you can't form a limited equity cooperative as a nonprofit corporation for purposes of state law. That's not the way the law has ever been written. Since it was introduced as S-one 160 by then Senator Welch, think 1986, it's always been these are business corporations, subtype, subtype,

[Ted Barnett — Joint Fiscal Office]: and if

[David Hall — Director of Business Services, Vermont Secretary of State]: we wanna pursue nonprofit status, we can do that.

[Marc Mihaly (Chair)]: Right. I'm not talking we're not talking about nonprofit Right. Federal state tax, but federal We're talking about So, you saying, I'm hearing apples and oranges here. We were under the impression that these limited equity co op manufactured home communities, some of them are literally labeled as for profit and some are labeled as non profit, and yours seem to be saying that at least 2024 on, those didn't apply. That what applies is they are limited as they are accurately labeled as limited equity co op.

[David Hall — Director of Business Services, Vermont Secretary of State]: Yes. I mean, the reason I pause is there's not one label. It's again, if you picked for instance an L3C, you would be listed as biggest category would be LLC, and then it would reflect that you had the election. Just like if you were a partnership and you elected to be an LLP, your big umbrella would be partnership and then you would have made the election LLP. All of those elections would be reflected in your documents, in our records, in the business information page, on the articles themselves. So going forward, I think it's accurate to say it reflects the statute as a business corporation that has elected to be a general, excuse me, a housing cooperative corporation, and that housing cooperative corporation has made the further election to be a limited equity co

[Marc Mihaly (Chair)]: Yes, Elizabeth Burrows. So

[Elizabeth Burrows (Member)]: help me try to understand. So then the profit nonprofit designation actually lies with

[David Hall — Director of Business Services, Vermont Secretary of State]: the tax bureau, or IRS,

[Elizabeth Burrows (Member)]: or whatever, the taxation versus the business designation.

[David Hall — Director of Business Services, Vermont Secretary of State]: Yes and, yes, whether I'm tax exempt is just a matter of tax law. The historical labeling is wrong. I think we can all agree on that. Whether it was formed, they should have all been formed, I believe they've all been formed under 11A, but some of them are referred to as profit corporations, they should be referred to as business corporations. Some of them are referred to as nonprofits, they're not nonprofits for the purposes of state law.

[Marc Mihaly (Chair)]: And did you, when you changed to 2024, you didn't go back and relabel everybody?

[David Hall — Director of Business Services, Vermont Secretary of State]: No, I mean some of these articles are, you know, I don't know how decades old.

[Marc Mihaly (Chair)]: So they're not, so Okay, yes, I've been in New York.

[Gayle Pezzo (Member)]: So this is not for the purpose of being tax exempt, income tax exempt. That list prohibits some of those domestic profit from being able to apply for certain grants without having to go through so many hoops and it taking so much more time. We are the ones that say domestic, nonprofit don't have to go through those channels.

[Marc Mihaly (Chair)]: Or domestic It business doesn't say that.

[Gayle Pezzo (Member)]: It says domestic nonprofit and says domestic for profit. Okay. Is an issue.

[Marc Mihaly (Chair)]: You seem to say they shouldn't be labeled as nonprofit because they can't.

[David Hall — Director of Business Services, Vermont Secretary of State]: That's right. That's right.

[Marc Mihaly (Chair)]: In other words, the Hunger Mountain co op is not a nonprofit. It's a co op, which is a different form.

[David Hall — Director of Business Services, Vermont Secretary of State]: And and is a different kind of co op under a different body of law.

[Marc Mihaly (Chair)]: Right. And and what you're saying under since '9 since 2024, they're all business the Hunger Mountain co op is a business corporation. It's just a type. It elect it goes down the tree. Is that correct?

[David Hall — Director of Business Services, Vermont Secretary of State]: That one actually falls under a different class. What class is that? I don't know if there would be, I don't know if they are, if it's up to them, but marketing co op or consumers co op, those are different, under a different body of law, under a different chapter.

[Marc Mihaly (Chair)]: Okay. Well, then let me ask you. You've seen have you seen the portion of the bill that we're referring to that says, notwithstanding any law to the contrary, a co op housing corporation, LEC shall be treated as if it has incorporated as a nonprofit corporation under the laws of the state, including for registration purposes with the secretary of state. And what are you saying about that?

[David Hall — Director of Business Services, Vermont Secretary of State]: I think the place we're trying to get is to make sure for purposes of the record in the Secretary of State's office that the terminology terminology shouldn't say profit or nonprofit

[Marc Mihaly (Chair)]: at It should say business corporation. Should say business corporation. You're saying it should excuse me for rushing.

[David Hall — Director of Business Services, Vermont Secretary of State]: No

[Marc Mihaly (Chair)]: worries. Business corporation. Cooperative, housing, limited equity co ops. Exactly. I know you're at take care of the problem? In other words, if it was if they were all labeled that way, would that take care

[Ashley Bartley (Vice Chair)]: of that?

[Gayle Pezzo (Member)]: I don't know. I just know that the nonprofit, you attempt to, that you're more eligible for the grant without having to go through all the hoops. What grant? Excuse me?

[Joseph Parsons (Member)]: What grant? Any grant? Anything? Yeah,

[Gayle Pezzo (Member)]: some, not any grant, but whatever grants you may be eligible for. Do you have to be a five zero one(three)? No, this is not about five

[Marc Mihaly (Chair)]: zero one(three)

[Ashley Bartley (Vice Chair)]: as well. This is

[Gayle Pezzo (Member)]: not nonprofit where it's a five zero one(three)? Is it? C-three. C-three. No, zero five zero or nine.

[Unidentified Committee Member]: I think it's a five zero one four is the Homeowners Association. Right.

[Gayle Pezzo (Member)]: It's not a five zero one three.

[Marc Mihaly (Chair)]: Your feeling is that what about the language in B?

[David Hall — Director of Business Services, Vermont Secretary of State]: It's extremely problematic because it's unclear what it does. I would recommend that you replace it with, as I said, some sort of directive that we scrub the record, make sure everything is labeled according to the way the statutory construction is. If you're not changing the statute.

[Marc Mihaly (Chair)]: No, I understand. So your view is that what you'd like to see is a directive, a legislative directive that you work with, you don't have to be with anyone, that you work to retroactively correct the record and bring all the limited equity co ops that are mobile home, manufactured home communities into the same categorization.

[Gayle Pezzo (Member)]: Without any unintended consequences.

[Marc Mihaly (Chair)]: Right, well that's something we're going to look at, yeah.

[David Hall — Director of Business Services, Vermont Secretary of State]: I mean, I think, I don't know if that changes life for the ones

[Marc Mihaly (Chair)]: that are Yeah, that's, but that would work for you.

[David Hall — Director of Business Services, Vermont Secretary of State]: Yes, that'd be good. I I would appreciate being able to point to something and say, we have the authority to change the record in

[Marc Mihaly (Chair)]: this Right. Okay. I think it's safe to say, we're gonna transition now, you wanna come up? Go ahead. No, no, don't go away. Working with counsel on that issue is where

[Ashley Bartley (Vice Chair)]: I think we're going. Did I mishear that you had a few concerns, or was that really the main one?

[David Hall — Director of Business Services, Vermont Secretary of State]: That's the main one. I don't have a substitute position on

[Ashley Bartley (Vice Chair)]: the rest of it. Okay, just wanted to make sure, because I'm only hearing one solution. I thought there were more concerns.

[David Hall — Director of Business Services, Vermont Secretary of State]: I know that you're out of time with me. I'm happy to be available to you electronically or in person, and I can show you this stuff in our system so you can have some mental schema about what it actually looks like when this happens. That might be helpful rather than talking these abstract sheets.

[Marc Mihaly (Chair)]: If you have a few minutes, it might be good for you to remain while we talk to counsel. Absolutely. Happy to. Thank you. Excuse me for rushing it. No worries.

[David Hall — Director of Business Services, Vermont Secretary of State]: I know the reality.

[Marc Mihaly (Chair)]: We this man, this man who's in such demand, Cameron Wood, our legislative counsel who has been working with us on this bill. What we are doing now, members of the committee, before we move on, at a certain point, when we get legislation like this, we have a discussion with our council. Okay, what would you like to see changed in the bill? And then he takes that and then is able to redraft what in other words, when this started, it was property of Gayle and Marc. Now it's ours. Now it isn't our property anymore. It's everybody's property. So if we want to change it, we direct legislative counsel. We don't need to vote on it, but we give him direction as to what we'd like to change, and then he comes back. In this case, because it's a complicated bill, we thought get him in here early to talk about it, and then we're going to hear from a few more witnesses, and we'll do it again. So that's what that is. So, you want to identify yourself for the record, sir?

[Cameron Wood — Office of Legislative Counsel]: Cameron Wood, Office of Legislative Counsel.

[Marc Mihaly (Chair)]: Alright. First of I just have two thoughts myself, and then I would appreciate anybody else wanting to propose instructions to our accounts. The biggest one, no surprise, is that however necessary, we make clear that we are dealing with the category of the sub sub sub category of limited equity cooperatives that are manufactured home communities in whatever way you deem appropriate. Is there any Is that

[Cameron Wood — Office of Legislative Counsel]: problem? Do you see any problem with that? I understand what you were asking me to do, and I will highlight if there are any issues with the language with another draft, but understood what trying to accomplish.

[Ashley Bartley (Vice Chair)]: Can I piggyback off of that? Just want Where are you? The whole bill.

[Marc Mihaly (Chair)]: Okay, yeah.

[Ashley Bartley (Vice Chair)]: I just want to be sure when we're going through, and this is more just for my knowledge and I know I've brought it up again, I just So only section two is specifically these LEC's that are manufactured home communities, correct? When we talk about the deeds, that is all encompassing of all mega factor films, correct? That

[Cameron Wood — Office of Legislative Counsel]: is my understanding of what I've been asked to do, which is it's section one, very first conversation that we had when we talked about bill of sale and we talked about the deeds and removing some of those forms that currently exist in statute, that would apply to any manufactured home, period. Beautiful. But then the next few sections for the remainder of the bill, my understanding based on what the chair has asked is that we would be limiting those impacts to only limited equity cooperatives that are also a manufactured home community. So that would be the changes we've discussed on the, that you were just discussing with the Secretary of State's office and then the storm water impact fee and then the tax changes at the end of the bill, those all would be limited to a manufactured home community that is the limited equity block.

[Marc Mihaly (Chair)]: I'm thinking and I'm curious how other people in community feel that when it comes to the section that we were just discussing with the Secretary of State

[Unidentified Committee Member]: It's on page eight,

[Marc Mihaly (Chair)]: is that? Yeah, that's on page

[Ashley Bartley (Vice Chair)]: eight, one fourteen.

[Marc Mihaly (Chair)]: I have it on page 11.

[Unidentified Committee Member]: The LEC section starts, Section page two that

[Ashley Bartley (Vice Chair)]: you just started talking about, so

[Unidentified Committee Member]: now section three starts on page 11.

[Marc Mihaly (Chair)]: It's just above section So, what I'm suggesting is that section b be struck, and in its place, that there be an authorization to the secretary of state to I don't know what the right word, David, would be. We're not gonna say scrub. But the secretary of state go back and examine those, and to correct the registration of limited equity cooperatives to reflect the nomenclature, the heuristic methodology in the twenty twenty four

[Cameron Wood — Office of Legislative Counsel]: minutes. So I can work with Secretary of State's office in coming up with the language to reflect what you just asked. But this is a very key thing that I think you all need to continue to discuss and hear from potentially myself and Mr. Hall. I really think the discussion, and I think Mr. Hall was doing a great job of trying to keep you on track on the structural, the statute, the tax impact of this. Because I wanna make sure you understand what you're potentially asking. If I change the bill to reflect what you asked, which is go back, change how these entities are listed and exist in your systems to reflect what they should be under statute, which is simply a business organization. It's not a for profit or a nonprofit designation, you're just business organization, home cooperative corporation, living with That's gonna fix the reflection of what they should look like from a statutory perspective. That's not gonna solve what my understanding the sponsors are looking to solve, which is more an issue with how these grants exist and who can access them. Because these entities are a bit of a hybrid in that they're not really I talked about this when we walked through on Tuesday morning they're not really structured as a nonprofit corporation, but they somewhat act as a nonprofit. I understand that. Here's what I'm thinking.

[Marc Mihaly (Chair)]: We're not going to change either federal or state tax law. We don't have the time, it's not going to happen, this isn't the time. If we wanted to go back and change state tax law to taxonomy, if you will, to create to change their categories so that limited equity coops are deemed to be nonprofit corporations for tax purposes, that would be a job that we could consider at another time, but we're not gonna do it now. Furthermore, to the we don't know for sure whether grantor x, some grantor out there, if they look and they see that you're registered with the secretary of state as a limited equity co op, how they're gonna and it's very clear that you're a limited equity co op as part of etcetera, how they are going to respond. If they really it seems to me we don't know that, and we're not gonna know it in the time frame here, but what I'm hearing, and and it may be that there are grantors who will not grant to anything but a nonprofit corporation, and there's nothing we can do about that. I know for a fact that people who are organizing the St. Johnsbury co op, there are grants that are not available to them. The same thing is true with the co op in Plainfield, there are grants that are not available to them because they are not a co op, they are not a nonprofit, they are a co op, it's a different category. That's life out there, we can't change that. And so, I'm not sure that there's anything more we can do. What I'm hearing is that subsection in its current form is we can't do it, that we cannot declare that they are nonprofits when they aren't nonprofits for tax purposes, and we are not willing to go into the tax code. That's what's bothering me. So I'm not sure that we're really in a position to do more than simply make sure that at the secretary of state level in the future, they're registered correctly. That's my problem.

[Cameron Wood — Office of Legislative Counsel]: And I will highlight, and I just will highlight, you still have the subsection C that we're trying to work to try to signal for more clear for a statutory purpose that these entities are serving

[Marc Mihaly (Chair)]: low and moderate income individuals. I do think that this whole bill, I hate to say it, is round one. I know that there are going to be, after we've lived with it, there's going to be a round, it's gonna end up being around too, remote communities.

[Gayle Pezzo (Member)]: Yes. So I think the person who could answer this very well is Jeremiah Ward from the WISP program for the state revolving funds, and that has to do with wastewater and water. And where they run into the problems is because of this list. They wind up getting the grant eventually, but as I said, they have to jump through billion of hoops when it says domestic fraud.

[Marc Mihaly (Chair)]: Right. If it is all it is, is the problem, we can get him back in here. But if all it is, I think you should talk to him, because if all it is is that it's a problem that it's labeled as a profit corporation, well, they're going to correct that. It shouldn't be. It should be labeled as a business corporation. Okay, then. Yes?

[Ashley Bartley (Vice Chair)]: I just If hypothetically we were to go back and scrub in a very hypothetical situation, is there a cost associated with that? Because every two years or however many years at the corporation, you have to refile with the secretary of state. And if we went back and changed, I feel like there would be a cost associated with that. And I just wanna be conscious of the consequence that these communities would then, I mean, realistically, weren't the Secretary of State's not gonna eat that? And I'd assume it'd go back on the communities. Is that a wrong assumption?

[Cameron Wood — Office of Legislative Counsel]: I'm probably not the best to answer that question.

[Ashley Bartley (Vice Chair)]: Is that a bad assumption? I mean,

[Marc Mihaly (Chair)]: you saying, just to piggyback, are you saying maybe we don't need to do anything at all because we just let them re register and let them take care of themselves?

[Ashley Bartley (Vice Chair)]: Yeah, I just want to be conscious of if we're saying prior to whatever, if we're making those changes, we don't go back without I want us to be cognizant that that could be an unintended consequence for these communities that we are already saying are low to moderate income.

[Marc Mihaly (Chair)]: Well, David, do they have to register every two years and do they would pause. Will they just have different boxes to check and we'll all check the right box?

[Ted Barnett — Joint Fiscal Office]: David, I'll open to your record, Mr. Service Director.

[David Hall — Director of Business Services, Vermont Secretary of State]: I appreciate the consideration about cost and burden. It would be low just to scrub and change. It would have impacts to those that are categorized in our system in a database setting as nonprofits. There are a few things that would be shifted, for instance, nonprofits file a report every two years, corporations file a report every year. So you would have to do an annual rather than a biannual. As far as making the scrub, making the change, that's something that we could work on internally if we need to engage our IT vendor, we could. I don't think it would be an additional incremental cost for us just to scrub the record. It would be a very, very different theme if we had to create a new module that wasn't one or the other, but if we can use the existing modules and just put people in the right box, relatively straightforward.

[Marc Mihaly (Chair)]: I can think of an unintended consequence. Let me ask you, Gayle, from your knowledge, are there going to be some limited equity co ops, who are mobile, who are manufactured home communities, that are going to say, wait, I'm listed currently as a nonprofit and it may have been a mistake, but I like it. I want to maintain the mistake. I don't want to change. I guess I'm asking, well, of all, David, do they have that choice, or are they gonna have to re register anyway under your new typology, your new taxonomy?

[David Hall — Director of Business Services, Vermont Secretary of State]: Sure, I think if I may, the way that you could thread that needle would to give us the authority, but not the duty. And if they request a change, then we can work with them on it.

[Marc Mihaly (Chair)]: Yes, Gayle.

[Gayle Pezzo (Member)]: So in my mind, this is we're talking about existing stock. Right. But I'm thinking also in terms of new developed new ones

[Marc Mihaly (Chair)]: would be limited equity co ops. They would be called limited equity co ops.

[Ashley Bartley (Vice Chair)]: Business.

[Marc Mihaly (Chair)]: Business corporations, housing cooperatives, limited equity co ops.

[Gayle Pezzo (Member)]: Okay, and so does that mean that it's equal to what's on that list? If that's changed, it all looks and receives the same benefit as it being listed as non profit, domestic non profit?

[Marc Mihaly (Chair)]: That's something we don't know. And I think talking to David, talking to Jeremiah is essential, okay?

[Cameron Wood — Office of Legislative Counsel]: Because a potential, what I can imagine is the be all problem solver is whatever grants you're trying to access, you could go, if it's in statute, and specifically say, these funds shall be available to business organizations that are registered as limited equity cooperatives under this chapter, that's a very piecemeal approach. Grants you're talking about, you could be talking dozens, hundreds, etcetera.

[Marc Mihaly (Chair)]: So Perhaps they're all under a few state programs and we can run that down. Is that something we should leave to the bill's coauthors, or it's something that we should ask you

[Cameron Wood — Office of Legislative Counsel]: to do? That is something that you all should gather that information first.

[Marc Mihaly (Chair)]: Okay. Are there other comments or thoughts about an initial round of markups before our council turns into a pumpkin in another committee?

[Ashley Bartley (Vice Chair)]: I feel like I will have the wondering after our conversation, Ted.

[Marc Mihaly (Chair)]: With Ted, right. So I have two

[Cameron Wood — Office of Legislative Counsel]: changes as of right now.

[Marc Mihaly (Chair)]: Right, and I think we, part of the thing that Gayle and I have to do is to find out whether there's a category, we can clarify the lawnmower and other categories in state, yes?

[Ashley Bartley (Vice Chair)]: Did we find out if we're gonna strike the stormwater?

[Marc Mihaly (Chair)]: Here's the situation with stormwater. Everybody remembers a three acre rule in that. So, we heard, and there are in fact two bills which would terminate the large fees, and thus not do everything, but do most of what the purpose was, in which case the answer would be we could strike all of that. Yesterday, I had a conversation with a member of the committee last evening, I haven't had a chance to talk to you, in which I was told that those no, that wasn't gonna happen, just wasn't gonna happen. And then in fact, they were waiting for our bill and looked very favorably on our bill as a narrow way of beginning to get into this. I think we have to leave it in right now. I've gotta find out. I'm going to appear before that committee at 01:15 to testify on behalf of a bill a bill about dam safety, and I will try to get more. The chair of that committee is out of town for the week, so that's just hanging out there. But at this point, I think it would be either or. It's either we leave it in and send it over to that committee, or we just take it out. There's not a proposal to rewrite it.

[Gayle Pezzo (Member)]: So, if I'm hearing you right, the bill regarding removing the impact fees, is it They say, now

[Marc Mihaly (Chair)]: there is a Senate bill, but the House bill, they're, I don't, they're saying, well, Kate Logan is the person charged with this on that committee, and she said it's not going anywhere at all.

[Gayle Pezzo (Member)]: Okay. So what's in my bill is the narrow

[Marc Mihaly (Chair)]: It's the narrow exemption, and that that's fine. It's in fine shape to go over. I'm not saying they won't fiddle with it.

[Unidentified Committee Member]: Yeah. Would rather see that.

[Marc Mihaly (Chair)]: They they they were positive about it. Mhmm. Anything else?

[Unidentified Committee Member]: How you doing, Cameron?

[Ted Barnett — Joint Fiscal Office]: I'm great.

[Elizabeth Burrows (Member)]: Good. Just wanted to add on there like that.

[Cameron Wood — Office of Legislative Counsel]: I have zero points.

[Marc Mihaly (Chair)]: And in fact, at 11:00, we are going to hear from Kate Logan on another matter, but there's no I'm announcing publicly while we're still on the air so that members of the public know we may ask Kate Logan about this issue. Any other comments, thoughts? Thank you. You actually have five more minutes for your due.

[Unidentified Committee Member]: It's all we have. I'm gonna

[Marc Mihaly (Chair)]: go get some more.

[Unidentified Committee Member]: Pretty empty.

[Marc Mihaly (Chair)]: Alright. I guess we have five minutes, and I think what we'll do is

[Ashley Bartley (Vice Chair)]: Oh, go can I do Go ahead?

[Unidentified Committee Member]: When just When I was asking David Hall about for profits and I said, you're just a bad for profit, what I should have said was, you're just a for profit that isn't making a ton of money, like you're just

[Ashley Bartley (Vice Chair)]: not profiting. Acting poorly in the profit.

[David Hall — Director of Business Services, Vermont Secretary of State]: But not succeeding. I was

[Ashley Bartley (Vice Chair)]: not judging anyone just for making money.

[Marc Mihaly (Chair)]: Actually, I do on record,

[Ashley Bartley (Vice Chair)]: I was not.

[Marc Mihaly (Chair)]: I do. Thank

[Ted Barnett — Joint Fiscal Office]: you, chair.

[Marc Mihaly (Chair)]: I do understand. Unsuccessful nonprofit. David, do you happen to know whether when you apply for a five zero one(three), which I've done using the law on form, but of course, it was my lawyer, I'm a recovered attorney, so it was not me. Do you have to, can you get a non profit status, five zero one(three) status if you are not registered as a non profit? Yes. At a state level, if you're registered as a business corporation, etcetera, you

[David Hall — Director of Business Services, Vermont Secretary of State]: can get a five zero one(three). You can, but it's based on how you draft your organizational documents. So there's the organizational operational test.

[Marc Mihaly (Chair)]: Right.

[David Hall — Director of Business Services, Vermont Secretary of State]: Right? And setting aside the operational test, the organization test actually means literally they're gonna examine your formation documents and see, are you organized for an exempt purpose?

[Marc Mihaly (Chair)]: Right.

[David Hall — Director of Business Services, Vermont Secretary of State]: What are the voting rights and schemes? Is there a possibility of private ignorance to the benefit of the owners? And then what are

[Marc Mihaly (Chair)]: the distribution of assets upon dissolution? Dissolution, and if you're a limited equity co op, it would seem to me Right. You would quite possibly qualify.

[David Hall — Director of Business Services, Vermont Secretary of State]: Absolutely, no, and I think the statute is drafted largely to reflect the revenue safe harbor rule that was promulgated in '86, specifically about low and very low income housing organizations that may seek five zero one(three) status. It's a good read, if you haven't seen that, I read that this morning. But they are really strict. So you need to definitely have to have an organizational structure and the structure governed by the documents has to check all boxes. But the form could be LLC, corporation, association, or a trust.

[Marc Mihaly (Chair)]: Right, do you know, Gayle, is Westbury A501C3? It is not. Has it ever tried to be? Yes. And it was denied?

[Gayle Pezzo (Member)]: Not Westbury itself, but one of the others and it was too cumbersome and it wasn't, it was CDI that attempted and they said that it didn't make sense for the manufactured home LECs. Okay.

[David Hall — Director of Business Services, Vermont Secretary of State]: I think, if I may, I know you got one minute, but I just would like to observe that if you achieve nonprofit exempt status from the IRS, that also puts you in some boxes, which are pretty tough. And I think it's important for you all to appreciate that the quest and the decision, I think the statute's role is to create the conditions, but it's gonna have to be ultimately up to the organization itself, because it is a quite complex process, not just in the formation, but in

[Cameron Wood — Office of Legislative Counsel]: the ongoing operation as well.

[Marc Mihaly (Chair)]: Right, Thank you. Sure. Alright.

[Cameron Wood — Office of Legislative Counsel]: May I take the first?

[Unidentified Committee Member]: Yes. Take one, take two, take the

[Gayle Pezzo (Member)]: great chance. Everybody likes them. Mary, can you contact Jeremiah Ward from CDI?

[Marc Mihaly (Chair)]: Well, but can we just talk to him?

[Gayle Pezzo (Member)]: Just talk to him? Sure.

[Marc Mihaly (Chair)]: Let's find out. Okay. If I don't wanna have this point, we are so crowded. I don't wanna have someone back as a witness if we can just resolve the issue informally, and then report on it. If on the other hand there's anything substantive, then we'll get them back. Thank you. You. It's 11:00 hour. Thank you. Thank you. Hey, come on up. But I'm warning you.

[Ashley Bartley (Vice Chair)]: Sophie, you're here. Walk through.

[Marc Mihaly (Chair)]: No, we're is just a second here. Hold on a minute. This is merely, this is an introduction. Okay. It's not a word for you. But we are going to, yeah, exactly.

[Ashley Bartley (Vice Chair)]: Unless you want us to ask you questions, like a walk or I'm Maybe. It's okay. Can I have an update for you, Chair Mihaly, too, about our conversation? Well,

[Marc Mihaly (Chair)]: that's actually, we were just talking about you, and I warned the public that we may go off the agenda and talk to you about that issue. Okay.

[Ashley Bartley (Vice Chair)]: Gonna figure out how to adjust this chair, it's making me feel very short. All right, for the record, I'm Representative Kate Logan from Burlington. I am here to talk to you about a bill that attempts to address concerns about not having sufficient labor rights authority at the federal level. I initially got concerned about this issue when President Trump fired one of the members of the National Labor Relations Board, resulting in there not being a quorum to the Board and start looking into what states can do to ensure that a state could take over the role of the National Labor Relations Board in the event that it became necessary. For example, if the National Labor Relations Act were repealed or something like that.

[Rep. Kate Logan (Burlington)]: So I was not unique

[Cameron Wood — Office of Legislative Counsel]: in

[Rep. Kate Logan (Burlington)]: that concern. There were other states that immediately took action, California and New York State and Massachusetts. All passed legislation that would allow the state labor relations board to take over the authority of the National Labor Relations Board in the event that the National Labor Relations Board did not have quorum. There was a subsequent legal challenge to those laws, and in November, I believe, it was ruled that the NLRA preempts states from taking that authority. So the bill that I've drafted, that Sophie helped me draft, does not speak to a lack of quorum at the national level, because one of the things that I've learned as we've gone along in this process with these legal challenges and things like that is that the regional offices of the National Labor Relations Board can continue to function even without quorum at the national level. So if there's, for example, a labor union that's seeking recognition and needs to conduct a vote in order to form a new local, that kind of activity can continue to proceed. But in the event that there was an even more significant challenge to the National Labor Relations Act, and frankly, based on policy agendas that I've heard discussed by our current federal majority, it's not just the National Labor Relations Act, but also the Fair Labor Standards Act and the Davis Bacon Act that are also things that the majority, I don't know how much of the majority, what percentage of the majority, but the Trump administration itself has expressed interest in doing something like, for example, either repealing those acts or giving states the freedom to get the waiver from those laws being in effect in their states. So at any rate, I felt that we have some obligation to consider what states can do to ensure that National Labor Relations Act related legislation of Fair Labor Standards and the Davis Bacon Act My bill does not reference the FLSA or Davis Bacon. Because I drafted this bill before I really kind of got deep into thinking about it, But yeah, that's what this bill attempts to do. Attempts to provide a framework that in the event that the NLRA is undermined substantially at federal level that the state labor relations board has the authority to take over those functions Well, for private thank you for bringing this to us. Are you the sponsor of the NI bill we're looking at, the mediator to the state, the general relationship? No, that's me and Okay, wasn't sure. So I think, I have to keep you bringing this. I think we're having those conversations. I would be really interested to know what you found after the December finding that, you know, what can we do? Are there things that you think we need to change in your bill? No. From okay. I don't reference Sephora. Okay. So you think I'm sorry. I did respond, but the the bill was drafted after that legal decision.

[Marc Mihaly (Chair)]: But wasn't the legal decision I I I haven't read the legal decision. But wasn't it based it's holding based on the idea that as long as the National Labor Relations Act is in effect, whether it's being underfunded, undermined, or whatever, it preempts the states from acting in that arena.

[Rep. Kate Logan (Burlington)]: Yeah, so if you read the bill, which is why I asked if Sophie was going to be here, can certainly just, we can take a look at the text of the bill, you'll see that that's exact, This is really kind of, this is a very dire situation that we would be talking about where this bill

[Marc Mihaly (Chair)]: It would contemplates the end of the federal regime.

[Rep. Kate Logan (Burlington)]: Or a substantial revision to the NLRA that essentially renders it, takes certain things out of the NLRA that we could then take over

[Cameron Wood — Office of Legislative Counsel]: at

[Rep. Kate Logan (Burlington)]: the So state it's very, very targeted. It's kind of like a It does nothing in the immediate term. Would be in a very extreme circumstance that this would make any difference.

[Marc Mihaly (Chair)]: Ashley? And

[Rep. Kate Logan (Burlington)]: can I just Let me apologize, I have not read the bill? Yeah, no, that's fair. Plan to after this, because

[Elizabeth Burrows (Member)]: I think this is what

[Rep. Kate Logan (Burlington)]: I do every day, and I think it's really interesting. Does your bill is it more of a fill in the gap, and after that move is done, the state no longer would have that capability? Or is it once the state kind of steps in, takes over that capability, it perpetuates the responsibility of the state? So in the event that the NLRA were reinstituted or that the ways that it was altered so as to severely limit its scope such that it would leave states open to taking over the responsibility for those actions. Like, okay, if either one of those things weren't true, then the state would not have any equity. It just depend I just wanted to make sure. Yeah, I understood.

[Marc Mihaly (Chair)]: Leonora, did you know?

[Rep. Kate Logan (Burlington)]: I actually don't see the bill in today's documents. So I'm looking at it. I'm looking

[Marc Mihaly (Chair)]: looking at the bill and familiarize ourselves, certainly. Yes.

[Unidentified Committee Member]: Leonora. Do we even need this? Like, is there anything federally that undermines our ability to fulfill those needs?

[Rep. Kate Logan (Burlington)]: Is that why we absolutely need this? Yeah, thank you so much. Yes, so we're federally preempted from providing those functions within our state. And if they are not in our state law because they're federally granted.

[Marc Mihaly (Chair)]: Like private employers.

[Rep. Kate Logan (Burlington)]: Yeah. So this would be similar to like over in my committee on environment, water standards, federal clean water standards. We have legislation, we have enacted legislation in the state that says in the event that the federal clean water standards are abrogated or substantially reduced, that we will then enforce the clean water standards in the state of Vermont. What I've heard as a strategy for folks who do want to undermine labor standards or do want to default most federal functions to state authority is, like I said, allowing states to have a waiver from the National Labor Relations Act or Fair Labor Standards Act or Davis Bacon. That seems to me a pretty substantial change in the National Labor Relations Act because it's no longer a National Labor Relations Act at that point.

[Ted Barnett — Joint Fiscal Office]: It is an

[Rep. Kate Logan (Burlington)]: optional opt in kind of law, not a national law. So yeah, we see this trend towards the evolution to the state. So it just seems to me that it would be helpful very much, not to me anything in circumstances that we're in right now. But in the event that something were to completely undermine the National Labor Relations Act, then the State of Labor Relations Act would be able to immediately step in and say, for example, adjudicate a conflict that rises to the national level. It would be in the event that the regional offices are no longer able to function, for example, so that labor elections can't be held. There a number of different The board could be defunded and its regional offices defunded. There are a number of different circumstances or laws could be enacted that substantially disable the MLRA, in which case we would already have something on the books that says, yeah, okay, we'll do it if the federal government doesn't want to do it anymore.

[Unidentified Committee Member]: Yes. So then, this is giving authority, but authority without funding can sometimes be tough. It require any

[Rep. Kate Logan (Burlington)]: It doesn't give any authority right now.

[Unidentified Committee Member]: No, it's giving us the authority in the case of a federal failure.

[Marc Mihaly (Chair)]: Without funding.

[Rep. Kate Logan (Burlington)]: Yeah, without funding. We'd have

[Marc Mihaly (Chair)]: to fund it then.

[Rep. Kate Logan (Burlington)]: Yeah, we'd have to fund it then. We can't fund it now in a way Like, we couldn't fund it now because we wouldn't make an appropriation because there's nothing to Right. I was just wondering whether that Yeah, we'd have to come back and fund the state labor relations board. I know they're already underfunded.

[Marc Mihaly (Chair)]: Kate, if we can change subject from a

[David Hall — Director of Business Services, Vermont Secretary of State]: Oh, sure, sure, sure.

[Marc Mihaly (Chair)]: We were just hearing, we were just discussing H seven fifty seven, which is the manufactured home bill, and one of the issues was what do we do with the provisions on the three acre rule, etcetera? And the question is, do we leave it in, in which case it goes to your community, or do we take it out because your community is taking care of it, your committee is taking care of the issue on its own?

[Rep. Kate Logan (Burlington)]: We've removed any language regarding Three Acre from the Department of Environmental Conservation miscellaneous bill, which is the only bill that we had on our wall regarding the exemptions from impact fees because it's too broad. It would remove impact fees from large corporations that are using every square inch of the property that they own to build up their corporate headquarters, for example, that too broad. So we felt like that was too substantial an issue for us to just stick into a miscellaneous bill and that it required a separate process and probably a lot of testimony, frankly, in order to be able to identify the specific parties that we would want exempted from the impact fees. But we all feel the problem. It's not that we don't think that there isn't a problem. And I'm not sure how quickly we would be able to take action. I did go downstairs and talk with Senator Ann Watson, she said that her committee doesn't have a plan to address anything in Three Acre this year. But then in speaking with folks who are impacted, manufactured housing residents, communities that are impacted, it does sound like there's ARPA funding that is at risk if these communities are unable to get an exemption from these impact fees because the communities can't afford to take down debt. And I know you all are really familiar with affordable housing and how hard it is. You can't just raise how much your carrying charges are in a manufactured housing cooperative because, yeah, it just doesn't work that way. They can't just take on debt to cover the impact fees. And there are no grant programs in existence that can help offset these impact fees. And so it seems to rise to a level of urgency where ARPA funding would go unused to do wastewater or storm water, no, wastewater planning. And there's significant enough developments. They're over threeeight of sites, so they would trigger the threeeight of rule to do these ARPA funded wastewater projects in manufactured housing communities. And so the urgency of the issue suggests that we should at least start there to provide an exemption for manufactured housing communities. And actually, I think H757 is probably the most targeted vehicle that we could use right now to address that. And so in our committee and with Senator Watson or Chair Watson discussed taking possession of H757.

[Marc Mihaly (Chair)]: When it comes over.

[Rep. Kate Logan (Burlington)]: Yeah, when it comes over. And I think that would be great for us. So if you all want to leave that section to us to discuss and take testimony on, we would welcome that. That seems like a good solution right now.

[Marc Mihaly (Chair)]: Thank you. Questions? Much appreciated. Thank you very much.

[Ashley Bartley (Vice Chair)]: Here's Ted. We have Ted's sheet.

[Marc Mihaly (Chair)]: Ted's We

[Ashley Bartley (Vice Chair)]: We just conjured you. Ted, we

[Marc Mihaly (Chair)]: just ran like clockwork in this. Have a seat.

[Ted Barnett — Joint Fiscal Office]: I felt better to be lucky than good. So for the record, Ted Barnett joined fiscal office. Believe, Miriam, Would have you like me to share my screen?

[Ashley Bartley (Vice Chair)]: That'd be great.

[Marc Mihaly (Chair)]: Okay.

[Ted Barnett — Joint Fiscal Office]: Take me a little bit of time

[Marc Mihaly (Chair)]: to make that happen. You copy?

[David Hall — Director of Business Services, Vermont Secretary of State]: I'm sorry. Already.

[Marc Mihaly (Chair)]: Think.

[Gayle Pezzo (Member)]: It's okay.

[Marc Mihaly (Chair)]: That's what I would do.

[Cameron Wood — Office of Legislative Counsel]: Yeah. Saying the link I clicked

[Ted Barnett — Joint Fiscal Office]: on said it's scheduled for your question. Okay.

[Ashley Bartley (Vice Chair)]: Pass it to me.

[Marc Mihaly (Chair)]: Okay. Thanks.

[Ashley Bartley (Vice Chair)]: Oh, what happened? You thought you were saying hello.

[Marc Mihaly (Chair)]: So. Yeah. Do you feel stiff in there? Do you feel stiff? Yeah. Good. Breathe.

[David Hall — Director of Business Services, Vermont Secretary of State]: Did we get little gifts?

[Marc Mihaly (Chair)]: We did. Oh,

[Ashley Bartley (Vice Chair)]: did MRI of the E. It's Chris.

[Marc Mihaly (Chair)]: There's a whole bunch of it. Of them, it's like eight. Right, Ted, take it away.

[Ted Barnett — Joint Fiscal Office]: All right, sorry for the delay on that one.

[Marc Mihaly (Chair)]: But we can't see it, you don't have to make it bigger. I'm Okay. A good test case because I'm

[Ashley Bartley (Vice Chair)]: You have it right there.

[Marc Mihaly (Chair)]: What? Have I know, but I'm getting I'm the test case. Does this work for everyone? Okay, I'm thinking of people online.

[Ted Barnett — Joint Fiscal Office]: Okay, so for my piece, I appreciate the use of the term fiscal walkthrough. I've always had a problem figuring out how to describe how we talked about things before doing an official fiscal note. So I'm gonna go section by section and talk about the various fiscal locations of July. I will restate also my name since it was a while ago, Temporary Joint Fiscal Office for the record. So starting with section two, and this is getting really in the weeds, making sure we're checking everything. The piece of the bill that would designate all limited equity cooperatives as nonprofit corporations. I think you've discussed that there would be some very minor fee implications. There are different filings for nonprofit corporations. Profit, I think the only place that would show up in annual filings or biennial filings for for profit corporations, filings, nonprofits, biennial. It's a super minor, I don't even know if the Secretary of State would really notice it.

[Marc Mihaly (Chair)]: They worked us here and David Hall thought it would be minor.

[Ted Barnett — Joint Fiscal Office]: Great, good. So we're in agreement there.

[Unidentified Committee Member]: We have a question. So, just to note for the record that that would now say instead of designates our limited equity properties as nonprofit, it would just say as business corporations.

[Marc Mihaly (Chair)]: You know, what's happened is that section is going to be changed. Okay. But it's not, it's still the same. Exact. Your conclusion remains the same.

[Ashley Bartley (Vice Chair)]: Okay, sorry.

[Ted Barnett — Joint Fiscal Office]: Wait, yes, and this is reflective of

[Marc Mihaly (Chair)]: Of the draft that exists, yes.

[Ted Barnett — Joint Fiscal Office]: Yes, the language as introduced. Exactly. Section four, which would exempt limited equity cooperatives from three acre stormwater permitting, similarly minimal. You'll also hear JFO use the term de minimis revenue loss from that provision. I believe Michael Brady gave you a rather detailed explanation of fees how certain, you know, the annual or the every five years, there's a certain permitting fee that goes to the permit fund, there's impact fees. So I won't necessarily go into the weeds on that one. If Michael Grady's walkthrough was sufficient enough to cover the implications, I listened to it, it all made sense to me. So yes, for that section, forecasting a minimal revenue loss to the environmental permit fund and potentially depending on how impacts these shake out to the various stormwater funds that are allocated to different watersheds. Just for your information,

[Marc Mihaly (Chair)]: we were just informed by a member of the committee, Kate Logan, that they have taken out of the omnibus their omnibus bill or whatever, they've taken the provision that would have eliminated the fees out as too broad, but they would welcome this provision as a different and narrower approach.

[Cameron Wood — Office of Legislative Counsel]: It's good to

[Ted Barnett — Joint Fiscal Office]: know. Moving into a larger impact, this is the next two pieces is the parts of the bill that would exempt manufactured home sales from the sales and use tax and apply the property transfer tax. Starting with the exemption from the sales and use tax, we're estimating a $600,000 revenue loss to the education fund, right? Because sales tax revenue goes to the education fund by exempting manufactured home sales from that tax. The education fund would see flex revenue. In the comment section, I would note that the existing 40% exemption from the sales and use tax on these sales to provide equity between traditional residential construction and manufactured homes, we estimated that that's in our tax expenditure report and that was 400,000. So 60% is 600,000.

[Marc Mihaly (Chair)]: Is the 600,000, I just wanna clarify. So is the 600,000 in addition to the 400,000?

[Ted Barnett — Joint Fiscal Office]: It would be in addition to the

[Marc Mihaly (Chair)]: 400,000. Right. Okay. Thank you.

[Ted Barnett — Joint Fiscal Office]: Yep, and this is, I will note, within the context of the education funds is really kind of at the margin of what we would start to think of as de minimis or minimal because of education funds huge, right? And so this revenue within the context of the education fund is kind of right on the margin of where we would put an official number versus what we would call de minimis. It's also, since we have the number from the tax expenditure report. So

[Marc Mihaly (Chair)]: it's not de minimis, but it's small, but relatively. Exactly.

[Unidentified Committee Member]: Can I ask a question?

[Marc Mihaly (Chair)]: Yes, please.

[Unidentified Committee Member]: On the other hand, do people who own the homes pay property tax? Yes. Yes. That goes to the Ed Fund? Yes. So was this calculation taking that into account or this is just the sales tax removed?

[Ted Barnett — Joint Fiscal Office]: This is the sales tax portion. We will get to the exemption from the property tax for manufactured home limited equity cooperatives in section 12. But yes, folks who are living in manufactured homes are absolutely paying the education property tax, and that's independent.

[Unidentified Committee Member]: But this is all manufactured home sales, whereas section 12 is just talking about LEC's being exempted from property tax.

[Ted Barnett — Joint Fiscal Office]: Right, exactly. Yep, yep, exactly.

[Marc Mihaly (Chair)]: Just comment, and please comment on my comment if It I'm is conceivable, quite possible, that a first time homebuyer who would not otherwise buy a home buys a mobile home. The and that the sales tax, when they're told about the exemption, motivates them so that this home would not have otherwise been purchased, and that home then subsequently pays property tax and benefits the education fund. There is no and so the education fund could be benefited, but since it is literally impossible to know if that occurs or the extent to which it occurs, it's simply not discussed here. We're talking about the net of just this change. Am I saying it accurately?

[Ted Barnett — Joint Fiscal Office]: Yes, so when we're looking at the data behind

[Unidentified Committee Member]: Like a tiny TIF purchase.

[Marc Mihaly (Chair)]: Yeah, exactly. We just don't know.

[Ted Barnett — Joint Fiscal Office]: We have data on the number new manufactured home deliveries in Vermont that we based this estimate on. So it's a first order type of analysis, what's currently going on, how people are responding, not looking into a more dynamic, trying to get a sense of what would have happened in the counterfactual sense. Exactly.

[Marc Mihaly (Chair)]: By the way, do you happen to know that number off the top of your head?

[Ted Barnett — Joint Fiscal Office]: I will provide it to you all. I have something, I have like a vague recollection, but I looked at the number a while ago. So I will send it

[Marc Mihaly (Chair)]: to the committee. I think that would be good. We did have testimony from yesterday. We had a tour of Beck Do Home, and then they testified. We asked them how many homes they sold last year, nineteen seventy five, and it was 75.

[Ted Barnett — Joint Fiscal Office]: Yes, my number is, I think, I'm gonna provide a number and I may email you and say that it was actually But it was around 200 was for overall state of Vermont. And I will also note that these data, I'm pretty sure, they're data that are collected nationally, and Vermont is a relatively small jurisdiction, and so they may not perfectly line up with what we're seeing on the ground.

[Marc Mihaly (Chair)]: Yeah, you might provide that. So, in other words, the number 200, let's say it's 200, you're not sure, whatever x is, it was derived from a national number extrapolated based on our population or something like that,

[Ted Barnett — Joint Fiscal Office]: right? Yes, I'll check the methodology, but yeah, it may also be a survey of businesses that you're surveying a limited number of businesses and extrapolating Yeah,

[Marc Mihaly (Chair)]: okay, thank you. So

[Cameron Wood — Office of Legislative Counsel]: moving on to

[Ted Barnett — Joint Fiscal Office]: section six through 11, which are various pieces to extend the property transfer tax to all manufactured home transactions. In that piece, looking at up to a $100,000 in additional property transfer tax revenue, I note here that the property transfer tax has statutory allocations that are not withstood budget. I've provided what that looks like on the following page. So if you add more revenue to the property transfer tax system, it would conceivably go to any of these uses. So you're adding to the piece, there's in fiscal year twenty seven, the consensus revenue forecast put $82,000,000 in overall revenue, it would be 82,100,000.0. And so with this budgetary amount, you'd probably be adding more. The best way to think of this is because the allocations to the Vermont Housing and Conservation Trust Fund and the Municipal and Regional Planning and Resilience Fund, since those would be decided through the budgetary process and set at these dollar amounts by adding more revenue to the property transfer tax, they would just hit the general fund. Wanted to

[Marc Mihaly (Chair)]: I'm actually if I'm not understanding it, I have a feeling that maybe that I'm not alone. Why don't you say abstractly first, where does the money, the property tax, property transfer tax, where does it go? Is it by percentage?

[Ted Barnett — Joint Fiscal Office]: So there is a statutory percentage. Yeah, it's sometimes ignored. Yeah, so every year through the budget, it's in section D100, that not withstands the statutory allocations in the property transfer tax and sets different allocations from statute. What I will note is that previously the numbers were more different from what the statutory allocations are in the current budgetary framework. So the statutory allocation, they're much more reflective of the statutory allocations. So in statute, the Vermont Housing and Conservation Trust Fund receives after taking money for the Department of Tax admin costs for the BHFA housing bond payment. The trust fund administered by the BHCB in statute receives 50% of property transfer tax revenue. And the MRPF, the Municipal and Regional Planning and Resilience Fund receives 13% in statute. These numbers are reflective of those, the 5013%. There are just minor differences because tax doesn't need their full amount for admin costs. They've asked for a smaller amount. And then the allocations in the MRPF are slightly different than statute. But broadly speaking, resembles what is in statute. Since these numbers are specified in the budget, the budget says this $37,600,000 is going to the trust fund. This almost $10,200,000 is going to the MRPF, that resilience fund. Any additional dollars beyond those amount that end up in property transfer tax revenue go to the general fund. And so by adding more property transfer tax revenue, you're subjecting more manufactured home transactions to the property transfer tax that would mean more revenue for the general fund. But the property transfer tax, complicated beast.

[Ashley Bartley (Vice Chair)]: Okay,

[Marc Mihaly (Chair)]: so in sum, at this point, assuming that 200 number is correct or whatever, we're talking about a $600,000 loss to the Ed fund, about a $100,000 fund gain to about half of which, depending on the budget for the year, would go to the housing trust fund, a piece of it would go to this municipal and regional planning and resilience fund, and then the rest waterfalls back to the general fund.

[Ted Barnett — Joint Fiscal Office]: Exactly. Because depending on what happens in the budget process for FY27, those numbers will be fixed for this fiscal year going forward, right? That's when

[Marc Mihaly (Chair)]: Does the committee understand go that ahead.

[Joseph Parsons (Member)]: Yeah. My question was just the property transfer tax. That doesn't start at a certain level, does it? I know it changes once it goes up.

[Unidentified Committee Member]: With the amount of Yes.

[Joseph Parsons (Member)]: But it doesn't have a low end that's not subject to

[Marc Mihaly (Chair)]: the property transfer tax.

[Ted Barnett — Joint Fiscal Office]: The piece that is exempted is only for transactions that are financed through certain mortgage programs, through VHFA, USDA RD. So if you receive financing from those entities, up to a certain value of that transaction is exempt from the property transfer tax, and then above that amount receives the general rate. And then it would probably be helpful to I can provide It's the same So for principal residence transaction, a certain up to a certain amount is charged to half a percent, and then above that is 1.25%. Property transfer

[Cameron Wood — Office of Legislative Counsel]: tax again. Yeah, I know. I was

[Ted Barnett — Joint Fiscal Office]: just curious if there was an

[Joseph Parsons (Member)]: exempt lower end.

[Ted Barnett — Joint Fiscal Office]: Sounds like

[Joseph Parsons (Member)]: it's fine.

[Marc Mihaly (Chair)]: It's fine.

[Ted Barnett — Joint Fiscal Office]: I'm blanking on what that threshold is at the moment. Spent way too much time on

[Marc Mihaly (Chair)]: it two years ago. So we have a couple of questions here. Just to clarify though, what you're saying is, these percentages are in statute. Yes. And for those of you who haven't lived through the detail of the budget process, which is Historically, for many years, the legislature has not been felt bound by the percentages that it put in statute, and the way it deals with it in the budget is using the word notwithstanding section blah blah, which sets out those percentages, and then it just appropriates what it wants to appropriate. And I think what Ted was referring to earlier is that the Housing Trust Fund has in fact, in like last year, received very close to, if not exactly, in statutory authorization. But that doesn't have to be the case. It's just that's what happened. Okay. Joe?

[Joseph Parsons (Member)]: I would also point out that the housing trust fund in our past five year financial situation at times did not receive even close to its allotted amount. However, received, in the aggregate, two to 300 times its allotted amount through one time ARPA fund.

[Ashley Bartley (Vice Chair)]: ARPA fund yes. 100 times?

[Marc Mihaly (Chair)]: Oh, ARPA funding was huge compared to state funding.

[Joseph Parsons (Member)]: Yeah. Exactly. So, like, at times, you'd say well, I remember a couple of years ago, like, we're not giving them their statutory funding. We're underfunding them. But then if you look down on a separate line item, they got a one time of $50,000,000.

[Marc Mihaly (Chair)]: Right, or the governor wanted so the governor advocated for a housing bond, a big housing bond issue, and the result and those bonds, that money was used for affordable housing as if, you know, a BACB had to administer a lot of that. So, there have been plenty of money dumped in. Unfortunately, that's not the case right now.

[Joseph Parsons (Member)]: Yeah, I just wanted

[Marc Mihaly (Chair)]: to point that out. We have invested many, many times what's the property transfer tax gives over the years because we had federal money, or we issued our state bond. Are there questions of Ted?

[Elizabeth Burrows (Member)]: Elizabeth. Thank you. I wondered whether you could just tell me off the top of your head, doesn't have anything to do with this bill really, but the MRPF allocations. Yes. Are those weighted by RPC?

[Ashley Bartley (Vice Chair)]: They are specific Weighted by population or

[Elizabeth Burrows (Member)]: how are they weighted?

[Ted Barnett — Joint Fiscal Office]: So these are specific grants that are administered by ACCD. I could reach out to ACCD to figure out exactly how that application process works. What I will say is that there is another set of statutory allocations for how much goes to regional planning grants and what percentage goes to municipal grants from municipalities. These amounts were specifically requested by ACCD. They're different than the statutory amounts to reflect demand that they have in their grant applications that they're seeing from folks. And so these amounts aren't reflective of statute, they are reflective of demand for grants that they give out to these various entities. But I don't know if the grants are formula grant or they're based on application.

[Elizabeth Burrows (Member)]: Right, so if the grant request is for expertise, never mind. That's not a question for you right now. I can follow-up. Thank you.

[Marc Mihaly (Chair)]: Thank you.

[Ted Barnett — Joint Fiscal Office]: Yes. I will make a note. It's yes, it's Dan Dickerson, who at ACCD, he used work at JFL. So I can ask him to provide a little context for you.

[Unidentified Committee Member]: Thank you, I appreciate

[Marc Mihaly (Chair)]: that. Yes.

[Ashley Bartley (Vice Chair)]: Are we going to go over section 12?

[Ted Barnett — Joint Fiscal Office]: We absolutely can. Okay. Yes.

[Ashley Bartley (Vice Chair)]: I wanted to make sure we went over section 12 before you left, because I think I do have questions. Okay.

[Ted Barnett — Joint Fiscal Office]: So on section 12, in data, so I went to two different data sources. Their DHCD maintains a registry of manufactured home parks, and they have data on different mobile home parks and the amount of units within mobile home parks that are owned by leaseholders versus what is owned by the owners of the mobile home parks. And then also cross reference asked Secretary of State which of their, in their corporation data, what they're seeing for limited equity cooperatives. And so it was essentially determined the universe of entities that could have parcels that would be accepted by this provision from the education property tax. Essentially what I was seeing in the data that, and you might have testimony that's different, but based on what I was seeing in the data is that cooperatives, they may have parcels that are for common areas, but most of the units within cooperatives are owned by the specific leaseholders as opposed to the cooperatives, like the specific units. And

[David Hall — Director of Business Services, Vermont Secretary of State]: so

[Ted Barnett — Joint Fiscal Office]: the number of common area parcels that would be exempted are quite small. And so based on that number of what I was seeing in the data, this would be a pretty minimal revenue loss. That said, the exemption could incentivize more parts to organize as a cooperative. And so this value could increase over time. But based on the data I saw and what the state of the world currently looks like, it's absolutely a minimal revenue

[Ashley Bartley (Vice Chair)]: loss. Yes, here's my question.

[Ted Barnett — Joint Fiscal Office]: Sure.

[Ashley Bartley (Vice Chair)]: So is it just the common area of parcels that would be exempt?

[Ted Barnett — Joint Fiscal Office]: So it's the way the language is real property owned by mobile home limited equity cooperatives or manufactured homes. And so what I was seeing is that it would exempt anything owned, but I wasn't seeing a lot of units owned by cooperatives. Primarily owned by leaseholders.

[Ashley Bartley (Vice Chair)]: So my, that is helpful. Yeah. I think my actual question is, if we changed the language in this hypothetical, and this can be an anecdotal because you've already done the data for this very specific subset. If we changed it to all manufactured homes, Do you think that de minimis would change to a much higher level? Yes. Yes, do. Would you potentially give me a shot in the dark? Or if you're uncomfortable with that, that's totally fine. It would no longer be minimal, is what you're saying.

[Ted Barnett — Joint Fiscal Office]: And you're asking about, is it manufactured homes in parks or anything that's a manufactured home anywhere in the state more broadly? Both. So yeah, I would have to do a much larger data lift. But it would take me a little time to do that work, but if you were curious, I could absolutely embark on

[Ashley Bartley (Vice Chair)]: that. I think for right now, the anecdotally, if we were to make either one of those changes, you feel that it would be more than a minimal effect.

[Gayle Pezzo (Member)]: Absolutely. I just want to understand the question. So Ashley, do you mean that if someone owns a manufactured home and they own the property? Yes. And you mean that if someone owns the home, Global Home, and they're an HOA and they own the property? Yes. Okay.

[Marc Mihaly (Chair)]: Yeah, in other words.

[Gayle Pezzo (Member)]: Because in that situation, there still might be somebody who has real property, correct? Right, but they're not on that registry. That's why I say they have to fit the mobile home park definition and that puts them on that registry. And there's two thirty eight of those entities. Not all of them are limited equity. Some of them are privately owned.

[Unidentified Committee Member]: Her question is if they all suddenly became limited equity, it's not necessarily in everyone's interest.

[Ashley Bartley (Vice Chair)]: I don't see how every property owner would possibly want to be

[Marc Mihaly (Chair)]: I a family think your question simply is, there are two, let's take a hypothetical. We have two trailers parked in mobile home. One of them is organized as a limited echo. They both have land that is not owned, not the land or driveways on the individual units. They both have common areas, walkways, playgrounds, whatever. Okay? Maybe a swimming pool. House. They both are like that. TED's analysis, and one of them is a limited equity co op and the other is privately owned, but they're identical. Ted's analysis, which reached the de minimis conclusion, was based only upon those that are limited equity co ops. Ashley is asking, well, what would the number look like if you included each of those two types of communities for however many there are? And Ted's answer would be, well, I don't know, but it probably wouldn't be de minimis anymore simply because there's more of them. I don't know how many, you say there's two thirty eight total parks, community in Vermont, of which how many are limited equity co op? 19. Right, so that's a fraction.

[Gayle Pezzo (Member)]: But every one of those two thirty eight are on leased land.

[Marc Mihaly (Chair)]: Yeah, yeah, that's different. So, these are all dealing with, right, and then if we were to include yet another animal, which is the animal of somebody putting a mobile home on a land they own, and we were to exempt them from all property taxes, we would be in a much different

[Ashley Bartley (Vice Chair)]: situation.

[Gayle Pezzo (Member)]: Jo, go ahead and squeeze in.

[Unidentified Committee Member]: Yeah, just to follow-up on that because, sorry, can I I know that that's the question being asked? My comment is what's behind asking that question? Is it the fear that all two thirty eight current parks rather than only 19 or 20 would suddenly become LEC's, then what is the fear? I make want

[Ashley Bartley (Vice Chair)]: sure when we're having this conversation, as a committee, we've established that manufactured products are one, really the quickest way, most economical way for somebody to own a home right now in our state. And I just want to be sure when we're having these conversations that we're looking at it through a lens of equity in the sense of, if we're doing this for this subset of 19, what does that mean? Like, are there other parks that should hypothetically, like, could be affected by this real property versus real estate that wouldn't be affected by this exemption? And is that actually fair? I just want that to be part of our conversation because that is something that I'm struggling with. And so that's, we have Ted here. I figured I'd ask the question. I don't wanna, you know, absolutely nuke our tax department. I'm just trying to understand where those numbers would be. I

[Unidentified Committee Member]: think that fairness logic in this, which I would also be concerned, of course, is that these properties have declared and have to be limited equity. So it's less of a long term investment where you're going to be creating generational wealth. And it's more that I get into a house and it's a different public good than And creating I

[Ashley Bartley (Vice Chair)]: think this could probably wait for a committee discussion.

[Marc Mihaly (Chair)]: Right, I think that's what we do.

[Ashley Bartley (Vice Chair)]: Yeah, I have a question for somebody. Go ahead,

[Joseph Parsons (Member)]: I'm gonna save it for that committee portion.

[Marc Mihaly (Chair)]: Okay. I do think it might be interesting that at least I don't know about you asking. I'm not particularly interested in knowing how much it would cost if we exempted all property from taxes, all property in the state, whether it's owned by the person, you know, that happens to have a mobile home on it. But I think it might be interesting to know what the number might look like if we applied it if we applied this not just to limited equity co ops, but we applied it to all mobile home manufactured parks or manufactured home communities. Is that difficult?

[Ted Barnett — Joint Fiscal Office]: So I think there are where I would ask follow-up questions and this could absolutely be something over email, but some of the questions I would think about is whether the goal is to exempt, to look at common area parcels, whether it's land owned by the specific park, whether it's the manufactured home itself considered as real property that's affixed to the parcel, which slices you want to look at would dramatically-

[Marc Mihaly (Chair)]: Consider the question withdrawn for the moment for me. Yes, yeah.

[Gayle Pezzo (Member)]: I think the most important thing to recognize is that, we'll call it 19, those 19 LEC's will never, that property never has any value to them whatsoever. Whereas in another park, the property has, if it's a private owner, he has equity in that property. He's paying taxes on something. When he goes to sell, he gains equity. If it's any other part, I'll say a nonprofit, I don't actually know what happens with a nonprofit, but I know they don't see, that park sells, they don't see any profit either. They only have profit on their individual home that builds equity. So any park, let's say it sells for $11,000,000 they don't see a dime of it. That's not the case with the others that are on the list.

[Marc Mihaly (Chair)]: Any other questions of Ted? Ted, thank you so much for your work on this and for your testimony, it's very clear, appreciate it. Yes,

[Ted Barnett — Joint Fiscal Office]: and feel free if folks have general questions about anything on the table, I'm happy to answer them.

[Ashley Bartley (Vice Chair)]: Let the record state our esteemed chair asked originally? Any questions. Are they going to be mad at anyone? No, no. It's all the chair.

[Unidentified Committee Member]: No, no,

[Ashley Bartley (Vice Chair)]: not mad. Was just trying to clarify

[Unidentified Committee Member]: what you were asking. And

[Ashley Bartley (Vice Chair)]: I think this is a good example when we have bills but a fiscal note looks like.

[Marc Mihaly (Chair)]: So, we'll fiscal walk through. Fiscal walk through.

[Ted Barnett — Joint Fiscal Office]: There will be, yes, and as I understand that you all can deliberate and make changes once the bill for a little bit about process, once the bill voted on in committee, that's when we'll generate an official fiscal note. That'll be a few pages and I'll have additional considerations. I would like to note that as a JFOR, I appreciate conversations around equity. When we're talking about different tax types and considerations around tax types, it's one of the key pillars of thinking about tax. Within this particular question, I think there are interesting considerations of equity because these specific organizations have a number of different They're limited in what they're able to do legally. And yes, there are other places in the statute for for affordable housing developments, where this consideration comes up and there

[Cameron Wood — Office of Legislative Counsel]: are different ways of evaluating affordable housing. Before we

[Marc Mihaly (Chair)]: go offline, just to remind everybody, we are reconvening at 01:10PM for an introduction and yes? 01:00. We're reconvening at one. Okay. Alright. We're reconvening at one for a bill introduction followed by, at this point, testimony on the bill that the labor bill that is adding the mediator position to the Vermont Labor Relations Board to replace the loss of that position at the federal level. And then at 02:45, I'll be introducing the landlord tenant fill, and then Oh my goodness, another sale. Okay, alright, two bills by the way.

[Ashley Bartley (Vice Chair)]: Everybody get your house. Thank you everyone.

[Marc Mihaly (Chair)]: Now I'm sure