Vermont Legislature SmartTranscripts:

[Rep. Marc Mihaly (Chair, House General and Housing)]: Thank you very much. Welcome everyone to a joint hearing of the House Committee on Commerce on Education and the House Committee on Development, what am I saying? It's Friday. Town's committee on commerce and economic development and the house general and housing committee. And it is still Friday, the thirtieth of the month of January. This is a joint hearing on h seven seventy five, which is really an act that focuses on rural housing production finances. And what we're going to do today is walk through have a walk through by counsel of the field, which is really important for both committees. And then the housing committee, general and housing committee, has possession of the bill. However, we have agreed that the expertise of the Commerce and Economic Development Committee is really important for this bill, and so we're going to do kind of what we did last year with the housing bill that became law, and that is that the how the commerce committee is gonna just take some of the portion of this bill and work on it, and then we're gonna take your language, put it in, and move it forward from there. There is a bit of a timing issue in that we would this bill, like so many housing bills, touches on a lot of subject matters which are in the purview of other committees, and so it's going to go at least to ways and means. It might go to appropriations. I'm just not sure all stops. I haven't really thought that through, but whatever. It means that we have to get this thing moving out of policy committees so it can get its way. So so there is a certain amount of rush on this to move on. Do you have any comments you'd like to make? I don't at this time. Thank you. Thank you, mister chair. So with that said, our first witnesses are Cameron Wood, legislative counsel, and John Gray, legislative counsel. Gentlemen, do you wanna come together? We are. Yes. They're gonna

[Cameron Wood (Legislative Counsel)]: do it.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Thank you. And I think I will just repeat the behavior that I cannot stop, which is that members are free to ask questions whenever they want.

[Cameron Wood (Legislative Counsel)]: Good afternoon, for the record Cameron Wood, alexit of counsel.

[John Gray (Legislative Counsel)]: Marc Gray, alexit of counsel.

[Cameron Wood (Legislative Counsel)]: I'd do a walkthrough of seven seventy five, which both of us have had the pleasure of drafting provisions.

[Rep. Marc Mihaly (Chair, House General and Housing)]: I believe everyone has a hard copy in front of them. Is that true? Do you all everything has their hard copies?

[Rep. Elizabeth Burrows (Member)]: I don't.

[Unidentified committee member]: I have an e copy which is fine. Okay.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Sorry to interrupt. No. Actually I'm not.

[Cameron Wood (Legislative Counsel)]: We're going to jump right in. It's 07/1985, an act related to creating tools for housing production. As I mentioned, both John and I drafted different sections of the bill so we'll walk through each of us kind of commenting on the sections but feel free to jump in if you have questions as we go through. Section one is titled Rural Housing Finance Pilot Program And what this would do is it's going to create a pilot program within the Department of Housing and Community Development. And as you can see here in A1, it is for the purpose of developing affordable housing on seven ninety nine, affordable housing in rural Vermont communities under the program THCD may authorize tax stabilization for up to 300 housing units in eligible communities over a maximum application period of three years. So there's a few key pieces or key phrases within that section that you all need to be aware of that have definitions, particular affordable housing application period. So here further on in this section we'll get into what are the criteria of where these houses can go, but as I mentioned a few key pieces of affordable housing which utilizes current definitions in statute elsewhere and then the application period here is three years. So it would be from the point DHCG begins accepting applications for a three year period or if DHCD closes the application periods into the map. The next two subdivisions, Subdivision 2 And 3 are really about administration of the program. So DHCP, I guess I should pause, kind of zoom in here a little

[Rep. Marc Mihaly (Chair, House General and Housing)]: bit if that's more helpful.

[Cameron Wood (Legislative Counsel)]: My apologies there. Does that work for everybody? That good? Okay. DHCD will Chow work in collaboration with DHFA, Toronto Housing Finance Agency, the Toronto Housing and Conservation Board, the Office of the State Treasurer, and the Treasurer's Local Investment Advisory Committee in carrying out the provisions of this pilot program. And I'll talk about the local investment advisory committee once we get to another section later on in the bill, that is a committee that currently exists that advises the state treasurer on investments across the state. So those entities, they work in collaboration with DHCD and the department may enter into an agreement with one or more of those partners to carry out specific provisions of the program.

[Rep. Marc Mihaly (Chair, House General and Housing)]: I just want to comment that this is a little unusual to do it this way, list all these agencies and then say they can work together. Partly it's because we don't know yet exactly how to do this in the smoothest possible way and the whole idea of this is to make it easy. We're talking about people who are developing five units of housing. These people don't have their pro form a, their spreadsheet does not have the tolerance for enormous complexity, that's the whole point. So you'll see that there are, I think there are areas that may need further work either legislatively or maybe not, maybe administratively in this appeal. You know, like, who does what?

[Cameron Wood (Legislative Counsel)]: Great. Moving to the top of page three and subdivision three here it's just requiring that those entities have to provide technical administrative support to the Department of Housing for administration of the program. Moving into subdivision B here on line five, DHC shall administer and pursuant to the Vermont Administrative Procedures Act for UVSA Chapter 25, the commissioner shall adopt any rules necessary for implementation administration of enforcement. Moving into subsection three, here's where we have the application process and the criteria for where these housing developments or housing units can go and you know, what are the requirements that have to be met. So the application is DHCD creates a simple application process for municipalities to participate in the program that requires the sponsoring municipality to demonstrate compliance with the requirements of this subsection. Location, so the housing development has to be located in a sponsoring municipality with a population of fewer than 5,000 persons. One thing to clarify for you all or for you all to be aware, it's not specifying at what point that population number is met or looked at. So is DHCD looking at a population of 5,000 or fewer at the time that applications are made available to the public, is it an ongoing municipality can go from above 5,000 to below and subsequently submit an application, etcetera, so that may be something that you want to explore. The housing development shall not be located within a TIP district or within a housing development site.

[Unidentified committee member]: What about a TIP district?

[John Gray (Legislative Counsel)]: Yeah, so housing development site is the technical term

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: for So the

[John Gray (Legislative Counsel)]: TIP district or housing development site, those are both the geographic areas you would wanna capture. The alternative way to say this is it's not gonna be the place in which tax type of financing should go. But this is a location based criteria. It's not gonna be the TIP district, it will not be in the housing development site, which is the parcel or parcels on which a housing development is being developed pursuant to CHIP.

[Unidentified committee member]: Are we looking at a housing development site to something?

[John Gray (Legislative Counsel)]: Just a technical term housing development site. Literally the term, defined term that we use for CHIP. So this could be anywhere in the state that meets these population conditions. So is a particular population, but it can't be in an area that is financed, broadcast from the financing. Was that it?

[Rep. Thomas "Tom" Charlton (Member)]: A municipality then, say, an incorporated village under 5,000 within a town over 5,000 would still be eligible.

[Mike Pieciak (Vermont State Treasurer)]: Yeah, would say it would.

[Rep. Marc Mihaly (Chair, House General and Housing)]: That's interesting.

[Cameron Wood (Legislative Counsel)]: Yeah, I mean municipality is defined as a city town or an appropriate village. It's an incorporated village that has less than 5,000 people within a larger municipality of greater than 5,000. I don't see any language. I don't see anything in the language I've written that would preclude that.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Interesting. That's an interesting issue. The intention here maybe we have to think about that. You could this is not fully jaded. Yeah. Yeah.

[Mike Pieciak (Vermont State Treasurer)]: It's a

[Rep. Marc Mihaly (Chair, House General and Housing)]: The intention well, that which is good. The intention here is to focus on entities that are smaller from a governmental perspective that really don't have the capacity to work their way through Chip. So I would think that it's good with a village Yeah. That's a small village in an incorporated town.

[John Gray (Legislative Counsel)]: There's still confusion on the housing development site piece. Am I or are you just thinking through lawyer?

[Unidentified committee member]: We appreciate the legal language. We would prefer it's clear not only to the lawyers. And perhaps your suggestion of any TIFF.

[John Gray (Legislative Counsel)]: The housing development site is a defined term in this. We just haven't gotten to the definition section.

[Unidentified committee member]: But when we so we read one and we look at two and we're talking about a proposed housing development. Up above, we're saying you can't do a housing so it kinda it's I I know what you mean, but it it contradicting itself.

[John Gray (Legislative Counsel)]: I hear you. Yeah. Okay.

[Unidentified committee member]: So maybe there's different language that we can use in identifying that you can't use TIF or chip or something.

[Rep. Thomas "Tom" Charlton (Member)]: It's true. And

[Unidentified committee member]: when we look at location within the municipality, we're not looking are we looking at the tiers again or can be anywhere, but they're gonna have to go through permitting? They may have to go through the full permitting process of act two fifty.

[John Gray (Legislative Counsel)]: This doesn't disrupt anything related to the act two fifty cost.

[Unidentified committee member]: It's anywhere. But if they were in a tier tier one or tier one a, then they wouldn't have to go through the process. Right?

[John Gray (Legislative Counsel)]: Right. I I don't know that about the act two fifty.

[Cameron Wood (Legislative Counsel)]: Defer those types of questions to another attorney. But I agree with John, there's nothing in here that I think would disturb the current processes in place regarding Act two fifteen exemptions, etcetera.

[Rep. Marc Mihaly (Chair, House General and Housing)]: So I I think this is very deliberately stepping outside of the tier process. So if they whatever the tier process requires, it sits there, and then this is an addition. So to be specific, if, yeah, if it's in tier one b and somebody's opted if a town has opted in, they'd be exempt. If it's in tier one a, they'd be exempt. But equally important, if it's a tier two, which is a lot of the state, they can do it. In fact, I would hope it's my hope that we would get applications from towns in tier two. And

[John Gray (Legislative Counsel)]: and just to return to your earlier I I think a simple fix for the housing development, which is just say for a chip site and then define chip site to meaning what housing development site means under it. Yeah,

[Rep. Marc Mihaly (Chair, House General and Housing)]: I think I get that. It could be tier two, but if it's project, think I there should have 16 housing units. So if it's about nine, then it still would get back to 50. If it's in tier one a or one b where they've opted in and it's nine units, it's a it's in tier one a or tier one b that's opted in, it's exempt. Right. If it's tier not in and it's less than 10 units, then it's exempt also.

[Rep. Thomas "Tom" Charlton (Member)]: Right. I'm just concerned about the 10 to 16 count.

[Rep. Marc Mihaly (Chair, House General and Housing)]: They're they would be covered. They would be subject to Act two fifty. Right. Yeah.

[Cameron Wood (Legislative Counsel)]: Okay. I'm gonna focus everybody back here on the Subdivision 2, which is where we left off. As you were just discussing, this is the criteria under subsection C, the application, the municipality has to demonstrate compliance with the subsection. So we've talked about location, where the housing development can be, where it can't be, maximum size, proposed housing development must be primarily residential, may include commercial. The residential portion of the proposed housing development shall not exceed 16 housing units. The commercial portion of the proposed housing development shall not exceed 5,000 square feet.

[Unidentified committee member]: It's a quick question. So how was the 16 unit max arrived at?

[Cameron Wood (Legislative Counsel)]: I'll defer to the sponsor. I

[Rep. Marc Mihaly (Chair, House General and Housing)]: knew you'd ask that question. It was pretty arbitrary. We just we wanted it to be a small a relatively small project. We thought about 10. We thought about 20, and we kind of some of us, including Tom Charlton and myself, just ended up 16. It's not a magic number. I can't pretend there's more than that.

[Samantha Sheehan (Municipal Policy & Advocacy Specialist, VLCT)]: Great answer.

[Cameron Wood (Legislative Counsel)]: Moving to the top of page four.

[Unidentified committee member]: Primary residence? The top. Primarily residential, yes, but

[Mike Pieciak (Vermont State Treasurer)]: It's not a fund.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Which which are

[Unidentified committee member]: We're not focusing on primary residential housing.

[Samantha Sheehan (Municipal Policy & Advocacy Specialist, VLCT)]: We're this could be an

[Rep. Marc Mihaly (Chair, House General and Housing)]: equal issue of short term rental?

[Unidentified committee member]: Yep. Just flagging that for

[Rep. Marc Mihaly (Chair, House General and Housing)]: Yeah, that's

[Cameron Wood (Legislative Counsel)]: It's undefined, and there's no current restriction. Top of page four, the last criteria here, supportability, states that at least 15% or a minimum of two of the proposed housing units shall be affordable housing units. Affordable housing units shall be subject to covenants restrictions that preserve their affordability for a minimum of fifteen years or longer as provided municipal violence. We're going to sub the starting on page, excuse me, line six. So Department of Housing Community Development develops a procedure for selecting among the qualifying applications that have met the criteria in subsection C, taking into consideration both the overall affordability of the proposed housing units and the extent to which tax stabilization facilitates that affordability. Using the selection procedure, DHC recommends to the commissioner of taxes up to 300 housing units for tax stabilization. Then subdivision E is where we really get into what tax stabilization means, what is it going to look like? Notwithstanding any law to the contrary sponsoring municipality may contract with the owner of property selected for tax stabilization. To fix and maintain, so this is lines fifteen and sixteen, fix and maintain for the duration of ten years the valuation of the property in the grand list as follows. Years one through seven, the property will be valued at the pre development value of the property. And moving to the top of page five, for years eight through 10, it would follow this in ABC, so for years 80 it would be 25% of the property value change or I guess excuse me let me back up, the property would be valued at redevelopment value plus an adjustment calculated at three year 25% of the property value change, year nine fifty, year ten seventy five.

[Rep. Marc Mihaly (Chair, House General and Housing)]: The idea here is at the very beginning of the process, the property is either owned or controlled by the developer. And the whole idea of this is to give the developer as they develop their own spreadsheet, their pro form a, is to help them by injecting into the pro form a the fact that they don't have to put as either wherever they do, put it above the line, below the line. They don't have to put a line, a big line for change in property taxes. But on the other hand, the reality is that at certain point when the project stabilizes, that's when it's built and rented out or owned, then you have human beings, not that a developer is a human being. Then you have Owners. People who are either tenants or or owners, and we didn't want to just have the full tax burden suddenly materialize on them in year 10 and just have everybody like what? When they get their tax bill. So it goes

[Cameron Wood (Legislative Counsel)]: up.

[John Gray (Legislative Counsel)]: You can think of the final three years as like a transitionary mechanism. The general idea is you're paying on the development value and then as you move in the final years to the actual fair market value transitionary mechanism to get you to that.

[Unidentified committee member]: I'm just wondering, why is it that we require the restrictions of the affordability for fifteen years, but the benefit only goes for ten?

[John Gray (Legislative Counsel)]: So the reason the fifteenth year figure is there, is that in title 24, there's an existing definition of affordable housing, which uses a fifteen year covenant restriction. You may recall that for CHIP and in other places, we've talked about all kinds of different definitions of affordable housing. In CHIP, the duration of the restrictions for primary residency is tied to the length of that debt until it's retired. You the don't same thing here, you couldn't use the same duration as Chittenden. And basically, I think it was just a choice to use an existing duration, the Title 24 duration. But if you wanted to do something comparable here in conceptual approach, you could say the ten year benefit, ten year restriction, like that would be a natural. So there's different ways to do it, but the fifteen year duration here is strong from the title 24 existing affordable housing definition.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Yeah.

[Rep. Thomas "Tom" Charlton (Member)]: Redevelopment value, what date is that set when permits are applied or when permits are all approved and ready to start with an excavator or don't we have that?

[John Gray (Legislative Counsel)]: The the thing that we do have is the value to the property as of the most recent annual appraisal date proceeding preparation of the property for development.

[Rep. Thomas "Tom" Charlton (Member)]: Now, what

[John Gray (Legislative Counsel)]: preparation of the property for development is, that's a general concept. Think speaking for myself, some of the thinking in the language here is you're trying to capture that someone might have to do things like demolition, or they might not have to demolish, maybe it's already ready to go and you're taking next steps. You want a generic enough phrase to capture the steps that someone would take to start converting that property into a housing development rate. And so this is the generic phrase that was chosen, but you could play with this line, could come up with a different fixed date, but the date that's in the draft right now is most recent appraisal, annual appraisal date preceding preparation of property development, which I think is still getting it here. There's still a looseness concern that you're identifying, but trying to get into that issue.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Elizabeth, you had a question?

[Rep. Elizabeth Burrows (Member)]: I just was wondering why you drafters of the bill decided to put a ten year limit on affordability. Why you put decided to put a limit on affordability?

[Rep. Marc Mihaly (Chair, House General and Housing)]: It came out of a definition. Go ahead.

[John Gray (Legislative Counsel)]: Yeah, it's the existing Title 24 definition that's regularly used for affordable housing. It is true that the title 24 has fifteen years or longer if the bibles of the community provide. I'm not sure if we have It's the exact same

[Cameron Wood (Legislative Counsel)]: as the title 24.

[John Gray (Legislative Counsel)]: So I think the durational component was, I'm gonna say arbitrary, it was chosen among different factors and settled on one that is commonly used by the legislature.

[Rep. Marc Mihaly (Chair, House General and Housing)]: There is a larger tension here to be perfectly clear. There is a tension here, which is on the one hand, you don't want to see state benefits accrue to projects that are building $600,000 homes selling them to people who are immigrating from Massachusetts. On the other hand, you don't want to put a provision in that kills kills the applications because five and seven and ten unit projects can't take it. They just can't do it, or they can't administer long term affordability, and the only people who can't can is like Champlain Housing Trust, can't Champlain Housing Trust or some other entity like that can't deal with three or five units. So that's a real world tension that I do not claim to that we have perfectly addressed in this draft.

[Rep. Elizabeth Burrows (Member)]: But that's that's a separate issue from that's the number of units versus the duration of affordability. And in fifteen years, let's say this project got us a million new homes. In fifteen years, ostensibly, none of them would be affordable anymore. And so we're back at square one with our affordability problem. And I just wondered how you planned through this to address that.

[Rep. Marc Mihaly (Chair, House General and Housing)]: It's the the affordability issue versus permanent affordability versus affordability for a duration is a proper subject for discussion by the committee.

[Rep. Thomas "Tom" Charlton (Member)]: I can imagine the answer to this, but I'm curious that it's a limited project, 300 units, three years. I'm wondering what the considerations are for having that number as opposed to something bad.

[Rep. Marc Mihaly (Chair, House General and Housing)]: It was you've done approximately the same amount of thought as 16 units. Could be actually and I I don't wanna undersell what we're doing. Yeah. It's we wanted it to be a pilot project, not a permanent project. Okay. So we had to come up with some limitation. It could be smaller. Frankly, it really could. I mean, frankly, there are two advantages of a fixed number of units without saying what the right number is. One is it allows JFO to much more accurately tell us, and we would like to know, what is the maximum cost to the education fund of this project? I have to confess, I am not in love with the the fact that we use education fund to finance housing that way, but that's just the way taxing tax works. Second advantage is it will tell us whether developers actually show up, which is important because in my personal view, it is very difficult to do development outside, you know, because the rents are so low and the purchase price is very often so low, it's hard for people to build, and that's what the pilot project will teach us. So the number is flexible. Tom?

[Rep. Thomas "Tom" Charlton (Member)]: It may have been answered,

[Cameron Wood (Legislative Counsel)]: but I just wanted to

[Rep. Thomas "Tom" Charlton (Member)]: explain that other elements of the financing stack could be open hand trusts. May be there are other places for long term or permanent affordability to be built into the project. So it's not fifteen years isn't a maximum limit. It's a minimum lift.

[Rep. Elizabeth Burrows (Member)]: But there isn't a requirement. But there is not a requirement.

[Cameron Wood (Legislative Counsel)]: Well, if they need if they if they need

[Rep. Thomas "Tom" Charlton (Member)]: the participation of local land trust to build that financing stack, which, generally, they do, they would be they're doing it already. That's the place where a local land trust could build in permanently. They have their own criteria. There are other criteria that will be introduced when they do their financings. If they could do it without the participation of grants and other sorts

[John Gray (Legislative Counsel)]: of things, they'd be doing it now.

[Rep. Elizabeth Burrows (Member)]: Abby? When drafting this, did you consider tying these developments to the homes for all designs that are being developed? Are almost by design for middle income and low income?

[Rep. Marc Mihaly (Chair, House General and Housing)]: We didn't tie them, no. But later on, when we get to the housing accelerator, Tom can discuss that. I do wanna mention, I don't wanna slow down questions or anything, but one of our witnesses has needs to leave at 02:10? 02:10. Yep. 02:10. So we we wanna get through through the work.

[Cameron Wood (Legislative Counsel)]: So we heard about the criteria, we talked about the supply chain process for GHCG, we talked about the back stabilization itself in subsection E, so for those following along we're back to page five. The last few subsections here just giving the BACB requirements to monitor, annually confirmed with Department of Taxes compliance with terms and then annual reporting requirement for DHCP submitting a report to house general and housing, ways and gains, set economic developments and finance. If they wanna add additional committees there, but obviously it's if it comes to

[Rep. Marc Mihaly (Chair, House General and Housing)]: one committee it's available for you all.

[Cameron Wood (Legislative Counsel)]: Then we have definitions, we've talked about affordable housing tying that to the current definitions that are in title 24 that exists. We've talked about the application period beginning three years and beginning from the first state of the department accepting applications. And then we discussed the pre development value and then the property value change. I think you're all aware based on our conversation on what those would be and we as mentioned we have the definition of TIF district and housing development site but we'll clean that up a little bit based on some of the feedback that was provided. So then the next section, section two, this is 32 BSA 5,404, this is the chapter in title 32, excuse me, the section in title 32 related to tax stabilization. So this is adding in the agreements under the rural housing finance pilot program established under this act which can be approved by the commissioner of taxes and recommended by the commissioner of the Department of Housing and Community Development. So this

[John Gray (Legislative Counsel)]: particular section, you may recall this from TIFF, this is a huge section, it's incredibly unwieldy and has a bunch of subsections. The first of the subsections relate to tax stabilization agreements. And I just wanna point out two different kinds of tax stabilization agreements are contemplated by this section. One are tax stabilization agreements as you see on lines two through four that affect the education department tax grant list of the municipality. There are also with some different second tax evasion agreements that do not affect the grant list of the municipality. Just to draw what the difference between those two is, It affects the grand list of the municipality. It means essentially that the share of liability that would have been formed by that gap in value between pre development and fair market is shifted across the whole state when the statewide education property tax is administered. That's what you see here. So the tax levitation agreement that is offered under this pilot program would affect the grant list of the municipality. The other option that's available is one that does not affect the grant list of the municipality, meaning that instead of shifting that liability, which may be relatively small, we know, but instead of shifting that liability across the state, it would mean that the municipality itself would need to cover the liability made up of that gap. But this is a policy choice, which section you put it in, what's proposed here is that it affects the education from tax payments of municipality, which means instead of the burden being shouldered by the muni, it shouldered by the state as a whole. You can think about it as just it's the liability that's on that gap in value between predevelopment. But

[Unidentified committee member]: there's also municipal tax as well.

[John Gray (Legislative Counsel)]: The muni still administers the municipal tax, would be shifted to the state. In effect would need to be raised through municipality.

[Cameron Wood (Legislative Counsel)]: Mr. Jerry, if you would like, I can jump to the sections that are more tied to the state treasurer subsidy that this year witness set as time constraint. If you want to jump to that or if

[Rep. Marc Mihaly (Chair, House General and Housing)]: you would quickly like the state treasurer. That think that would be an excellent idea so

[Cameron Wood (Legislative Counsel)]: state forgive me if you

[Rep. Marc Mihaly (Chair, House General and Housing)]: go to scrolling but we're going to

[Cameron Wood (Legislative Counsel)]: jump all the way down to page nine section four this is entitled 10, section 10, this is where the Vermont state treasurer, excuse me, has the authority to establish credit facilities for the purposes of funding specific investments that you all as a legislature have articulated in this section. So here's subsection A currently, this is line six and seven, The state treasurer has the authority to establish a credit facility of up to 10% of the state's average cash balance on terms acceptable to the treasurer and then under sub B, those funds can provide non lines twelve and thirteen can provide financing for infrastructure projects in Vermont mobile home parks. That's the sub A and the sub B. The proposal here is to increase that credit facility up to 12.5% of the state's average cash balance up from 10%. There's just a cleanup here in subsection C, so pardon the scroll. So just comment that there is another credit facility under subsection C that allows for an additional 2.5% of the state's average cash balance to be used to fund climate infrastructure and resilience projects. So that's sub C, there's no change there. So reporting requirement in subsection D. In subsection E here, what this is going to do is it's adding language to say that the state's temper may retain interest paid on loans established under those credit facilities and interest will be transferred to a Vermont Housing Special Fund which is created in the next section. And then the sub two says that the treasurer may use interest paid on those loans to provide capital for housing projects in Vermont and that in the state that any treasurer just are necessary to promote increased availability of housing, including both purchasing of off-site constructed housing as set forth in sub F. Then we get to the subsection F and it is the treasurer job of the authority to create a credit facility of up to 1% of the total funding allocation under sub A of this section to facilitate bulk purchasing of off-site construction housing. And then in the next section here, we have the creation of a special fund. The fund consists of the following monies appropriated by the general assembly, federal government, etc. The key thing though, as was mentioned in the previous section, it's the interest paid on these loans from these credit facilities are going to go into this new special fund. Question that you may want to talk with the state veterans, I was not able to hunt down the answer for folks who here, I'm not sure where that interest goes currently, but this would be changing it to direct it to this special fund in accordance with these subdivisions that we just reviewed. And then the money in that fund, this is kind of standard language we put into the special funds, money that are gonna stay there, to be at the end of fiscal year remains and use an additional fiscal years, etcetera. And the treasurer may also use those funds to pay for the administrative costs necessary to support the credit facilities created. And I'm assuming we may need some little cleanup here. So I'm assuming it's the credit facilities created in the previous section. So there's a few amendments I need to we we may need to make to to clear that up. Just

[Rep. Marc Mihaly (Chair, House General and Housing)]: generally, and then I I I do appreciate counsel, your willingness to change the order because I think the next thing we'll do is hear from treasurer. But there's three different things going on here. One, remember the cash fund of the state has to be relatively liquid as the treasurer will explain because the money's moving in and out of it all the time. But the treasurer has felt, and we passed legislation that enabled the treasurer to invest 10 percent of the money at any given point in, housing, affordable housing, and has done so. This bill increases that to 12.5%. So that's one. The second is my impression is at the moment to be confirmed in testimony that the interest that is earned on all of these admittedly below market loans, that's a point, goes to the general fund, and this would divert it back into housing. And then the third is, you're going to hear after Mike Dicek's testimony, you're going to hear, as we go back, you're going to hear about another element of this bill, which is a housing accelerator, which essentially promotes the bulk ordering of off-site modular phones. And the problem and essentially, the the concern was that if you to make bulk ordering, an entity of the state may have to take a whole bunch of smaller orders, put them together into a bulge board, and the developers will pay for these units, but if you're going to go to a home manufacturer of off-site modular homes and ask them to open up a whole new line to make, you know, 40 new homes, they're gonna be concerned about making sure that they're gonna be paid, and this language allowing 1%, is it?

[Cameron Wood (Legislative Counsel)]: The credit facility of 1%.

[Rep. Marc Mihaly (Chair, House General and Housing)]: 1%. It's a credit facility that would allow the treasurer to help backstop to facilitate that. And with that, I guess, mister treasurer, would you come forward? You're trying to deal here with the fact that your time time is limited. Yeah.

[Mike Pieciak (Vermont State Treasurer)]: Good afternoon, everybody. Thanks for having me, and by the way, it's a joint committee so we get more opportunity to talk

[Cameron Wood (Legislative Counsel)]: to everybody about these ideas.

[Mike Pieciak (Vermont State Treasurer)]: Happy to take any questions you have.

[John Gray (Legislative Counsel)]: I thought maybe it'd be helpful if I

[Mike Pieciak (Vermont State Treasurer)]: could just provide a little bit of background information on those, particularly those first two points.

[Rep. Marc Mihaly (Chair, House General and Housing)]: I think it would be great if you told us who you are.

[Mike Pieciak (Vermont State Treasurer)]: Sure, might be checking. Again for having me. So the 10 in Vermont program, know, this is something that, as the chair pointed out has existed in statute for about at this point it's

[Rep. Thomas "Tom" Charlton (Member)]: actually about twelve years and think

[Mike Pieciak (Vermont State Treasurer)]: was in discussions about 2015, of course it was established. When I came into office in 2023, we took strong look at this because our cash balance had really declined quite a bit during the pandemic. When this program was first established, the cap balance was in the $200,000,000 $300,000,000 range fluctuating throughout the year. Now it's in the 1,500,000,000 to $1,800,000,000 range fluctuating throughout the year. That 10% number, which is based on those averages really went up quite a bit. And we took advantage of that expanding it from, at that time there were about 15 or $18,000,000 of loans that were outstanding, we expanded up to $100,000,000 Now it's up to $120,000,000 So we're taking a conservative approach still. Basically, we're assuming that the cash balance is 1,200,000,000.0, even though the cash balance today is 1.5 plus billion. So we're still taking that conservative approach, but it's expanded our capacity quite a bit. And we focused on housing as our top priority as the chair pointed out and have really tried to focus on dividing the value of the below market interest fund at this point in time. Because as costs have risen for building all types of housing, one of the things that I think as a state we're trying to figure out is how to be allowed for the housing to happen at a lower cost. And the financing costs are one of the things that was making it prohibitive for a lot of projects to go forward. They had been penciled out prior to or during the pandemic. And then once the pandemic ended, all the costs went up quite a bit. Labor costs went up, materials went up, and financing went up. And they could no longer make it work at the higher financing levels that they were gonna have to borrow from. So we asked all the projects that we work with, do you need this money in order to be able to complete your project? And we need them to answer yes to that. That's something we set up. That's an internal policy. We obviously check that and look at it. And then we also wanna make sure that there's a pretty limited risk profile. Whenever you're lending or investing, there's always some risk, but we want it to be as low risk as possible because we need these monies back because they are monies that have been appropriated or will be appropriated by the legislature.

[John Gray (Legislative Counsel)]: So we need them to come back, but

[Mike Pieciak (Vermont State Treasurer)]: we're trying to get a second bite at the apple in the interim. So how we reduce our risk is we've obviously looked

[Cameron Wood (Legislative Counsel)]: at the quality of the project but we also try to

[Mike Pieciak (Vermont State Treasurer)]: find an intermediary or always find an intermediary that will lend from us and then directly to the project. So we basically have two opportunities for repayment there. So the Vermont Housing Finance Agency is a great example. The Vermont Economic Development Authority is another example. Credit unions and community banks have been another example that we've been lending to and through recently as well. So moving the 10% to 12.5% would give us another about $30,000,000 in capacity to do loans and lending in this program. Just to give you a sense of what the impact has been, we've lent out just under $100,000,000 and that is supported by construction or the preservation of about 1,300 units of homes in Vermont. There are about 30 projects or so across the state that we've invested in. We have another round of investment that we're gonna announce on Monday. And again, that's about $30,000,000 or so. And that impacts about four fifty units of housing across Vermont. So that announcement that we'll make on Monday is pretty similar to what you could see as an impact here, 30,000,000. We've been able to find projects, leverage that money and support about four fifty units of housing as a result.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Mike, what are the interest rates kind of that you're at?

[Mike Pieciak (Vermont State Treasurer)]: Yeah, so it depends on how long the loans are for. If it's a really short loan, like five years or less, it's 1%. If it's sort of something more like ten years, it's 1.5%. If it's ten to twenty, it's 2%. If it's over 20, it's 2.5%. So we just account for the different level of risk that exists based on the duration of the loan. Now, if we put that in our bank account right now, it looks like we're getting paid about 3.8% interest from the bank. But those rates have been coming down and down and this is a long term investment. From our perspective, these are projects that wouldn't go forward without this ability to save money on their financing. And we might be getting 3.8% but if they went out into the market to get a loan from a commercial bank, it could be 8%. So it's quite a dramatic difference for them to get a loan that's 2% plus administrative fee maybe from VIDA or from a bank or credit union that's set up to 3.5%. That's a big difference for them and it really makes projects able to go forward that otherwise would not be able to pencil out if they didn't get that reduction in financing costs.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Which you're comfortable with going up to 12.5.

[Mike Pieciak (Vermont State Treasurer)]: Yeah. So to be clear, Cameron pointed out, there is another credit facility too. So in total, it would bring it up to 15%. This should be 12.5 under the 10% of the Mon program. It would now have to be 12.5% of Mon if it's run through. But and

[Cameron Wood (Legislative Counsel)]: then the two It's not as catchy,

[John Gray (Legislative Counsel)]: though. Yeah.

[Unidentified committee member]: Like the big

[Mike Pieciak (Vermont State Treasurer)]: climate and infrastructure. So that 15%, I would be comfortable, we need liquidity, obviously to make sure we're paying the bills

[Cameron Wood (Legislative Counsel)]: that we have that are coming due that are part of

[Mike Pieciak (Vermont State Treasurer)]: the budget. 15% as sort of a less liquid or illiquid investment. I think that is sort of

[Cameron Wood (Legislative Counsel)]: where we I don't know

[Mike Pieciak (Vermont State Treasurer)]: how much higher we want to go than that, but that doesn't give me great pause. Again, it'd be about $150,000,000 out of about $1,500,000,000 cash on hand that we have. So it still gives us quite a bit of flexibility and liquidity in order to make sure we're making those payments that we need be making.

[Rep. Thomas "Tom" Charlton (Member)]: Do you find that you're sitting in first position with these when lending? Or are you with a a smaller part of a larger capital stack? And if the latter, have these activities sort of been really highly valued by existing lenders who are finding additional capital to reduce their risk as well?

[Mike Pieciak (Vermont State Treasurer)]: Yeah. So it's a great question. Can't think of an example where we are only where it's always that was part of the capital stack. And in the first round, it was often that we were the last one because costs had risen and price sheet and all that sort of thing. In this most recent round, are a number of projects we're like the first one in and that's a different kind of momentum for those development. But I think being sort of toward the beginning or toward the end are pretty impactful places to be because it either closes about or sort of tells it forward. In terms of your question though, mean, of that 100,000,000 or so, I think when we calculated it, there was about an additional $330,000,000 that was leveraged against that 100,000,000. So that just gives you a sense of the ratio. So that's either private developer or nonprofit developer coming in and bringing that capital to bank, leveraging that or credit union leveraging that as well. But that's important for us because it reduces our risk. We don't want to be the only one in on the loan. The other point that you made about what position are we in, when we have an intermediary like a bank or credit union, they, in many cases, want to be first position. That matters to them more than it does to us because if they don't get paid, they still have a requirement to pay us. But that's how we sort of get a double layer of protection.

[Unidentified committee member]: Mike, are you funding any housing? Are you funding housing as part of other projects? Is this housing that is mostly affordable? What?

[Cameron Wood (Legislative Counsel)]: Yeah.

[Unidentified committee member]: And I'll tell you why I'm asking. I'm really concerned. This is a Band Aid and not a root cause fix. So as we add more money, which we're hearing in other contexts that the money people are happy to lend it, right? This is the penciling out piece. But are we continuing the problem that we have? Or are we focusing on actually fixing the problem that we have? And I'm there are a lot of ways to think about that.

[Mike Pieciak (Vermont State Treasurer)]: Yes. So in terms of the I mean, of the good things about this source of funds is that they're really, it's really flexible. We don't have requirements that come with certain environmental based grants or climate or weatherization grants or historic credits or low income tax credits or all those things have different requirements and different strengths. This we've always viewed as very flexible. So it can be any kind of housing. It's been primarily affordable housing. We went through the Vermont Housing Finance Agency, that's about 56,000,000 of our amount that we get funds out. That's going toward affordable housing. There's other investments that we're making in affordable housing outside of that as well. But there's also workforce housing and also some market rate housing. Market rate is for the minority by a vast amount, but there is still some. And the other piece that we hope to grow but exists also is housing for older Vermonters. As that is I think a area that should continue to take this from all policymakers, but certainly from this source of funds. So it really is flexible and it represents sort of the spectrum of the housing investment.

[Unidentified committee member]: So this project that talks about a percentage of the project is housing, but not the entire project is housing. Does that fit with the portfolio that you're right now also?

[Mike Pieciak (Vermont State Treasurer)]: Yeah, it's a good question. So most of, almost all of the projects are only housing that we're focused on, but not exclusively. There are some projects just maybe at this point too, that would sort of fall into a sort of economic impact project that has a housing component. And generally what that usually means is there's a hotel and there's also housing. And the hotel and the housing are connected and they sort of go side by side from the financing standpoint. But we view that as both sort of housing, but also recognize that the sort of 10% program is created for general economic activity. So we wanna recognize the impact in many communities that a new hotel can have. And actually the hotel, if a community doesn't have enough hotel rooms, it can actually put pressure on housing through the incentive of local residents putting their home up for Airbnb or or their ADU or a home that they own as a short term rental rather than a long term rental. So there is a housing component even when invested in a building

[Rep. Marc Mihaly (Chair, House General and Housing)]: project like a hotel,

[Mike Pieciak (Vermont State Treasurer)]: but those are the minority. The vast majority are only housing.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Is is the with respect to the part of the bill that is referring to the interest that you earn, how much how much is does that currently involve? And more or less, how much interest

[Mike Pieciak (Vermont State Treasurer)]: are we Range talking of a million to $2,000,000, sort of what comes from this portfolio that goes. How does it

[Rep. Marc Mihaly (Chair, House General and Housing)]: go to the general fund?

[Mike Pieciak (Vermont State Treasurer)]: Yeah. Exactly. Right.

[John Gray (Legislative Counsel)]: So we you

[Mike Pieciak (Vermont State Treasurer)]: know, that whole 1,500,000,000.0, you know, we're investing in in our bank accounts, we're investing in treasuries and short term investments. There are other funds outside of that cash fund that we're investing as well. And all of that sort of collectively then sort of passes through our office into the general fund. So that number prior to the pandemic was like $700.800000 of revenue to the general fund, almost nothing. And now it's tens and tens of millions of dollars because the cash balance is so large and interest rates have been so high. But we are seeing both of those things come down a bit, the cash balance down a bit and then interest rates now starting to fall. We used to be getting five and a quarter percent on our bank account. Money is over in a bank account. Now it's like I said, I think it's about 3.8%. So those numbers are

[Rep. Thomas "Tom" Charlton (Member)]: coming down.

[Rep. Marc Mihaly (Chair, House General and Housing)]: So the 1 to 2,000,000 is the portion of the interest that it's attributable to the loans under the 10%

[Mike Pieciak (Vermont State Treasurer)]: commodity.

[Rep. Marc Mihaly (Chair, House General and Housing)]: And that currently goes to the general fund.

[Mike Pieciak (Vermont State Treasurer)]: Yeah. Exactly. Correct.

[Rep. Elizabeth Burrows (Member)]: Elizabeth. Okay. Thank you. So just so that I don't misspeak about this to my colleagues and to my constituents who are really interested in all of this, and just so that I fully understand, the 10% program or the would be 12.5% program, the interest on that goes into the general fund?

[Mike Pieciak (Vermont State Treasurer)]: Yeah, exactly.

[Rep. Elizabeth Burrows (Member)]: Why? Why would like, if this is an investment, if we're taking money out of the Ed fund

[Rep. Marc Mihaly (Chair, House General and Housing)]: No. This isn't taking any money out of the Ed. It's cash that the state has that it always has, just operational, moving in and out.

[Rep. Elizabeth Burrows (Member)]: But it is creating like, we do all of this creation of housing with monies from the Ed Fund, do we not? Not this program.

[Unidentified committee member]: Separate from

[Rep. Marc Mihaly (Chair, House General and Housing)]: This is separate from tax increment or taxes. That was Right. Prior. This this bill has, like, five elements to it. One element you heard earlier is it is it is tax stabilization is taking taking property tax and eliminating it, and that does take money out of the income. This is a different element, which is, the treasurer's program, 10% for Vermont, which simply you as you said as you said, it's two bites of the apple. Instead of leaving that 10% in a bank somewhere earning 3.8%, it allows the treasurer to devote it to housing, most of which is affordable or work.

[Mike Pieciak (Vermont State Treasurer)]: And it's exclusively in the general fund, this program that we brought in. That's the impact in the general fund, not in education fund.

[Rep. Elizabeth Burrows (Member)]: I guess my question is why we as legislators are so, from where I'm sitting, arbitrary about what we consider property valuation increasing tax base and our inputs into the Ed Fund. But when it comes to other elements of property or housing or other pieces, we don't bring that back to the Ed Fund. And I'm just confused about you're all looking at me like I'm getting signals that I really don't understand. So can you explain again? Because I don't really understand why there are some inputs into the Ed Fund, there are some outtakes from the Ed Fund, and they seem arbitrary to me.

[Rep. Marc Mihaly (Chair, House General and Housing)]: This has nothing to do with the Ed Fund. It's all about

[Rep. Elizabeth Burrows (Member)]: the Ed Fund. Does it have to

[Rep. Marc Mihaly (Chair, House General and Housing)]: do with property? Fund. It has nothing to do with property taxes, nothing to do with the Ed Fund. It's just that the treasurer has a cash balance that they just have because money flows in and out. You know, we make an appropriation. It's over time. I guess you can speak better to this. It just flows in and out. And the question is, how do we use this one point two to one point five billion dollars in cash that's just sitting there. And at the moment, the default is to invest in in a bank at 3.8%. And so the 10% Vermont allows them to pay 10% of that floating cash benefit and invest in housing, And I think through a committee, right?

[Mike Pieciak (Vermont State Treasurer)]: Yeah, exactly. There's a local investment advisory committee that is made up of myself, obviously, a member from the bond bank, a member from Efficiency Vermont, a member from Vida, a member from VSAC, and a member from the PHFA. So all of us are advising on the applications that we receive on, the decisions that we make around investment. Thank you.

[Rep. Elizabeth Burrows (Member)]: I appreciate that explanation. My other question is that are there any limits that you have on you said you had internal rules on certain things. Do you have other limits on the types of housing that this funding can

[John Gray (Legislative Counsel)]: be used for?

[Mike Pieciak (Vermont State Treasurer)]: Yeah, so there's nothing in statute that limits So the type of

[Rep. Thomas "Tom" Charlton (Member)]: when we

[Rep. Elizabeth Burrows (Member)]: But you said you have internal

[Mike Pieciak (Vermont State Treasurer)]: Yes, we have an investment policy that we have with this committee, and it's focused largely on the risk. We want to make sure that we're not too heavily invested in any one project or any one intermediary, so that all of our eggs are in one basket. We also want to make sure that we don't have it in our portfolio of loans, that everything isn't twenty five years, but it's only blended. So some things are getting paid back in five years, some things are getting paid back in ten years, some are in twenty, and then some are longer. Because that gives us flexibility too, because it doesn't mean all of the money is out for twenty five years. Some of it's getting paid back sooner, which gives us added liquidity if we need two years or five years The or six other thing is we do have a prioritization that we talk about, and we do want to have the priority be affordable housing because there is a subsidy here, but it's not exclusively affordable housing that we're focused on. It can be other types of housing under statute, but that is primarily where we end up investing.

[Rep. Elizabeth Burrows (Member)]: Do you have any kind of prioritization for housing that's accessible or includes universal design?

[Mike Pieciak (Vermont State Treasurer)]: So there is at least one project we've invested in Waterbury that is for individuals with disabilities. And if there are more opportunities for those kind of investments, We can only invest in

[Rep. Elizabeth Burrows (Member)]: what people apply for us for. We would be certainly interested in more investments. But I guess what I'm asking is, do you have an internal rule about prioritizing the addition of in an aging state, where we have a 0.04%, my understanding at last count, available 0.04% available rental units that are accessible. When we talk about adding housing, do you have an internal rule that adds accessible or housing using universal design?

[Mike Pieciak (Vermont State Treasurer)]: Yeah, so there's no internal policy, but it is just from my own personal perspective, like one of the areas of focus for us is to invest in housing that is for older owners. I mentioned the one that we invested in that was people with physical disability, which is a specific investment, a specific project. But generally, we have prioritized to find housing that is for older monarchs as well. We made an investment into the Virgin's brand down in Virgin's to help that project go forward in 65 of assisted living. There's another project that we've invested up at Grand Isle that's a senior facility. It's one that we invest in St. Albans. It's a senior facility. So again, we can only invest in what comes to us. I think

[Rep. Elizabeth Burrows (Member)]: And I understand. I understand. Was really asking just simply whether you have an internal rule about that.

[John Gray (Legislative Counsel)]: I see

[Rep. Elizabeth Burrows (Member)]: that you don't. I know that you have and we've talked about this before, that you have made those investments. That's not what I'm asking. I'm just asking whether you have an internal policy about it.

[Mike Pieciak (Vermont State Treasurer)]: Right. No, we don't. But just as a personal matter,

[Cameron Wood (Legislative Counsel)]: as a member that's on that board and as

[Mike Pieciak (Vermont State Treasurer)]: the treasurer, it's a personal priority that we find opportunities to invest in Secure House.

[Rep. Marc Mihaly (Chair, House General and Housing)]: What I'd like to do since I know you have to go in about one minute is do you have anything to say you want to explain in terms of your backstopping the 1%?

[Mike Pieciak (Vermont State Treasurer)]: Oh, yeah. Yeah. So I mean, generally, you know, when we're talking about that second or third point that you brought up, you know, right now, all we do is lending, right? That's exclusive authority that we have. If we did have more flexibility and made this sort of a true credit facility where the interest that's coming back stayed within the credit facility, I think we then would have just broader flexibility to decide, well, instead of investing directly in this project, maybe we'll help buy the loan interest down and that is just a cleaner way to proceed. Maybe we would decide that we wanna provide a smaller grant to the project and also invest in terms of a loan alongside of it. Maybe we just wanna do the grant. There's more and more interest in having equity participants as well, having a small equity piece that can help a lot with the cash flow of these developers because they don't have to pay you back on a regular basis. They pay you back when there's liquidity in them. So that could be a possibility as well. So I think it just broadly gives a lot more flexibility for us to find ways to maybe invest in projects in a different way and also to take on a little bit more risk. Because right now we have to be very risk adverse and that limits the kind of projects we can invest in. But if we were to make a grant, we know that we're paying, we know that that money is not coming back to us. It's a different calculation. If we invest in a project and have this loan loss reserve made through this money, that gives us a little bit more flexibility. So just at the end of the day, it gives us different ways to potentially move projects forward and allows the risk profile to expand just a little bit than it exists now.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Any further questions?

[Unidentified committee member]: Yeah, don't we have other entities in the state that do that right now?

[Mike Pieciak (Vermont State Treasurer)]: Yeah, so they're potentially Yeah, I don't think on the equity side they're

[Unidentified committee member]: But they grant funds.

[Mike Pieciak (Vermont State Treasurer)]: Yeah, exactly. And when we are making these investments, it is usually, I mean, we

[Cameron Wood (Legislative Counsel)]: have that in the book

[Mike Pieciak (Vermont State Treasurer)]: of investment advisory committee that has sort of their ear to different investments that are being made in housing investments, particularly the HFA. We often try to work also with the Department of Housing to get a sense of what are their priority projects that might exist and whether any of them show up in our RFP responses. So we do try to leverage our money so that we're not, that one entity is making the right kind of loans for that particular investment or the right kind of equity or the right kind of grant. So we do try to coordinate with the other funders in that way. It's something that we look at.

[Unidentified committee member]: Yes. Did I miss the discussion about section four about credit for infrastructure investments at manufactured housing communities?

[Rep. Marc Mihaly (Chair, House General and Housing)]: Yeah, I think this is something we have to look at and probably ask counsel about. It looks like the existing law only mentions manufactured housing, not housing generally.

[Cameron Wood (Legislative Counsel)]: Right.

[Rep. Marc Mihaly (Chair, House General and Housing)]: But yet you act on housing generally.

[Rep. Thomas "Tom" Charlton (Member)]: Yeah, we have, I mean, are at

[Mike Pieciak (Vermont State Treasurer)]: least three investments that we've made into manufactured housing communities. They generally focus on taking out some the developments that have gone cooperative, so it's now resident owned and the costs of certain of their infrastructure improvements, maybe they already have a one on the books and it's just a really high interest rate and this comes in and provides them some relief or they have infrastructure investments they need to make that they can't finance. And then that's another opportunity for us to come in through an intermediary and make those investments. So I think there's at least three investments that I've made that have involved. One pretty significant one in Brattleboro as well as in the no such problems.

[John Gray (Legislative Counsel)]: Mike, I know

[Rep. Marc Mihaly (Chair, House General and Housing)]: you have to go. Thank you very much for taking the time. Great. Thank you. And I counsel, can you return to the table? Oh, has Michael has a heart stop. That's late. Hold on. Don't sit down. On. Oh, Michael's on soon. Good, alright. I apologize to the committee, this is just a little disjointed. As I said, this program has five elements to it and I think what we should do Michael, you have until 02:30?

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: That's correct.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Okay. I think maybe it would be useful if very quickly you could walk through the section that Michael is going to testify to.

[John Gray (Legislative Counsel)]: For the special assessments? Yes. Yep. So just to grant, again, John Gray, Office of Flag City Council. This is gonna be a relatively simple session, special assessments bond, just some context in existing law. We have the ability for municipalities to impose special assessments, which are taxes levied on properties benefiting from a particular public improvement. It can be levied on the basis of a majority vote of the electorate board if the property owner itself that would be subject to the special assessment, meaning that they are the ones receiving the benefit of the public improvements that are funded through the special assessment, if they consent then that special assessment can be imposed as well. So nothing about the section that you see here is touching the special assessment process itself that continues to exist. We have this in existing law that you can show these special assessments for the purpose of public improvements. What this is, is adding a financing tool that could take advantage potentially of those special assessments. So section three is your special assessments bond. What this is doing is creating a revenue. So subsection A is creating the process for actually issuing these revenue bonds. Just to back up a little bit, you'll know that for general obligation bonds, which are those that are supported by the taxing power of the municipality and holder of a bond that is a general obligation bond could compel a tax levy to support payments under that bond. But I want something different here. A revenue bond is backed exclusively by the revenues behind that bond. So what we see here is A is the authorization on approval of the legislative bodies of the municipality, subsection C, which I'll talk about in a second. A municipality may issue revenue bonds for the purpose of financing a public improvement for the benefit of the limited area of the municipality to be served by the improvement. It's using the same language that's used in the special assessment section. This is just authorizing the municipality to issue those revenue bonds. And I do just want to focus on approval of the legislative body. You're going be accustomed to saying vote, right? You're accustomed to saying a vote for the general obligation bonds because you still have the existing process for the special assessment being imposed into the first place requiring either that vote or consent of the affected property owners. We don't duplicate anything here. This is just going be a bond backed by those revenues and limited to those revenues. It's not going be something general taxing power being felt. So revenue bond, the final line of this first subsection A, a revenue bond issued under this section is issued for an essential and governmental purpose. Michael may speak to this, but basically I think this is getting, you can get certain tax advantages if bonds are issued for essential governmental purposes. So subsection A is the authorization and the process by which that is done by municipality. Subsection B is spelling out what a revenue bond really is and what the particular revenues are. So under subsection B, a revenue bond issued pursuant to the section shall be payable solely and exclusively from the special assessments levied on the properties to be certified that improvement. And they shall not constitute general indebtedness of the municipality. No holder of a bond issued under this section shall have the right to compel any exercise of the taxing power of municipality to pay off the bonds. Really drawing out the distinction between revenue bond and the general obligation bond. This is truly judged back by the special assessments themselves. There's no special assessments, there's not gonna be something to pay off the bond and no taxing power that could be compelled to pay on them. Subsection C is something quite different. I think that Michael Obama will be in the best position to speak to this, but you can think of these as sale restrictions that I think are related to the marketability of revenue bonds issued under this section. So the restriction that you see here is that the municipality may issue a revenue bond pursuant to this section only if one or more of the following conditions are met. Vermont Bond Bank is provided a commitment letter for the issuance. Commitment letter I'm not visual figurative but it's just a letter, it's an agreement laying out the terms for which financing would be extended. Subdivision two, a major credit rating agency rates the issuance at a minimum credit rating of B. So this is one of various credit ratings you can receive from those credit rating agencies. Or three, a private bank has provided a commitment letter for the issuance and a certification that the private bank is a qualified institutional buyer or quib because that term is used under the Securities Act rule 144A. You'll hear this referenced as a big boy letter, which is the term that's used in that space. But you can think of each of these conditions as saying, we either have a minimum credit rating for the issuance or we know that the purchaser of the bond is sufficiently sophisticated, which is what qualified institutional buyer means. It's basically an exemption from standard secured tech procedures for sufficiently sophisticated investors. We know that the purchaser of the bond is sufficiently sophisticated to understand that they're purchasing a revenue bond. This is meant to enhance I think some of the marketability, but I think that Michael will speak to this. That's the whole section A is authorization, B is spelling out that it's revenue bond and C is setting out sales restrictions. The one thing I will say if we come, I'm sure that we'll be coming back to this. We might have to think at some point about the timing because subsection C is can only issue it if these conditions are met and they contemplate that you'd be pretty far down the road for that to happen, but there might be ways to do that. So that is your special assessment prompt.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Michael, you want to identify yourself from the record. I just want to add to the record that I know this man can do no wrong because like me, he's from Cincinnati. Identify yourself for the record and take it away.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Thank you very much. Michael Gaughan. I'm the executive director of the Vermont Bond Bank. And just to start out my comments here, I would just applaud both committees for the diversity of approaches to this very challenging problem. It's clear we need a quiver. And so, in that spirit, this provision is in the spirit of seeing what works with different tools in the toolbox. And as most folks know, there's quite a bit of discussion about this last session, infrastructure is oftentimes a barrier to housing development. And this is another tool to help facilitate that infrastructure development expansion, etcetera. So special assessment revenue bonds, you know, the idea here is that the users of the infrastructure pay for the infrastructure. Quite simply, that's that's what is accomplished by this. And because of that, it's saying, well, you know, because the users of the infrastructure are the ones that pay for it, we don't need to, you know, have all use all residents within a community sort of bear that obligation of this of this infrastructure and the debt associated with it. So that's, that's what it's sort of a more narrow provision, a more narrow debt structure to facilitate infrastructure development. I shared some materials that I'm not necessarily going to walk through in detail, but what we're proposing here is extremely common public finance tool in 39 states, potentially more, but 39 states have issued either not at the state level, but you know, subdivisions of the states have issued debt associated or in this form over the last five years in the total amount of 17,000,000,000. That's likely a little bit of an undercount because it doesn't take into account private bank loans and things of that nature. These are just public bond issuances. There's also a piece that I shared from Nuveen, who's a major institutional investor, describing this category of debt, which is called land based finance, essentially. And what you'll see in there is that it's a very useful tool. It reiterates the concept that the users of the infrastructure pay for it. But it does describe the fact that, you know, in newer districts where you don't have a lot of vertical development, this can be of higher risk than, say, your typical municipal debt. And that's the reason we worked or we suggested these three guardrails so that we don't have, you know, a lot of speculative debt in this vein sort of floating around the state. We think it's a good tool, but it's a good tool when used with discretion and narrowness. And so I think the piece is helpful in describing the trade offs of this particular structure. It also spends quite a bit of time talking about how this is very closely tied to housing development in places like California, Florida, Colorado, and Texas. It is the way that infrastructure development to support housing is facilitated. And so obviously we're strongly in support with this, with, you know, these strong guardrails so that we don't have a lot of speculative grade debt of this nature floating around the state. And we, you know, preserve our good reputation. We have some modest suggestion from from this draft, which is just to make sure we also include credit unions, define private banks, make sure that's defined well, and then, you know, potentially open it up to other financial institutions that might be like other private institutional investors, but we'd want to work through details of that in the future with some additional guardrails and review. But generally, we like this language.

[Unidentified committee member]: Revenue bond.

[Rep. Marc Mihaly (Chair, House General and Housing)]: We do. Okay. Questions, mister Bond? This is simply trying to put another financing device on the table that is used in other jurisdictions and to have the approval, the governmental approval tailored to who's paying, who's responsible. Yes. So

[Rep. Thomas "Tom" Charlton (Member)]: it seems like you're putting together a package of things that might help in rural, especially, you know, because of the difficulties. And I'm just trying to understand maybe how this additional financing would apply to some of these smaller real plans. And maybe the project or the assessment areas, particularly big, and how that would mesh both in terms of the municipality being able to avail itself of that possibility, as well as the practical reality of some of these smaller projects and the type

[Rep. Marc Mihaly (Chair, House General and Housing)]: of developer that would be

[Rep. Thomas "Tom" Charlton (Member)]: thinking about.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Mike, do you want to comment?

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Yeah, no, that's a great question. It's actually that was the genesis of this idea is that very situation you're describing. You know, we are the financial administrator of the state's SRF program and are deeply involved with village wastewater systems that have been proposed in a number of communities that would help with additional density and housing development. And we observed several circumstances when a very small amount of debt was going to help leverage a very large amount of grant dollars for that community and help facilitate quite a bit of new housing. And because the entire community was being asked to weigh in on this very narrow project for a small portion of the town, in some instances, the projects couldn't move forward. And so that actually provided informed a lot of the thinking around this tool. And for those very small communities, you know, we would expect and hope that they're working with the bond bank and the SRF program, or through our new housing infrastructure loan program that the general assembly funded last session, where we can, you know, we can be very hands on with a lot of technical assistance on how to get through this process. And they can be assured that they have a trustworthy partner on the other side of this debt instrument looking out for them. So yeah, the whole idea behind this really the genesis was rural communities.

[Rep. Thomas "Tom" Charlton (Member)]: Yeah, it would seem to be that this is a helpful proposal, but it'll have to mesh with other things in order to get especially an affordable housing project in a small to old town going. Is that fair?

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Yeah, I mean, agnostic to, it doesn't speak to affordability, speaks to the But infrastructure side of we have, I can give you a real life example Through our housing loan program, we've been having preliminary discussions. And there is a project that's proposed by Cathedral Square Senior Living that has you know, will support a lot of density, but it's a I think it's a $5,000,000 infrastructure cost for 30 units because they need the, you know, they need they they can't do it as well. They can't do it through decentralized system. So, essentially, like, you know, like, if that's providing new land value along that new infrastructure, that's something that we can capture through the special assessment because you're gonna have increased land values where you have that ability to have density. And so that's a great example of how it can tie to an affordable project, which oftentimes have more density anyway. So that's, you know, that's just one for instance, they aren't, you know, there isn't a requirement there, but there's definitely a nexus in terms of the policy intervention.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Yes. One more question here before you leave us.

[Rep. Thomas "Tom" Charlton (Member)]: Thank you, Michael. Could you help me contextualize a BBB credit rating or bond rating and municipalities of under 5,000? Do you does that feel like a bar that's credible?

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Yeah. I would expect that for a community under 5,000, really, it would honestly be my hope that they're working with the bond banks so we can, you know, we can be there to do really good technical assistance focused loan underwriting. But we didn't wanna preclude other options if that community have some special sophistication. The town of Stowe, for example, has even though they don't go to public markets, they carry a double a three rate public rating. So for instances like that, we don't wanna preclude any options. However, for a small town, we would hope they work with us. A triple b credit triple b minus is the lowest, what's called investment grade credit rating. So that's, you know, that's that's notable once you go below that level or you don't have a rating, you're into the speculative debt category, and that's where you really want these guardrails around making sure that it's only qualified institutional buyers or accredited investors that are buying the debt. So we are actually requesting that it'd be one notch higher than a triple b minus, again, so that we maintain Vermont has a very good debt reputation in the wider municipal market, and we wanna preserve that while also allowing what we think is a very important tool for housing development. Thanks.

[Rep. Marc Mihaly (Chair, House General and Housing)]: I I just wanna add that part of the impetus here came from, frankly, my own experience with the bond bank represent being involved in a very small project to rehabilitate an old dam in my town of Callis, where part part of the money came from assessment well, from a bond. And the bond bank is just incredibly great to work for work with because they are used to working with very small amounts of money relatively in small towns. And I think that would be that's really a terrific advantage, and it goes to the question you were raising. They're they're just set up for this.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Thank you.

[Rep. Marc Mihaly (Chair, House General and Housing)]: It's Michael. Are there other questions? Yes. I have a quick question.

[Rep. Elizabeth Burrows (Member)]: So the way I read this, the it could the bond would just need to be approved by the legislative body of the municipality and not by our voters. Correct.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: That's alright. You you you'd have to tying back to the original special assessment statute, you would have to have approval of those property owners are subject to the assessments. So, yeah, so there's already consent there. And then you have consent at the board governing body level to secure those assessments in a debt structure. What we really wanna avoid and what you'll see in the literature I shared was that other states approach this issue through additional special districts. In other words, additional units of government. We wanna consolidate the number of units of government here. So that's an important point to us. We share, this is the way Oregon approaches the problem as well. We're really interested in eliminating any new special districts and keeping things with our existing units of government. So that's just to give you a little background on that.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Thank you. Any other questions of Mr. Dodd before he takes off? Michael, thank you so much for being with us. And I gather you do have a few suggestions for small changes, and I gather that you're in touch with counsel.

[John Gray (Legislative Counsel)]: I'll I'll I'll reach out.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Yeah. And we'll we'll we'll make sure that we loop back to do that.

[Michael Gaughan (Executive Director, Vermont Bond Bank)]: Great. Thank you. They're very technical. And for the joint committee, I would have loved to be there in person with school pickups and all, it's a little tricky on Friday, but thank you so much for the opportunity.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Thank you. So shall we continue the walkthrough?

[John Gray (Legislative Counsel)]: Can I respond to just two things to Representative Cooper's question? I don't think that you were, I don't think your question was a misunderstanding, but I did just want to confirm that the options are options. You're only needing one of the three, you don't have to have a BBB rating. I just want to make sure that that was clear. The other thing I was going to say for sub segment C, which is dealing with debarketability, the commitment letters, and the credit ratings, I just wanted to note that in the special assessments chapter there's a sub chapter related to clean energy assessment district, which is a more technical thing. And one of the approaches that they take there for securing agreements from the property owners is meeting underwriting standards published by DFI. So just to note that you can take different approaches to how you want to secure this and ensure that sufficient standards are kept up. This is one way of doing it, but just note that statutes contain other ways of thinking about kind of minimum financial guarantees.

[Rep. Marc Mihaly (Chair, House General and Housing)]: What we have now, we have two sections remaining. We do have one witness remaining, and that I think it's on a very simple aspect of the bill, which is the VHIF. Right? So maybe we should take that, let the witness testify, and then go back to the accelerator. Does that make sense?

[John Gray (Legislative Counsel)]: That's how you would like to proceed. Yes, sir.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Alright. Okay. So maybe let me share my screen

[Cameron Wood (Legislative Counsel)]: now and get us to that section that we're going to move to which is on page 28. And I'll take a moment just to apologize for, you know, the kind of transition that we've been going through and we should have started this out by just identifying that all of these different subject areas that we're talking about, they are somewhat exclusive of each other. And they could be used together for these housing projects that could move forward if all of this were to pass and become law. But as we discussed in the beginning, you have this pilot program that has specific parameters about where they can be located, affordability, etcetera. Entirely separate from that, we have the creditors credit facilities that we've discussed and increasing the percentage that they could invest with that credit facility and then adding on the ability for them to use those funds, including the interest that they would now keep in the special fund using that for bulk purchasing. Separate from that, we have what we just walked over, which was the revenue bonds for special assessments. Separate from that, we're gonna talk about this change here in section seven on page 14, which is changes to the Vermont Rental Housing Improvement Program. I'm gonna start just with the assumption that you all are relatively familiar with what this is. There's been multiple changes of the program throughout the past few years, addressing expanding eligibility for people who have served through the program, etcetera. But essentially, this is through Department of Housing and Community Development and the purpose is for rehabilitation of housing program, excuse me, rehabilitation of housing throughout the state. And this is making a change in sub A regarding the administration of the program under subdivision two. The department shall develop statewide standards for the program including factors that partner organizations use to evaluate applications and award grants. So as you all may recall, THCD actually provides funds to other entities to then loan out or grant out to individuals to use to rehabilitate housing. My understanding of how that works on the ground is they don't give all the money upfront, the landlord or the person doing the development has to put in a certain percentage of their own money and then they receive funding throughout the life cycle of the rehabilitation from BPIP. What this language would do is it says the department may authorize partnership organizations to advance funding at the beginning of a project as part of an award. There's nothing in the statute that prohibits DHCD from doing this now. In discussing with the department, it's something that they feel that they would need direct authorization to do so. So that's what this language is intended to do. As straightforward as it's written on the page, they can authorize those partner organizations that they work through to distribute the money, to give the money to the individual who's doing the rehabilitation upfront as opposed to providing that form up for reimbursement based.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Being here, again, just making things easier for small developers that don't have as much access to cash. Maybe what we should do is hear from DHCD and then take questions. Would that be okay? I just

[Unidentified committee member]: have a very quick question. When it says financing, it doesn't say obviously, we're talking about the grants, and it could also be the loan. So it could be an upfront loan that gets paid back rather than being a reimbursement grant or reimbursement loan that we So used to

[Cameron Wood (Legislative Counsel)]: they do both grants and loans. And depending on whether it's a grant or depending on whether it's a five year or a ten year loan will depend on who the unit then has to be rented to, how long the affordability has to exist, etcetera.

[Unidentified committee member]: Right, we're not seeing that language here because that's not what we're changing.

[Cameron Wood (Legislative Counsel)]: It would just apply to all of it. You could do it

[Rep. Thomas "Tom" Charlton (Member)]: if it's a grant,

[Cameron Wood (Legislative Counsel)]: you could do it upfront if it's a loan. It would just give the department pretty broad authority to allow them to advance funding. They would then be able to dictate what that looks like. Maybe they only advance it if it's a grant, maybe they're only gonna advance half of it if it's

[Rep. Thomas "Tom" Charlton (Member)]: a five year loan, those would

[Cameron Wood (Legislative Counsel)]: be questions for them about how they would go about implementing it. Great.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Josh, you want to come and testify on this issue Not of Not the what am I saying? The HCV here? No. They're not. Okay, well then, I'm sorry. Was Okay. Yeah. I was I'm sorry. I'm used to That's right. Yeah. Right. My apologies to the committee for doing this out of order. I thought we had a witness, but we don't. Again, this was just very we don't have testimony, but this is very simply designed to make it one more way of potentially making it easy for a small developer. Why don't we now go to the house and accelerate it?

[John Gray (Legislative Counsel)]: Okay.

[Cameron Wood (Legislative Counsel)]: So I'm going to back up, be happy to take any questions about those that are on the view that we've there. Backing up to page 12, section six, this is another pilot program so entirely separate from the rural program that we discussed earlier. This would be an off-site construction accelerator pilot with, I should say, through the Agency of Commerce and Community Development in collaboration with the department of buildings and general services shall develop a pilot demonstration project and study that explores the possibilities of reducing housing development costs through modular construction. My understanding is this is a proposal from the administration, so you all may want to hear from the department or from the agency directly about their thoughts behind this or how they intend to actually implement, as far as the language goes, the pilot would consider the following elements, purchasing for a single development or aggregation of multiple developments. So it doesn't have to be a singular, Streamlining regulatory processes by creating pre approved modular designs, moving to the top of page 13, creating a loan loss reserve for construction loans, off-site construction including panelized or volumetric modular construction, establishing a statewide procurement consortium for bulk orders, aligning state local permitting and the creation and adoption of off-site building codes. How are they gonna go about doing all of that? You get into subsection C and D, the agency can work with the office of state treasurer to identify the feasibility of the state providing a guarantee or other device to facilitate bulk purchasing of off-site construction homes. So if all of this were to go into statute as a package that could be the work that you've done in the federal credit facilities, you've added sections in there that allow them to use those funds for this purpose, could be something different. The pilot shall occur in a municipality willing to participate in the regulatory reforms necessary to implement the process and accept the constructed homes. There's not a lot of detail on what that looks like, how municipalities would apply or potentially be chosen. So that may be a conversation or questions that you wanna direct to the agency or the department, but they would work with a municipality, could be one, could be multiple, all under the kind of umbrella here of looking at off-site construction and bulk purchasing to utilize those in developing housing in that municipality or municipalities that are chosen. Municipal planning grants are made available to participate in municipality to assist in enacting necessarily regulatory reforms. And then we have reports here in the subsection AFR fifteen, twenty twenty eight, agency shall submit a written report to House Committee on General and Housing, Senate Committee on Economic Development for recommendations and legislative action based on the success of the pilots. The last thing I'll comment is the administration did ask for a significant amount of funds to implement this pilot so that may be something that they come back want to discuss with them when the meeting happened just a while.

[Rep. Marc Mihaly (Chair, House General and Housing)]: You've worked really hard on this part. Do you want to comment about this?

[Rep. Thomas "Tom" Charlton (Member)]: Yep. I can comment a little bit. The sum of money in the administrative version of the film was a placeholder number. We've taken it out because we've had conversations with the treasurer about funding it differently rather than out of budget. This is there is additional language that during markup will likely be put in here to better articulate these items one through seven criteria to look at. A great deal of work that that represents has already been done, but it's been done in different agencies, different offices and organizations. So everything from pay to do homes, the agency itself, let's build the homes and so on.

[Cameron Wood (Legislative Counsel)]: And what we're finding is they have a

[Rep. Thomas "Tom" Charlton (Member)]: lot of parallel material that they come up with independently. So we'll be meeting and sitting down with them. One thing that this does do is enable the HCAs here with the agency of commerce and community development

[Mike Pieciak (Vermont State Treasurer)]: to herd

[Rep. Thomas "Tom" Charlton (Member)]: these different ideas together and synthesize them in clear manner. They're the ones that know how to make this happen. So they're really on the subject matter. Actually, I want to give I want to give them the latitude. We'll make adjustments that will make the program work and make it work relatively soon. I think that's This is

[Rep. Marc Mihaly (Chair, House General and Housing)]: this is one more by way of background, what we're dealing with here, we're not dealing with manufactured homes that are, like, what you think of as single wides and double wides. That's not what we're dealing with. We're dealing with homes that are built in a factory, such as Huntington Homes, for example. They're built in a factory, and there are, you know, many models, and they're taken out in trucks and big and then put together on-site. We had testimony, the general and housing had testimony which revealed that though these these homes have substantial advantages and that they can be constructed quickly, they can be constructed indoors in the winter, and in addition, with a workforce that is specially trained and doesn't have to work outdoors and spend a lifetime becoming old sooner. And that those are terrific advantages. The reality is that those houses are in the same price range as stick built homes. That is they're not a lot cheaper than a stick built home. So the question has come up, well, how do we make them cheaper? And the answer is bulk ordering. It's one thing if, in other words, if you go to an organ I'm just gonna use the name Huntington Homes, but it could be any one of a number of manufacturers. Want us to be able to say to them, build us 40 of these homes, this model. And the question and then it's going to be cheaper. And the question it if you ask how much cheaper, the answer is, of course, I don't know. We're not there yet. But it's definitely going to be cheaper. In order to do that, they need the numb they need two things. They need a certain number of orders. They're not gonna do it for two orders or three orders or the savings won't be that great. They need a significant number of orders. In order to do that, one possibility is yes. If you have one developer in for Tom lives in Chester, and Chester has a project that could be, I don't know, a 100 units, the developer of that project could decide to order 40 units of a certain type. But that's great if they do, then then then it doesn't need a lot of aggregation. But on the other hand, a lot of what we're imagining is, again, these units, five units here, five units there, 10 units here. We want one agency aggregating these, working with the developers, seeing if we can agree on a common module, and then go to the Huntington Homes or whatever it is and say, here it is. So that's one element of this, is aggregating it. And the second is working with the treasurer's office. The treasurer has been really great in thinking with us and saying, these five developers stand behind their order. They they will pay for these units, each one of them. Obviously, they have to have their financing lined up, etcetera. But we want you to stand behind them one way or another, whether it's purchasing a credit facility or, you know, without getting now into exactly how it's done, that some way or another, the state doesn't have to pay for the units, but the state stands behind in order to facilitate the purchase. This is a classic example of leveraging, using state funds to leverage private sector activity. So that is the theory behind this.

[Unidentified committee member]: Michael has a question.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Yes, Mike. I was just curious, is it possible

[Cameron Wood (Legislative Counsel)]: that

[Rep. Marc Mihaly (Chair, House General and Housing)]: one of

[Cameron Wood (Legislative Counsel)]: the drivers for the increased pricing in housing is regulations that we have put on developers? And I mean, obviously we talk about Act

[John Gray (Legislative Counsel)]: two fifty and all that, but

[Cameron Wood (Legislative Counsel)]: just in general regulations for efficiencies. I don't know because I'm not going tell them, but I am curious is that something that's driving our prices up?

[Rep. Marc Mihaly (Chair, House General and Housing)]: It's one of the factors.

[Cameron Wood (Legislative Counsel)]: Have we

[Rep. Marc Mihaly (Chair, House General and Housing)]: gone down that road of possibly reducing those factors? We are I know that there are any number of efforts in the legislature and in there there are any number of proposals to try to reduce the transactional cost of permitting. We have a bill that is in the Senate, Senator Clarkson introduced, FI introduced, to make the appeals process much more much quicker. Let's build homes has proposed one approach. The administration has ideas as well. These are very interesting. Some of the most interesting ideas are what is called by right housing. That is housing which will not require any discretionary permit. It's simply a developer can walk into a town and just ask for a building permit. In order to do that, you have to build into the planning apparatus of the town all the criteria you need, and we have to integrate it with state permits. State permits are a substantial part of the problem. It's not just local permits. It's not just Act two fifty. It's all the permits together. But I don't that's about all I can say right now in the answer to that question. This does not what this does, it doesn't address the permitting issue directly, but I think that it could Right. Because it could get to the point of where it meshes with the eight zero two homes proposal, where you have project designs that are preapproved. Tom and then We have other Tom and then other questions. Okay.

[Rep. Thomas "Tom" Charlton (Member)]: Just push the the quick answer is yes to your question. The advantage of small and simple projects hopefully is to make the financing stack simpler because every additional player that's doing grants or is doing low finance, They all have their

[Mike Pieciak (Vermont State Treasurer)]: own criteria for what has to happen.

[Rep. Thomas "Tom" Charlton (Member)]: From experience, I can tell you that federal funds kick in a lot of criteria and expectations that get very expensive very fast. And it is true that when government finally gets into a building project, price does go up because of the number of additional things that we are asking for. This bill does not directly deal with those. There are some advantages to off-site construction that will help alleviate a little bit of that. But it is in addition to zoning, it is also it's energy code. It's everything from the point for all of us. But it's it's little bits and pieces that get added as additional organizations get involved.

[Rep. Marc Mihaly (Chair, House General and Housing)]: It's one issue. I think the biggest driver is it's materials and labor. Yes, you have a question?

[Unidentified committee member]: Just thought that I thought that the bill did, on page 13, talk a lot about working with municipalities that are willing to work on their regulatory process. That's part of the deal, is that you get to be part of this pilot program because you're willing to, at the start, anything happened, before there's a single bit of dirt being dug up, you have already basically heard all of the input, right, from people who might have objections to one aspect or another. And so the point of this is really a great testing ground for broader, in my opinion, broader discussions that we're trying to have statewide at the local level.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Other questions, we're within five minutes of the end of our hearing today. God forbid we should end early, but Okay. All right.

[Cameron Wood (Legislative Counsel)]: I'll just do a very quick point. You have two other sections in here. One is related to positions. It creates two positions within the

[Rep. Thomas "Tom" Charlton (Member)]: department development and then you

[Cameron Wood (Legislative Counsel)]: have the effective date which is I believe is July.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Thank you. Samantha, do you want to come up? You have six minutes.

[Samantha Sheehan (Municipal Policy & Advocacy Specialist, VLCT)]: That's it. Actually we did do it. We can maybe do it.

[Unidentified committee member]: My thought says eight.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Oh, okay, that's good. You have eight minutes.

[Samantha Sheehan (Municipal Policy & Advocacy Specialist, VLCT)]: Great. The record, my name is Samantha Sheehan, the Municipal Policy and Advocacy Specialist for the Vermont Cities and Towns. And I do hope this will be quick. We support the bill, encourage you to take it up and to pass it with

[John Gray (Legislative Counsel)]: a

[Samantha Sheehan (Municipal Policy & Advocacy Specialist, VLCT)]: few tweaks, maybe. But I guess where I'd like to I'm going to primarily speak to sections one through three today. And I first want to underline something that you've heard from legislative counsel, which is in both cases, so the opportunity here for tax stabilization for the purpose of construction and the opportunity for the special assessment revenue bond, These are really existing municipal finance authorities now. What you would be doing through the language proposed here would be expanding and making more flexible the use of those existing authorities that Vermont communities already utilize for a variety of endeavors. As well as you heard from Michael from the Vermont bonding, these are really consistent with best practices and really successful programs from around the country. It's talking about the proposal for a tax stabilization agreement for housing. This is something the LCT has advocated for a long time, but specifically, we have advocated that the state put some skin in the game with these types of agreements Because now a municipality can vote or a municipality can choose to enter into a tax stabilization agreement for its own municipal property tax rate. It can also choose to provide that stabilization for the state education property tax rate by a vote of the whole town. This has been done. It's pretty rare. And it's usually for a very large commercial purpose. So like a big employer, a big building with multiple uses that usually is going to attach a lot of other different types of revenues, not specifically for housing of five units or 10 units. And even then, when the municipality does vote, all the voting residents of the city of Montpelier voted for this type of tax stabilization agreement, which has happened here in Montpelier, what it would mean is that all the other property taxpayers would still be owing the state their money from the new tax growth on that property that has been stabilized. So what we're asking for is, as John Gray laid out, there are two places to put this in the law. We're asking for the place that actually would stabilize the tax rate for the state for that period of the seven years.

[Rep. Marc Mihaly (Chair, House General and Housing)]: My impression was that's what the draft does.

[Samantha Sheehan (Municipal Policy & Advocacy Specialist, VLCT)]: Yes. Support what the draft does. Right. Yeah. And if you were up to undo that, it wouldn't be a new thing, basically. Yeah. It wouldn't be like a new tool for municipalities to use. Because there's a way to do it now, and it's pretty convoluted, and everybody else has to pick up the slack. There was something else I wanted to say. Oh, super minor, but in the same section in subsection C3, speaks to the affordability requirement. This really performs like another thing municipalities already have the ability to do, which is an inclusionary zoning ordinance, where you're requiring for a period of time a percentage of the units being made affordable. And that should be ordinance, not bylaw. That's just not something bylaw does. It's something that municipal ordinance does. And then, don't know. Mr. Chair, you can direct me or I can take questions. Are, I think, a lot of ways where there are many reasons why we support especially the earlier sections of the bill for the special assessment district for revenue bonds. There are many ways they could be used and leveraged along with other existing landscape programs or for certain particular types of infrastructure that have a customer, so water and sewer and electric, where there's a few dozen municipal electric utilities. It's So a very useful tool when you're not just creating housing, but you're creating new customers. So an apartment building might be one property and one value on the grand list, but it may be 20 or 100 or 150 new utility customers. And so in these cases, this type of special assessment revenue bonds can be very productive in a really healthy way to socialize the cost of the infrastructure. And we support it. We support expanded authorities from municipalities to use the polls flexibly. I think maybe the last sort of high level point I'll make is that what's really cool about this package of policies in this bill is that it directs both state and municipal types of public investment, specifically into rural towns, which has not been happening for the purpose of housing. We know from prior years' studies and the needs assessments that we have some really good productive tools that the LCT supports continued appropriation for, like the downtown tax credits, VHIP, Brownfield redevelopment and revitalization money, many programs created and spent with ARPA dollars, not a lot of that money has gotten into sub-five thousand, sub-two 500 population communities. And so what's cool about these, and we hope you preserve them the way they're drafted now in sections one, two, and three, is that you're putting the lever in the small town government to pull to put public investment in for the period of time that it's needed to build the infrastructure and housing that the community wants.

[Rep. Marc Mihaly (Chair, House General and Housing)]: You know what, we are I know that I know you're going to be testifying You're you're gonna be testifying before our committee again, and you probably will be testifying before Senate comments. One question, and then I think we have to end what's required.

[Unidentified committee member]: And I just, one, thank you for your comments. A lot of this bill came from last year when we recognized very quickly that chip wouldn't be enough specifically for our small rural pounds. I know I personally can be a bit of a dog with a bone when it comes to that, and I recognize that. And I'm about to put you on the spot. So maybe you'll come back and you can give me an exact answer. Looking at the location requirement with a population of fewer than 5,000 persons. Do you know how many municipalities?

[Samantha Sheehan (Municipal Policy & Advocacy Specialist, VLCT)]: It's most of the state.

[Unidentified committee member]: Okay, that's what I figured.

[Samantha Sheehan (Municipal Policy & Advocacy Specialist, VLCT)]: Yeah, 73% of municipalities have a population of 2,500

[Unidentified committee member]: or less. Beautiful, thank you.

[Rep. Marc Mihaly (Chair, House General and Housing)]: Perfect. With that, I want to thank the members for all your questions and your attention. It was such pleasure to have the two committees together, and I want to thank in advance the trauma committee for being willing to work with us on this in a relatively short timeframe. I think it needs a little work, so things always need a little work. Thank you. We are adjourned.