Vermont Legislature SmartTranscripts:

[Emilie Kornheiser (Chair)]: We are on Ways and Means. It's still February 25. We are at 01:25. Apologies for anyone who's just tuning in at home wondering what has been happening in the last ten minutes. We are taking up H-seven 57, an act relating to manufactured homes and limited equity cooperatives. We received this from the House General Committee. It has a lot of tax policy in it, a lot of things that affect tax policy in it, particularly some issues around appraisal and property taxation and all kinds of things like that that we've spent a lot of time on recently. And so we're going to spend some real time on this bill over the next two weeks. And yeah, I'm going to turn over to Cam to take us through it.

[Cameron Wood (Office of Legislative Counsel)]: Good afternoon. For the record, Cameron Wood, Office of Legislative Counsel. Happy to walk you through July as it came out of the House General Committee, Madam Chair, as you mentioned. The bill itself primarily dealing with manufactured homes, otherwise mobile homes. Throughout the current statutory language, it refers to mobile homes. If it was built after a certain date and meets certain federal housing requirements, they're called manufactured homes. But one of the provisions in the bill is actually giving the authority for our our office to go through and update the statutory references throughout to manufactured homes. But for starters, I just wanted to share the statutory definition so we all know so we all know exactly what we're talking about here. So this is actually a definition that's in title 10, which is the chapter related to mobile home parks. Some of these sections are gonna apply to these homes, whether they're in a park or not. Some of the sections later on are going to apply to a what's called a limited equity cooperative, which we'll talk about that when I get there. Some of the sections are going to apply, like I said, to a manufacturing home whether it's in a park or not. So I just wanna start with the definition, but the definition is in title 10. And it's a mobile home means a structure or type of manufactured home, including the plumbing, heating, air conditioning, electrical systems contained in the structure that is built on a permanent chassis, designed to be used as a dwelling unit with or without a permanent foundation, transportable in one or more sections, and at least eight foot wide, 40 foot long, and when erected, has at least 320 square feet. Or if it was constructed prior to 06/15/1976, the dimensions of eight feet wide by 32 feet long. And then or any structure that meets all the requirements in Subdivision 1 except for the size requirements, but it has the certification. It's manufactured home. So we just wanted to start here to kind of define what we're talking about, you know, so we're not talking about RVs or tiny homes or anything like that. There is the statutory definition, and it does have to meet these requirements for the remainder of the sections that we're talking about.

[Emilie Kornheiser (Chair)]: Is the whole rest of the language we're looking at within this title?

[Cameron Wood (Office of Legislative Counsel)]: This is entitled 10. The rest of the sections that we're talking about are going to be in different titles. But where appropriate, those titles do reference back to this. Yes, Okay. Now, we're in the draft itself. These first few sections are going to be dealing with the sale of a mobile home or a manufactured home. I'm gonna try my best to use manufactured home. I may use it interchangeably. As I said, it references mobile home in the current statute. These first few sections are about how and and amend the process where we're dealing with the sale of a mobile home, whether or not it's in a park. So it doesn't have to be

[John Gray (Office of Legislative Counsel)]: in a park. It could be in a park. It doesn't have to be.

[Cameron Wood (Office of Legislative Counsel)]: And before I jump into the language, just as a very high level comment, understand that different from kind of a a stick built home that's on a piece of land, a mobile home or a manufactured home is mobile. It that's why they initially were told that. As I referenced in the definition, it's built on a chassis that's moved. They're built in manufactured warehouses and then moved to a location. And then from there, they can be permanently cited such that they will not move after that fact, but not all of them are that way. Some of them still, you know, can be moved after they're, you know, put in the the location where they they may become permanent. So I'm mentioning that because current statute, you can sell a mobile home either via a bill of sale or you can purchase it as a mortgage, and it has to be financed as real estate if it meets certain conditions. And so this first section here is amending the definition of permanently cited.

[John Gray (Office of Legislative Counsel)]: And this is important because this

[Cameron Wood (Office of Legislative Counsel)]: permanent siting has an impact of whether something can be financed as real estate or whether it has to be financed as, you know, personal property. And my understanding is it also has implications to the tax treatment of the sale and the tax treatment of the home itself. And I will defer those questions to my colleagues who cover those areas.

[Unidentified Committee Member]: At the end of the page right before this one, it said, list advertising sales display separately, what services are for any other commercial. Whitney is not used for living in?

[Cameron Wood (Office of Legislative Counsel)]: So, it could be used as a display home. Right. All

[Unidentified Committee Member]: must be related to the actual property. Could you put mobile or could you put mobile clinic in there for health services? Would that change what this is?

[Cameron Wood (Office of Legislative Counsel)]: I guess I'm not following.

[Unidentified Committee Member]: Mobile home remains mobile home.

[Cameron Wood (Office of Legislative Counsel)]: Right, so this is saying a mobile, right?

[Unidentified Committee Member]: So all those things are completely connected to the actual mobile home, it's not, I was reading it differently.

[Cameron Wood (Office of Legislative Counsel)]: This is a thing that

[Rebecca Holcombe (Member)]: has other

[Unidentified Committee Member]: commercial purposes, if you have any commercial purposes because it says that.

[Cameron Wood (Office of Legislative Counsel)]: Right.

[Unidentified Committee Member]: You could use it to sell bananas, or you could use

[Rebecca Holcombe (Member)]: it to sell canned dough,

[Unidentified Committee Member]: or you could use it in the store.

[Emilie Kornheiser (Chair)]: The Back up to your question, is that okay? Yeah. You could run a cannabis business out of here, and it would not be used as a domicile, but it would still remain a mobile home for the purposes of this chapter?

[Cameron Wood (Office of Legislative Counsel)]: So the chapter is about what you have to do when you sell them.

[Unidentified Committee Member]: Great.

[Cameron Wood (Office of Legislative Counsel)]: And so that's how I read it, is if you're using it for some other purpose, if you're going to go sell it, it doesn't become something different. It's still a mobile home for the purposes of the sections in this chapter that deal with how you transfer ownership of that building. Is that I hope I'm clarifying.

[Unidentified Committee Member]: Right.

[Emilie Kornheiser (Chair)]: I feel clarified.

[John Gray (Office of Legislative Counsel)]: Okay.

[Unidentified Committee Member]: Okay.

[Cameron Wood (Office of Legislative Counsel)]: So we get to this definition of permanently cited, which, like I said, has kind of some implication of when you're giving it certain tax treatment or whether it's gonna be financed in a specific way. And the the language here is just clarifying that permanently cited means one or more of the following things. So, you know, currently, was a question from individuals testifying on the bill. There were questions about whether or not all five subdivisions had to be met in order for something to be permanently cited, and the committee wanted to specify that everything in this list has to occur in order for something to be permanently cited. Okay. So we're getting into the next section here, twenty six zero four. So this is about deeds. So as I mentioned at the beginning, these things can be sold via bill of sale or they could be sold via a deed. There is a section that's not here in the bill, but it's in this chapter that says that if an individual owns the property where the home is going to be located, it shall be financed as residential real estate. And then it says if the person does not own the property where mobile home is gonna be located, it may be financed as residential real estate. So this kinda gives a little bit of, flexibility for financing institutions depending on the circumstances of whether they would be comfortable financing it as a mortgage or financing it as personal property. This has implications because, generally speaking, if you finance it as personal property, you may not get the same terms as you would for financing it under a mortgage. And so that flexibility currently exists, and there's nothing in this draft that changes that specific statutory section that says that. There are some changes here when something is being transferred via a deed. So sub a says, if you're buying the home from a dealer after on or after 07/01/2008 and it's being financed as residential real estate, it shall be conveyed by a deed. And then there's another section later on that says if somebody is purchasing it via a mortgage, it needs to be transferred via a deed. This and then there's another section which we're gonna get to in a minute about converting bills of sale over to deeds. So what you all have done in the past is try to move the statute in a direction of transferring treating and transferring the ownership of these properties via deeds.

[Emilie Kornheiser (Chair)]: And I think there's been sort of a long standing, slow process of us trying to treat manufactured housing with the degree of respect under the law that we treat stick built housing. And if I think about it in the context of the other work we're trying to do to create consistency in appraisals between towns, this is one of the places that I personally have seen the most anomalies or the way that we use the property transfer tax. Sort of thinking about that as a consistent frame is how I'm trying to view this bill.

[Cameron Wood (Office of Legislative Counsel)]: Okay. So the this what this section is gonna do is sub a, if you buy from a dealer, finances real estate, has to be conveyed via deed. Sub b, if the owner or excuse me. The owner shall, upon financing or refinancing a mobile home as real estate or selling it as real estate, transfer it via a warranty deed or a quitclaim deed, which is then identified in the section. So that's the first two things about this, a and b. If you're financing as real estate, it has to be transferred via a deed. The recommendation here is to walk that back. So as you can see, first off in the subdivision a, they're striking a requirement about, what the deed needs to look like. And I'm gonna get to that in just a second as I get down sections. The subdivision b here says that instead of a shall finance it as real estate, it's the owner of a mobile home that is permanently cited may finance it as or excuse me, may issue it to the grantee, the person who's buying it by a warranty deed or a quick claim deed. So it's no longer a requirement. It's a May. And then I'm going to pardon the scroll, because I'm gonna get us all the way down to a new subdivision e in this section, and then I'm gonna come backwards. This new subdivision e is gonna go in. It's gonna say nothing in this section prevents a mobile home owner from conveying a mobile home by bill of sale or financing or refinancing the mobile home pursuant to this section, notwithstanding whether the mobile home was previously conveyed finance or refinance as residential real estate.

[Emilie Kornheiser (Chair)]: So would that allow something to move between a deed and a bill of sale and then back to a deed, and you'd lose the beautiful title history?

[Cameron Wood (Office of Legislative Counsel)]: You're taking the words out of my mouth. I was going to phrase it slightly differently, but yes, currently, there's statutory language that says if it's treated as a deed, then it's treated as a deed throughout from thereon. There's no going backwards to then treat it as a bill of sale afterwards and treat it as personal property. What this subsection would do is kind of remove that requirement, and it would allow individuals who have financed it via a deed, if they're going to transfer ownership to someone new afterwards, they could then do it via bill of sale, not via deed.

[Unidentified Committee Member]: I don't know if it's a proper question for cameras. Do you know why the

[Abby Shepherd (Department of Taxes)]: committee decided to go there?

[Emilie Kornheiser (Chair)]: I guess I'd love for you to talk to the community

[John Gray (Office of Legislative Counsel)]: to find that out.

[Charles Kimbell (Ranking Member)]: Is there seems strange that we should treat the transfer of property differently based on how it's financed. We don't do that for other properties. That's why this sounds strange.

[John Gray (Office of Legislative Counsel)]: Right, that was my point. Yeah.

[Cameron Wood (Office of Legislative Counsel)]: So at the start, they are slightly different in the sense that they're mobile. As I mentioned at the very beginning, I mean you can come into this state or go into another state and buy a mobile home and then take it out of state and move it somewhere else. So they're not, in all instances, permanently affixed to property. And so historically, they weren't treated as typical real estate and given deeds because they live in this hybrid existence of it's a piece of personal property that you can live in. So I agree with your point, and that was one of the comments I made a minute ago. It seems like, at least in my reading of the statute over time, this body has determined that under certain circumstances, when it really seems to be more appropriate to treat it as if it's a real property, piece of real property, then we're going to treat it as real property. And we're going to make it be transferred via deed from there moving forward. And this section would be I don't want to say going backwards, but it would be going in a different direction of then giving flexibility for the owner to transfer it via either a bill of sale or a deed.

[Emilie Kornheiser (Chair)]: I don't want this to be like a red herring, but people actually move stick buildings too. Sort of It's charming when you see it, right? And it's harder, but it happens. It's not expensive. It's actually quite expensive to move a manufactured home as well.

[John Gray (Office of Legislative Counsel)]: Okay.

[Cameron Wood (Office of Legislative Counsel)]: These next few sections, will point out a change that the General and Housing Committee is recommending. If you remember the section a and the section b subsection a and b says, if you're buying it from a dealer and you're financing as real estate after 2008, shall be transferred via deed. Next section, if you're financing it as real estate, you're transferring it, it shall be treated, you know, it has to be treated via deed. Section C and D then talks about what type of deed, whether it's a warranty deed or a quick claim deed. And then it provides a form of what that deed can look like. What the proposal here to strike is the deed that's striking, that is substantially in the form provided in this subsection. And they're adding in here at the bottom a warranty deed described may take the following form. There is a legal consequence of these two lame these two pieces that you need to be aware of. How the statute is written, it says, if you're transferring it via a warranty deed, that is substantially in this form, then it has these legal consequences when it's duly executed and delivered. Line six right there. Substantially in this form, when it's duly executed and delivered, it has the force and effect of a deed and fee simple. And the key thing is then gonna be that the individual selling it warrants and defends the same to the grantee and their heirs. So it's saying if you're transferring it via deed and you do it in this form, it has this legal effect. By striking that language at the top, you're saying that the deed doesn't need to be in that form. What form does it need to be in? The statute doesn't say.

[Emilie Kornheiser (Chair)]: So it could be, like

[Cameron Wood (Office of Legislative Counsel)]: My understanding, I I don't know, if there's any other statutory section that would control, not to my knowledge, but if you wrote on a piece of paper that, you know, you're conveying a deed to somebody and you're duly executing it and you signed it, you know, in accordance with any legal requirements there, that would suffice. There's a lot of information that's in this form. I mean, it talks about where it's located. It has to have description, name here on line six, name of the manufacturer, the model, the serial number, encumbrances, exceptions, you know, where the thing is going, the book and the page number and the land records where it exists. So there's a lot of information there. And the proposal here is to not require that it be in substantially deform. If you're asking why, my understanding is there was testimony from certain financing lenders that said nobody follows it, so we shouldn't make people follow it. My response to the committee and to you all is it doesn't mandate that it be followed. It just says substantially this form. So it could be in a slightly different form, but it would need to be in substantially that form.

[Abby Shepherd (Department of Taxes)]: It contains that information.

[Cameron Wood (Office of Legislative Counsel)]: Correct. So just a thing for you all to be aware of. One other thing I will mention here is there was striking this language about whether or not you need to get the landowners authorization.

[Emilie Kornheiser (Chair)]: Before we get to that, I think we have a question from Chris and then I have a question.

[Charles Kimbell (Ranking Member)]: Thank you. Thank you. My apologies.

[Unidentified Committee Member]: Can you shed some insight in why the committee wanted to go in this direction? And can I add a you know, it seems to me we would be going if we pass this out, going from something that's pretty straightforward and neat and clean to something that's potentially nebulous? And why would they want to do that?

[Emilie Kornheiser (Chair)]: I'm not going to ask Cam to speak for the committee. Don't think that's a fair position to put him in, but I encourage you to go ask someone on the committee. Okay. Thank you. Thank you. Okay. So my question is, are you aware if someone transfers that property via sort of

[John Gray (Office of Legislative Counsel)]: a

[Emilie Kornheiser (Chair)]: note, like an informal note, and that doesn't contain that information, what would happen for, like, grant list listings and lister cards and stuff like that?

[Cameron Wood (Office of Legislative Counsel)]: I don't know the answer. I'll stop my asking. Keep But I wanna think about it and come back.

[Unidentified Committee Member]: Yeah. I represent less

[John Gray (Office of Legislative Counsel)]: than that.

[Cameron Wood (Office of Legislative Counsel)]: What is the I don't know if

[Unidentified Committee Member]: this is an obvious question or not. What is the difference between a warranty deed and a paid deed? So the warranty

[Cameron Wood (Office of Legislative Counsel)]: deed is where the individual who is selling that property is guaranteeing clear title of that property, and they will defend the purchaser of the property against any claims against that. And the warranty deed is the opposite. You are transferring the ownership that you have, and you're not defending against anyone who has a claim of ownership over you. Okay, so in this, just trying to, I guess, kind of, you know, very briefly summarize. In the sections authorizing the sale of these things via a bill of sale regardless of whether it has been financed or transferred via deed previously, and then changing the requirement that the deed that conveys the property be in substantially the form that's out in statute. The last piece I will mention here, as I said, is currently, if you're purchasing the home and it is on someone else's property, you need to get that land owner's permission or the statute indicates that you need it. Here in the struck language here, it says no owner of land on which the mobile home is cited shall unreasonably withhold the consent. And then when you get to the deed section itself, it has a section where the owner of the tract of land signs. And so that was struck. And the discussion was that they didn't feel that it was necessary to get the landowner's permission.

[Emilie Kornheiser (Chair)]: Okay. I'd love us to think about those that scenario.

[Cameron Wood (Office of Legislative Counsel)]: So I did flag for the committee that you

[Emilie Kornheiser (Chair)]: Is that just private landowners, or could it be a landowner, like a park owner? Is a park owner a landowner?

[Cameron Wood (Office of Legislative Counsel)]: Yes. It could be. So the scenarios that I gave are it could be a mobile home park. So you own the mobile home park. You don't own the mobile homes themselves. You may. But somebody owns the mobile home, and they're just paying you the rent to be in the lot, the lot rent. And you would not they would not be required to get your permission to come on and then move that sell and move that home. And I brought up it could be a park in that situation, or it just could be somebody's property. And I could have multiple acres where, I have my home on one part of the land and a mobile home on a separate part that I have allowed somebody to put there. And that could be a scenario as well.

[Charles Kimbell (Ranking Member)]: It'd be reasonable for a lender to require a lease agreement to be executed in part of the package.

[Cameron Wood (Office of Legislative Counsel)]: Well, especially if you're moving it from one part to another. Yes. Okay. So the c and the d are just the different deeds and the different forms. The amendments there are the same.

[John Gray (Office of Legislative Counsel)]: Walk Can come back up?

[Cameron Wood (Office of Legislative Counsel)]: Yes, ma'am. Go up to There's like

[Emilie Kornheiser (Chair)]: a gendered wife husband language. There

[Cameron Wood (Office of Legislative Counsel)]: is in the form itself.

[Emilie Kornheiser (Chair)]: Is that like a drafting convention that we do now? Or is there a new drafting convention that's a little

[Mark Higley (Member)]: That

[Cameron Wood (Office of Legislative Counsel)]: is in current statute. And you could change it to be more neutral language.

[Emilie Kornheiser (Chair)]: Are there drafting conventions around that at all? Typically, there are, yes.

[Cameron Wood (Office of Legislative Counsel)]: What are they? As a general matter, we would go to a more neutral reference.

[Emilie Kornheiser (Chair)]: I'm gonna withhold all of my other amendment desires except for that one, which I think like, I'm just gonna say that we

[Abby Shepherd (Department of Taxes)]: would like to do that, please.

[Cameron Wood (Office of Legislative Counsel)]: Yes, ma'am. Thank you.

[Unidentified Committee Member]: Yes.

[Emilie Kornheiser (Chair)]: I will not The others can wait for actually more formal

[Cameron Wood (Office of Legislative Counsel)]: I will take some ownership in that, in that initially, the form was going to be struck. And so it was all just strike through. And then at the end, I commented to the committee that they may want to provide a form. Whether you're gonna substantially require people follow it or not, it's probably a good policy to have some indication to the public of what it could look like so it became unstruck at the last minute and did not get a further amendment from there. Okay. So that's the end of that section. Moving I'm on page seven now. Moving into the next section where the proposal is to strike this entire section two six zero five, and the section is listed as mobile home bill of sale conversion process. So as I mentioned, of these homes don't have a deed. They may have been purchased via a bill of sale many years ago, and the individual has lived in it, and there's never been any need or reason to convert it over to a deed. Well, now, if you remember in the previous section, it says that if you're going to sell it and transfer it to somebody who's gonna finance it as real estate, then you have to transfer it via a deed. So this section is how an individual takes the bill of sale and goes and converts it to a deed with the clerk's office in the town where the mobile home is located. The proposal was to strike this entire section somewhat in alignment with the above because there's an authorization to transfer them via bill of sale or deed. I did comment to the committee that you're removing the statutory authority where you convert a bill of sale to a deed, which somebody may want to do?

[Abby Shepherd (Department of Taxes)]: For whatever

[Cameron Wood (Office of Legislative Counsel)]: reason they would have. For whatever reason the conversion has, and I will defer to the commitment.

[Emilie Kornheiser (Chair)]: But I'm wondering the reasons that a person who maybe even before this passed had a bill of sale, they might want to convert it to a deed. Can you imagine a scenario where that might

[John Gray (Office of Legislative Counsel)]: be true?

[Cameron Wood (Office of Legislative Counsel)]: Well, immediate scenario was the requirement that you had to if you were selling it to somebody or you're refinancing it as real estate. Maybe you purchased it at a time and you could only purchase it as a personal property loan, but you've paid it off. And now at some point, you want to go get some sort of loan taken out using your house as the collateral. Could you do it as a real estate transaction? You would need to have a deed, and you could convert it to do that.

[Charles Kimbell (Ranking Member)]: So it's also the example that if a person purchased it on a mobile home lot, there would be a bill of sale, but then citing it, it would then be eligible to be a warranty fee. It would be eligible to be financed as real estate at that point, yes.

[Cameron Wood (Office of Legislative Counsel)]: And I don't know at what point the lender is going to gather that information. When you're buying it from a dealer, presumably, know where it's going and whether it's then going to be permanently cited there. So I don't know if a finance lender is gonna say, I'll give you a personal property loan, and then when you cite it, we'll convert it to a real estate agreement. Or if they would make that determination on the outset, I don't know the answer to it.

[Mark Higley (Member)]: Patrick Higley? Maybe you've already said this, came in late, but currently you have to present a uniform bill of sale before you can move that

[Charles Kimbell (Ranking Member)]: off its site.

[Mark Higley (Member)]: Yes, So would now that after it could include either a deed or a bill of sale?

[Cameron Wood (Office of Legislative Counsel)]: So there's a section of great points or there's a section that's not in the bill where if you're transferring ownership via bill of sale, you have to go through a lot of steps when you're doing that. You have to go to the clerk where the location of the house, where the location of the mobile home is. You have to get sign off from the clerk's office that you don't owe any taxes on that home. You would then have to take it to the clerk if you're moving it into another town, then you would have to file the bill of sale there. So there's a lot of steps in what you go through if you're transferring it via a bill of sale, and none of that was changed. So if you are transferring it via bill of sale, you would still have to comply with all of those requirements. What this is doing is it's primarily just, it's removing requirements that if you're transferring it and it's being financed as real estate, it's not required to be transferred via PEEP anymore. That's really that I would say one of the primary changes here. Okay. So there could be reasons you would want to convert it. And I think in statutorily, the primary reasons would be you're financing it as real estate or someone's buying it from you financed as real estate, in which case it has to be transferred via a deed. And so if you only have a bill of sale, this would be the process you would go through to convert it to a deed.

[Unidentified Committee Member]: So on the bottom of page six, Pam, you have the section of allowing a property to be sold to have a bill of sale, sold with a bill of sale. But then in this section, this is removing the statutory authority to convert it back to it. So does that create somewhat of a

[Unidentified Committee Member]: legislative tracks? Potentially.

[Unidentified Committee Member]: You could use a less strong written track, but

[Cameron Wood (Office of Legislative Counsel)]: I can see it as a possible issue. The statute and the changes that are made here don't change the fact that there are these homes that exist that don't have deeds because they weren't financed that way. And I did mention to the committee that by striking this section, you are removing the ability to convert that to a deed. And whether if this were to go into effect as it's drafted, you can still transfer them via deed. And so there may be a reason you still need to convert it. And whether a finance lender would accept one versus the other, require a deed moving forward, allow someone to transfer via bill of sale if they're financing via real estate, I have to defer those questions to those entities that are operating in this space.

[Unidentified Committee Member]: That was actually oh,

[Rebecca Holcombe (Member)]: I had a question about money. This is something we might consider at risk.

[Cameron Wood (Office of Legislative Counsel)]: Okay. I am on page eight. Now we're going to move into a different area of the law, different concepts. We're going to talk about limited equity cooperatives. And I'll start by just giving a very brief overview for those who may not be aware. In Title XI, which deals with corporations, there are cooperative housing corporations that can be organized and registered with the Secretary of State. And those are organizations that own property and individual members have a membership share in that cooperative. And that membership share gives them a proprietary lease, which is the right to live in a portion of that property. And I'm trying to be careful here because these could be apartment buildings, they could be a mobile home park. I mean, there's many different types of homes that a corporate housing corporation or a cooperative housing corporation could own. And you would have a proprietary lease to live in whatever that arrangement is. One of the apartments in an apartment building, one of the rooms in a house, mobile home on a mobile home park. And so within the Cooperative housing corporation chapter, there is what's called a limited equity cooperative, so a subset of these. And as you can see in the sub a here, the purpose of a limited equity cooperative on line 15 is to fulfill the public purpose of providing and preserving housing for persons and households of low and moderate income at the time they purchase their membership. So the design here is this is gonna try to be available to people with low and moderate income. Those terms are defined. I believe low is 80% AMI, and I think moderate is hundred, one hundred and twenty. I'll check while we're sitting here talking. So within that, this section, if you're going to be a limited equity cooperative, there are certain additional restrictions that apply. And one of those is you have to have this value formula that So it's sub one here. The articles of incorporation shall require that the cooperative interest be sold at not more than a transfer value determined by a limited equity formula contained in the articles. And again, that formula is designed to provide and maintain long term affordability to people of low and moderate income. So the point here is you don't want the membership shares to be extremely high. You're trying to get make this affordable for people. The other key piece that I will so I'm kind of skipping a lot of the section here, because I want to bring you down to the sub six, which is the other important piece to be aware of. The articles of incorporation require that upon dissolution of the Cooperative Housing Corporation, any assets remaining after retirement of corporate debts and distribution to members of their share shall be distributed to a charitable organization described as section five zero one(three) of the IRS or another limited equity cooperative. So if you're registered as a limited equity cooperative, if you dissolve, which requires a vote of the members, then when you dissolve, after you pay off whatever debts you have as the cooperative organization, You pay the individuals their membership share, which as I mentioned in number one, is intended to be an amount that makes it accessible for people of low and moderate income. Anything that remains must go to a nonprofit or another limited equity cooperative. That's gonna be important, in a separate section of the bill. The last piece here is the the sub seven and then the new sub eight. So the art this is in sub seven beginning on line six here. The articles of incorporation require that no sublease of a unit shall provide for monthly payments by the sub lessee in excess of a 110% of monthly payments for the unit provided in the proprietary lease. What does that mean? Again, it's intended to a cooperative housing organization is an intended cooperative structure where the members live in the housing itself. So there are separate requirements that say that 80% of the units of a cooperative housing organization have to be lived in by members of that organization. And there's a separate section that says if you sublease a unit, you can only sublease it for one year at a time. So you've already put some limitations on how many people can sublease and for how long. And what this is saying is for the limited equity cooperatives, we're going to further restrict your ability to sublease because we want it to be available for low and moderate income people. We're going to say that you can only sublease the unit for a 110% of your proprietary lease costs. Whatever your membership cost is to live in this cooperative organization, you can only charge 10% above that if you're gonna sublease the unit. The issue becomes and was talked about in committee for certain mobile home parks that are limited equity cooperatives. If the individual owns the mobile home on the park, they may have a mortgage. And if they need to lease that unit out, they can only lease it for a 110% of their membership costs, which in some instances is only a few $100 for the lot rent. So if you have to lease it, you can only lease it for 10% above that, which wouldn't be enough to cover things like your mortgage, your utilities, or upkeep, etcetera. That was the issue that was raised that they were trying to address. And so what they did was they added this sub eight, which says that for a mobile home park organized as a limited equity cooperative, the articles of incorporation shall prohibit the subleasing of a unit unless a member demonstrates a hardship, in which case the board of directors may, an affirmative vote, grant an exemption. That's not defined, so it would be up to the cooperative itself to determine what a hardship would be. And then it says that the unit has to be subleased to an individual of low or moderate income. As I mentioned, those are defined terms. And then lastly, it says that it would require that the unit owner shall not sublease the unit for a higher amount than necessary to cover costs of the unit, which include the monthly payment, the proprietary lease that you're paying. Moving to the top of page 11, the mortgage, utilities,

[John Gray (Office of Legislative Counsel)]: etcetera.

[Emilie Kornheiser (Chair)]: And this section feels to me to be one of the sections that's further from tax policy.

[Charles Kimbell (Ranking Member)]: Okay.

[Emilie Kornheiser (Chair)]: You could say that someone's ability to pay their property taxes would be sort of wrapped up in this. That's the only reason I would. But that's a stretch.

[Mark Higley (Member)]: Do you know, so whether it is a deed or a bill of sale, it sounds like from what you were talking about, could be a financing different from banks regarding that? Yes, sir. Has that been considered and discussed in committee as far as maybe even christelia? Because I would think regardless, it would still be financed as a new law.

[Cameron Wood (Office of Legislative Counsel)]: I will say I was there when Mr. Ode testified and he was asking that the flexibility to finance it as either real estate or personal property remain. That was one of his primary concerns. He was there was discussion at one point of whether to mandate that all of them be financed as real estate, to take away that option to finance it as personal property. And he testified that there was concern among his membership about if that were the case, they would just pull back from financing mobile homes entirely. So he wanted that flexibility to remain, and the committee left that alone. They left it such that there is a little bit of flexibility there.

[Charles Kimbell (Ranking Member)]: Thanks.

[Cameron Wood (Office of Legislative Counsel)]: Okay. I'm going to try to speed up a little bit. This last subsection B here is stating that so we're still in a limited equity cooperative chapter. States that a mobile home park organized as a limited equity cooperative shall be treated for the purposes of state funding and grants as if it were incorporated as a state nonprofit for a public purpose and public benefit under the laws of this state. Nothing in this section shall be deemed to alter or change specific funding or grant requirements, including the definition of low or moderate income as outlined in the new program funding or grant source. The problem that the committee was trying to address here is with These are corporations, corporate entities. They have to register with the Secretary of State's office. Some of them with the Secretary of State's office are listed as nonprofit organizations and some are not. And as they were digging into that, the Secretary of State's office indicated that at some point in the past, these entities were being treated as if they were nonprofits. They're not, by nature of the fact that it's a limited equity cooperative, doesn't automatically make it a nonprofit. And when you actually look at the cross references in the statutory section and the organization structure itself, it's, somewhat aligned in a for profit status, not a nonprofit status. And so there are some that are listed as nonprofit, some that are. The new Secretary of State's registration system lists them properly, which is just a business organization, cooperative housing organization, limited equity cooperative, and doesn't make a claim as to whether it is nonprofit or for profit. Because of that, the testimony in the committee and the problem was there are it is difficult for some of these entities to access certain state funding and grant sources because it may be difficult for them to demonstrate their nonprofit status. And so they wanted this language in here to try to signal to state funds and state grants that these entities are similar to nonprofits. They serve a public purpose and a public benefit, and they should be treated as such. Didn't want that to be interpreted to somehow alter any of these specific eligibility criteria for any state funding and grant. And their point, I see we have a question about their the point they were kind of referencing back to is this provision in subsection six, which limits what any equity, money equity that a limited equity cooperative has when it dissolves the limitation on its use from there.

[Emilie Kornheiser (Chair)]: I think there's an existing question about if this applies to property taxes and income taxes that needs to be resolved.

[Rebecca Holcombe (Member)]: That was one of my questions. To steal your thunder. No, no, that's great because I'm giving you a chance for a second question, which is, Kim, who is not included in this? We're using the term mobile home park. What about permanently affordable village created using modular housing? Would that constitute the same thing?

[Cameron Wood (Office of Legislative Counsel)]: It is a great point of highlighting that the limitation here is for a mobile home park organized as a limited equity cooperative. So the sub B doesn't even apply to all limited equity cooperatives, which have the same condition. The sub six applies to a limited equity cooperative, whether it's a mobile home park or not. The sub B here would only apply to a mobile home park that's a limited equity cooperative. So unless the village you're referring to is registered as a limited equity cooperative, then it would not apply.

[Rebecca Holcombe (Member)]: But if it was registered as limited equity cooperative, but it wasn't a mobile home park Then

[Cameron Wood (Office of Legislative Counsel)]: it would not apply. No, ma'am.

[Rebecca Holcombe (Member)]: It seems, going back to your point, if what we're trying to do is build consistency, it seems like that's another potential need for modification.

[Cameron Wood (Office of Legislative Counsel)]: Okay. Moving into the next section. This is the bottom of page 11. This is a little bit outside my area. This is more municipal zoning, and it's an area covered by Ellen in our office. But I will just comment what's here on the page. This is trying to clarify that for municipal zoning purposes, the bylaws cannot exclude so I'm on lines eighteen and nineteen The bylaws cannot exclude mobile homes, modular homes, or prefabricated housing. Currently, it just says from the municipality, and this is just clarifying that the bylaws cannot exclude those types of housing from districts that allow year round residential development. And if you have any specific questions about the impact of that, I would potentially defer that to Al. Okay. So now

[Emilie Kornheiser (Chair)]: we're moving into section that's outside of our jurisdiction.

[Cameron Wood (Office of Legislative Counsel)]: Understood. We're gonna move into areas that are covered by my colleague here, but I'm gonna scroll down because I just want to bring up one other section that is in my area, which is here on the bottom of page 18. There's some session one here that talks about the Secretary of State's business registration, and it just authorizes the Secretary of State upon a request from a limited equity cooperative to update the limited equity cooperative's registration to ensure proper reflection of the cooperative's business organization structure within the Secretary of State's system. As I mentioned earlier, there are some that are listed as nonprofits. There's a question about whether or not they actually are nonprofits. And so as opposed to unilaterally making them all nonprofits or unilaterally going in the opposite direction, the Secretary of State's office was okay with this language of saying, if the entity so chooses, we will update their registration within our system to accurately reflect what it should be. And then the last thing is what I mentioned towards the beginning, authority for our office to make revisions to the Vermont statutes to replace mobile home with manufactured home where it's appropriate.

[Emilie Kornheiser (Chair)]: Is that how that's always phrased?

[Cameron Wood (Office of Legislative Counsel)]: Manufactured home?

[Emilie Kornheiser (Chair)]: Like when you do a find and replace formally? When you do a formal find and replace, is that Yes, how you usually phrase

[Cameron Wood (Office of Legislative Counsel)]: this is the template language that we use. And then effective 07/01/2026. And if you would like, Madam Chair, I'm happy to turn it over to my colleague to walk through the remaining sections of the bill.

[Emilie Kornheiser (Chair)]: That sounds great. I'm going to make a brief public service announcement that we are moving H750 to some other time this week so that we can finish walking through this bill. So anyone here who's here for school stuff, we won't be able to physically leave. Dawn's here for both hands, so if you can start off. Oh my.

[Unidentified Committee Member]: You're

[John Gray (Office of Legislative Counsel)]: pretty stable. I'm

[Emilie Kornheiser (Chair)]: also going to make a public service announcement that we're probably going be here Friday afternoon, but I don't have anything scheduled yet.

[Cameron Wood (Office of Legislative Counsel)]: Madam Chair, I apologize, but I am scheduled elsewhere. So I will follow-up. Thank you. You're welcome. My pleasure.

[John Gray (Office of Legislative Counsel)]: Afternoon. I don't know if I saw you this morning, but I am still John Gray. I'm the

[Cameron Wood (Office of Legislative Counsel)]: solicitor

[John Gray (Office of Legislative Counsel)]: council. Before I screen share, because I'm gonna pull up what we were just looking at with Cameron, I think it's actually simpler for me just to explain what's in my sections because the concept is incredibly simple, but the language is not. So I think Cameron did a really good job of setting up that sometimes manufactured homes are treated differently. Sometimes they're mobile, sometimes they're fixed to the land, sometimes they're financed as tangible personal property, and sometimes they're financed as real estate, in which case you get a mortgage. One of the consequences that follows from this is what kind of taxation do you get for a manufactured home depending on its treatment? So if it's real property, it's subjected to the property transfer tax. But if it's been financed as tangible personal property, it's movable, you just bought it from the lot, it's not fixed to land, it may then be subjected to sales and use tax rather than the property transfer tax, which only applies to real property. So the sections that you're gonna see me walk through are just treating all manufactured homes the same for this point of sale tax regardless of the financing structure. And so what it does is it exempts from the sales and use tax mobile homes that are treated as tangible personal property and subject them just like manufactured homes that are treated as real property to the property transfer tax. The end result is all manufactured homes under that definition in Title X would be subjected to the property transfer tax and none would be subjected to the sales and use tax. That is the simple explanation of what is happening in infections. The reason I'm gonna have a lot of text for you is because we don't typically subject tangible personal property to a real property tax, which means that all of the defined terms we have in that chapter, the property transfer tax, may not speak to the terms that we use when we talk about tangible personal property, so lots of conforming changes have to be made to subject manufactured homes that are tangible personal property to a real property tax.

[Emilie Kornheiser (Chair)]: And so I think there's the policy consistency question that I want us to focus on here, and then there's a secondary question of removing something. We're talking about Ed fund revenue, and we're talking about housing is it housing fund?

[Cameron Wood (Office of Legislative Counsel)]: No, housing conservation. Yeah.

[Emilie Kornheiser (Chair)]: Yes. So we're talking about different pots of money coming in as well. Bridget.

[John Gray (Office of Legislative Counsel)]: Here we go. So I am on page 12, and we're first starting out with the sales and use tax exemption. And for our exemptions, we set out statutory purposes. So what you can see here in non underlying language, we're getting on line nine. So we've stated the statutory purpose for the existing exemption for certain kinds of mobile homes and modular housing. This is not what Cameron has been talking about. This reference to mobile homes and modular housing is using a title nine definition that is different than the Title X definition of manufactured homes that Cameron talked to you guys about. You'd like to see it. You've technically seen it at the beginning of this bill, but

[Cameron Wood (Office of Legislative Counsel)]: I will just flip to it real quick.

[John Gray (Office of Legislative Counsel)]: This title nine definition of mobile homes picks up both the classic definition of mobile home in title 10 that Cameron talked walked you through and also picks up this other category, unmotorized vehicle other than travel or recreational trailer designed to be towed and designed or equipped for use as sleeping, eating, or living quarters. Whatever that may be, that is still subjected to the sales and use tax under this chapter. However, there is an exemption provided for those mobile homes and modular housing under that definition.

[Unidentified Committee Member]: Yes. So like a camper

[John Gray (Office of Legislative Counsel)]: where Yeah. Think that's where the that's the intention. I think that's right. Campers under Exactly. Oversimplification, but that's I the think that's the easy way to think about it. The new language that we have here beginning on line 13 is the exemption I was just talking about. So the statutory purpose of the exemption for sales of mobile homes is to ensure that all sales of mobile homes as defined in title 10, that classic definition of mobile homes, are treated similarly for purposes of the property transfer tax. So treat all title 10 defined mobile homes the same way for purpose of the property transfer tax. So to ensure that they aren't double hit, if they don't both get paid sales tax, also a property transfer tax, we are in section six creating an exemption. So that's on page 13. Bleeding into page 13, retail sales and use of the following shall be exempt from the tax of retail sales and the use tax. You can see the existing 40% exemption that's not being touched. It's just updating the reference. That's for those campers types. So those are exempted 40% of those receipts, but the new exemption is your subdivision b here on line five. Sales of mobile homes, as defined in title 10, when sold as tangible personal property, would now be exempt from sales and use tax. The next sections are just subjecting those same set of mobile homes to the property transfer tax. And exactly as I described before, I have to create a bunch of conforming changes to ensure that the definitions that typically apply to real property pick up tangible personal property. You can think about if we're transferring by deed. It's not the sort of thing that would apply to tangible personal property, so we're adding terms to make clear that the commonly used terms in this chapter will capture this tangible personal property. That's what you see on line sixteen and seventeen. In the case of a mobile home, so it's tangible personal property transfer includes a sale, and it's a lot of changes along this line. But

[Emilie Kornheiser (Chair)]: Wanted to simplify this considerably. What would a path to that be? So

[John Gray (Office of Legislative Counsel)]: if nothing was transferred by bill of sale but was instead done by deed, as in all manufactured homes were treated uniformly as real property rather than tangible personal property, you would need to make none of the changes in any of the sections that I have. They would all go away. Should be great for me.

[Cameron Wood (Office of Legislative Counsel)]: I would need. This isn't about You didn't say the word. Because

[John Gray (Office of Legislative Counsel)]: then all manufactured homes would be subjected to property transfer tax because they would be real property.

[Charles Kimbell (Ranking Member)]: The question becomes, which we have to discuss, is when is it advantageous for buyer, seller, or lender to treat it as tangible property instead

[John Gray (Office of Legislative Counsel)]: of real property? And that's exactly the questions that House General was asking and trying to reach the place like that.

[Charles Kimbell (Ranking Member)]: There'd be a problem separating campers.

[John Gray (Office of Legislative Counsel)]: So those would still be we have a call out for those because we can reference the Title IX definition. So I I might need to make one tweak to that section. That's possible. But, yes, they would still be subjective to the there's a there's a way to treat those under sales and use, maintain those for sales and use, and then treat all others uniformly for the property transfer test.

[Mark Higley (Member)]: Sorry, the last one, Joel? So under the property transfer tax for your mobile homes, they could still be looked at as a seasonal home, in other words, the higher property transfer tax rate? Yep.

[John Gray (Office of Legislative Counsel)]: And we would have to look at the if we started going down that path, I'd have to look at the you'll recall that the way the property transfer tax is set up is you have that 1.25, but then you have a list of exclusions and different treatments based on certain values. So we would we could look at those if we started going down. Other similar type changes, value, the existing definition of value references transfer of title to property, fixed to gifts, controlling interest. We just need to make sure that we picture up sales of tangible personal property. So that's what you see on lines 11. In the case of a mobile home sold as tangible personal property, value would be the amount of the full actual consideration of such sale paid or due paid, including the amount of any liens existing before the sale and not removed thereby, capturing the same concepts as applied to one that are sold with a deed, but just referencing sale as opposed to transfer by title. Gonna be boring changes throughout these sections.

[Unidentified Committee Member]: Thanks for the

[Emilie Kornheiser (Chair)]: Could something be transferred via a bill of sale and then immediately converted to a deed for the purposes of

[John Gray (Office of Legislative Counsel)]: taxation? Yes. I think that is the way

[Emilie Kornheiser (Chair)]: If I bought a house in New Hampshire and then brought it to Vermont and converted it to a deed, then everything could proceed from there? How would that work?

[John Gray (Office of Legislative Counsel)]: That's a good question, because I assume you would be trying to pick up the use tax, but you would now be exempted from the use tax under this proposal.

[Emilie Kornheiser (Chair)]: Yeah, because people really track their use tax. Sorry.

[John Gray (Office of Legislative Counsel)]: I know nothing about the real world. I just know what is considered.

[Emilie Kornheiser (Chair)]: From Vermont.

[John Gray (Office of Legislative Counsel)]: I think you would have to figure out how yeah. I don't I don't know the exact way to deal with I'm just

[Cameron Wood (Office of Legislative Counsel)]: trying to

[Emilie Kornheiser (Chair)]: think through the scenario. I mean, clearly, just having deeds would create consistency under the law in a way that would make everything else work. But I'm thinking about the scenario where you're working with a seller that just doesn't want to deal with such things. Ways to still have it work out. Okay.

[John Gray (Office of Legislative Counsel)]: Yeah. I mean, if they have Yeah. We don't

[Abby Shepherd (Department of Taxes)]: have figure it out, can we?

[John Gray (Office of Legislative Counsel)]: Most obvious change in this chapter, property under the existing law means real property, but now you're adding tangible personal property. So the case of a mobile home sold in that way would include that tangible personal property. Term does not include personal properties transferred real with real property other than a mobile home. So it would be picked up in this way. We've got the call out to the title 10 definition of mobile home. Again, not that title nine more expansive definition. And then page 15, we suspect that this is the actual imposition of the property transfer tax. Taxes hereby imposed upon the transfer by deed of title to property located in the state, transfer or acquisition of a controlling interest in any personal title property in the state in the new language or the sale of a mobile home as tangible personal property in the state, which would speak to the what we were just doing. Section nine, more conforming changes. Taxes paid to the commissioner within thirteen days after transfer of title to property typically. That's how we're typically dealing with real property. In the case of a transfer acquisition of controlling interest for which a deed is not given within thirty days after transfer or acquisition, and then the concept you would have for these kinds of homes or in the case of a sale of a mobile home as tangible personal property within thirty days after that sale. So it's giving the timing with that tax liability. Section 10 is how to deal with property transfer of returns. They've gone into some mechanical pieces. You can see what's done for kind of the existing law and for existing property. In the case of a property transfer by deed, a property transfer of return combined with this section is delivered to the town clerk at the time a deed evidencing a transfer of title is delivered to that clerk for reporting. The case of that transfer by controlling interest for which a deed is not given, a property transfer returns delivered to the commissioner within thirty days after that transfer acquisition. And then the mechanical proposal for dealing with this is that in the case of a sale of a mobile home, it's tangible personal property. Property transfer of return complying with this section shall be delivered to a template at the same time that an executed mobile home uniform bill of sale is filed with the clerk. So if you have that bill of bill of sale, you'd be providing the property transfer of return at that time. Some cleanup changes in this conforming style and then spelling out for subsection e, what are the confidentiality provisions? In the case of a transfer acquisition of a controlling interest in a personal title property for which deed is not given, That's under existing law. The return submitted to the commissioner is treated as a tax return and dealt with under the standard confidentiality provisions of section thirty one zero two. This is treating the sales of mobile health sustainable personal property in the same way. You can see above that this is done differently for real property. The case of a property transferred by deed, commissioners authorize to disclose to any person any information appearing on that return, including statistical information, such information derived from research into information appearing on the returns as is necessary to determine Right. If Sorry. I don't think that there is any I don't think this is a deliberate thought through.

[Emilie Kornheiser (Chair)]: I didn't mean to ask you why. Anyway, so thanks for answering them. Lastly,

[John Gray (Office of Legislative Counsel)]: acknowledgment I think that's for lost money. Acknowledgment of return and tax payment On receipt by a town clerk, the clerk shall forthwith mail or otherwise deliver to the transferee of title to property or the purchaser. We just need to pick up that purchaser. Homeable home and tangible personal property. A written acknowledgment of the receipt of that return and certificate. That acknowledgment shall be affixed to the deed or real property. For that controlling interest, it would be affixed to the document evidencing the transfer acquisition of a direct or indirect controlling interest. And for this set of purchasers, it would be affixed to the mobile home uniform bill of sale. The acknowledgement affixed to that bill of sale shall not disclose the amount of tax paid with respect to any return or transfer. So treating in the same way that these other sets of real property are dealt, but picking up the bill of sale as opposed to a deed. I do have one more piece here. This is a report from the Department of Tax. This is on page 18. This is going back to the concept that Cameron was speaking to you about those mobile home parks that are organized as limited equity cooperatives. There was testimony heard in House General about some broad variation, I think, in the ways that mobile home parks organized in this particular way are valued. So there's just a question as to how to approach that. So this section 12 speaks to it on the fourth On or before November 15, Department of Taxes shall submit a written report to the house committees on housing and on ways and means, and the senate committees on economic development, housing, and general affairs finance with an inventory and analysis of the current appraised value of each mobile home park registered as a limited equity cooperative and would include these three factors, a description of the different appraisal methods used across the state, examination of any justifications for differences in approach, so that there are differences, and recommendations for ensuring consistent and appropriate appraisal, taking into consideration limitations under this callout. And just to remind you of the the callout, this is the piece that Cameron was speaking to you about on those transfers of interests, the proprietary leases and the like, that upon dissolution of a limited equity cooperative, the assets would be applied against the debts and then would could only be transferred, say, to nonprofits or charitable organizations and the like. And so this was from their position, the way that House General was framing this was, is fair market value an accurate way to think about the appraised value of these particular parks? And should this particular section affect the way that

[Emilie Kornheiser (Chair)]: So it's about appraisal, not tax I have not read the section carefully yet. It's about appraisal and not tax treatment. Yes, ma'am. I think when I'd heard about it sort of just around the building, I thought it was tax treatment.

[John Gray (Office of Legislative Counsel)]: Okay. It may at one point have been Okay. And then changed in the final I in the earlier stages of this bill, there was a wholesale exemption for the mobile home limited equity cooperatives from the property tax outright, and there might have been a question about, did you change the treatment of these, but it ended up becoming about permissible variations.

[Unidentified Committee Member]: So was the per representative Holcombe's earlier point, you're talking about just mobile homes that are in an LEC. So is the problem that you're trying to solve, or what's the testimony, and if there's a special person, maybe just on that, Mobile homes generally, that there's not much of an issue with how those are appraised, but when

[John Gray (Office of Legislative Counsel)]: it comes to specifically LEC's, that's where they're seeing the It's more specific than that. So this is about the appraised value of the park itself rather than the mobile home. Oh, okay. And so but you can think about it this way. You could imagine two poles. Imagine a mobile home park organized as a limited equity cooperative, which owns the entirety of the land within its structure. You would imagine that the appraised value should reflect the land values of that, but it might be, and under some of the sections of statute, it might be that they divvy up those interests among the mobile home owners to pay their share essentially of that common interest that they share in. But you can imagine another mobile home park that only owns the communal section and all of the land is otherwise owned by the mobile home owners themselves, in which case you get a different appraised. Yeah. Yeah. Basically.

[Emilie Kornheiser (Chair)]: I think there's I think there's a question of appraisal value, and then there's a question of, like, how parcels are counted and how parcels are combined and then how it's valued. There's no problem.

[Rebecca Holcombe (Member)]: And again, I totally defer to people who know far more about this than I do, but I think this also applies to limited equity cooperatives that have manufactured or modular housing. There is a shift in our building, but it also can include a shared septic system, or a shared water system.

[Emilie Kornheiser (Chair)]: I think it also applies to all manufactured home communities or trailer parks or however we want to describe them, regardless of what their actual ownership structure is. Think there's

[Rebecca Holcombe (Member)]: a I totally agree. I I don't think we're seeing the same thing. We just need to look at where this is too narrow. It's my question.

[Emilie Kornheiser (Chair)]: Yeah. I also think there's a question of, are we actually approaching this very This is very, very narrow. And everything we're doing on mutual assessment districts actually, to some degree, gets at all of this without naming it. But we will have time on all of that.

[John Gray (Office of Legislative Counsel)]: The other thing I might offer on this front, I think this is a comment that was made yesterday, that a lot of times there's variations in practice that aren't attributable to the way that the law is set up. So there may be variation that's happening and we look out and say, Oh, there's this variation. What explains it? We need to change the law, but it doesn't actually address the way that people actually appraise, which is, think, the broader work that you guys are undertaking. So just to say that variation is not in the case explainable through the way that the law is working, and sometimes treating the law does not address the variation.

[Unidentified Committee Member]: Thank you.

[John Gray (Office of Legislative Counsel)]: That's it for me.

[Emilie Kornheiser (Chair)]: Thanks, John.

[Unidentified Committee Member]: Well, thank you.

[Emilie Kornheiser (Chair)]: We're likely to change lots of stuff here, so I don't I'm happy to have you come and give us a sense of scale of what we're talking about, if that's helpful. Then we're going spend some real time with Abby, who I think has lots of thoughts for us. And we're not going to be talking about construction at all this time, and we're moving into Friday, I'm sorry. No, everything we do is interesting.

[Unidentified Committee Member]: Like numbers on

[Emilie Kornheiser (Chair)]: Cool, great. So glad you're here. Okay, cool. Great. Floor tours.

[Deborah Anderson (Joint Fiscal Office)]: All right, Debra and joined fiscal office. In that case, I don't know if I necessarily need to share my screen, unless you want me to Sure.

[Cameron Wood (Office of Legislative Counsel)]: Okay. I will do that.

[Unidentified Committee Member]: Just getting a sense of

[Emilie Kornheiser (Chair)]: the scale that we're talking about would be helpful.

[John Gray (Office of Legislative Counsel)]: Yeah. I like that blow by blow.

[Deborah Anderson (Joint Fiscal Office)]: Yep, absolutely. I have to find which of my 12 tabs I filled in is the Okay. Correct

[Cameron Wood (Office of Legislative Counsel)]: Here we go.

[Charles Kimbell (Ranking Member)]: Like there.

[Emilie Kornheiser (Chair)]: How many windows, though, with tabs?

[Deborah Anderson (Joint Fiscal Office)]: Good question. Yeah, I could go all the way down. Okay. So broadly, in terms of scale, by exempting manufactured home transactions, manufactured homes that are transferred as tangible personal property from the sales tax, we're looking at an estimate of about $600,000 in foregone tax revenue. This is built on an estimate in the tax expenditure report on that slightly more expansive definition of manufactured homes and campers in Title IX, but that's the general sense that's Ed Fund revenue. And there's a disclaimer Julia always has when we put on changes impacting the education funds, right? Absent any other changes in policy, the property yield or homestead property tax rate may need to be adjusted to account for the foregone revenue from this exemption. So $600,000 in fiscal year twenty seven and then about $650,000 annually afterwards accounting for inflation as time goes on. On the property transfer tax side, by subjecting those transactions that were previously subject to the sales tax to the property transfer tax, you're looking at about $100,000 in additional property transfer tax revenue. And I will note that the vast majority of transfers of manufactured homes in the property transfer tax data, which I appreciate the call out of you all wondering why it's in statute that there should be a lot of data about the property transfer tax. I love having that information. That's really helpful to me. And so the vast majority of those transactions are occurring for principal residences. And what that means is that in the value under $200,000, it's subject to the half a percent property transfer tax rate for principal residences. So the rate is lower than our sales tax rate, and that's why you're seeing lower value in the property transfer tax when you subject those same transactions there. I will also note, though, to Representative Higley's question, there is a very small amount that's paying that 3.4% rate that's levied on second homes fit for you around habitation, but it's a really small it's just a couple. So, you're probably looking at an effective tax rate on mobile manufactured home transactions of about 0.7%. So, the vast majority is falling in this category of the value is under $200,000 it's a principal residence. And given that you're just looking for magnitude, I don't necessarily need to go into allocations and how the property transfer tax works.

[Emilie Kornheiser (Chair)]: That's helpful. Thank you. The one question I think I have that I don't think you would have an answer to, but maybe you do, is the sales tax revenue. If a lot of purchasing of manufactured homes are happening in just a few places because that's where the lots are or the dealers are, and that community happens to have a local option tax, we could make a change that would have a really outsized impact for one town, even though it would be a negligible impact for the state as a whole. So that might be a fun thing to think about.

[John Gray (Office of Legislative Counsel)]: Sure. I don't

[Deborah Anderson (Joint Fiscal Office)]: have an answer right now. And I know there's a lot of That question depends. I understand there's a lot of towns considering a local option And this

[Emilie Kornheiser (Chair)]: then if it's being delivered, are you paying it to your town, not to where you bought it? Anyway, lots of questions.

[Charles Kimbell (Ranking Member)]: I may have been under a misperception or misconception, not sure which was, but that was that many homes that are sold as tangible property get a sales tax, but then when they are cited, they can then convert that into a warranty deed and then into a property transfer tax and get a credit back from the sales tax.

[Deborah Anderson (Joint Fiscal Office)]: Do your numbers reflect that whole process? We are relying on information on the number of manufactured homes that are delivered in Vermont for the sales tax portion. And so saying of those deliveries, if you were to convert that from the sales tax to the property transfer tax, that's the magnitude, it's probably, to your point, stating the maximum potential impact. And given type of transaction where folks are converting and getting a refund in sales tax, the impact would be lower than

[Charles Kimbell (Ranking Member)]: the numbers potentially there. Estimates of data by the number coming in,

[Deborah Anderson (Joint Fiscal Office)]: best data we have available on the subject.

[Unidentified Committee Member]: Question, what happens when Rebecca

[Rebecca Holcombe (Member)]: Canfield gets his new factory online?

[John Gray (Office of Legislative Counsel)]: Always Canfield.

[Emilie Kornheiser (Chair)]: But again, if they're being delivered, then I believe that it's the place where the sales tax could get any support. I

[Rebecca Holcombe (Member)]: think he's okay at it.

[Charles Kimbell (Ranking Member)]: My federal tax credit's quilted on my side.

[Emilie Kornheiser (Chair)]: Hi, Abby. Hi. Thank you for having me.

[Abby Shepherd (Department of Taxes)]: Thanks, Abby. I'm Shepherd, executive policy advisor at the Department of Taxes, and I do have many thoughts on the bill. Thank you for summarizing my testimony in advance. There's a lot going on in the bill. You've heard a lot of the main points that I was actually planning to make. And then I have a few others that I would be happy to point out. So when we first started really digging into this bill, just trying to understand what the overall intent was was not really clear. So I tried to hypothesize a few and then had comments on that. And then I have very specific points about the sections that I can go over. So first, one potential intent that seems to be somewhat clear in the bill is lowering the actual effective tax rate on these transfers of mobile homes. So by shifting to the property transfer tax, Ted just went over, it would lower to It was interesting to hear you say 0.7%, I think, as opposed to under current statute with the sales tax 40% exemption. It's more like a 3.4% effective tax rate, instead of six. So that's an interesting policy decision if you were interested in making that shift. That certainly is a clear policy direction in the bill. That said, we would caution, be careful making such a huge change to tax treatment, which typically follows property law. So divorcing actual property law treatment of different types of property from the way they're taxed is a little unusual. So under property transfer tax law, you have controlling interests are really the only type of non deeded transfer that is subject to that tax. So this would be pretty unusual. It also would not, in our minds, be a simplification for the mobile home buyers. Real estate transactions are pretty complex processes, they would have to go through the property transfer tax return as opposed to when buying and paying sales tax that's entirely managed by the seller. So that's much simpler. That's just a very small administrative reason, but it certainly wouldn't simplify for those mobile home buyers. Sorry to

[Emilie Kornheiser (Chair)]: interrupt you. Did you submit your testimony?

[Abby Shepherd (Department of Taxes)]: These are just my notes. Would you like You me to so much. Sure. It's changed as I was listening to it. It's really helpful to hear Carolyn talk about the bill, and Ted, and like all the students.

[Emilie Kornheiser (Chair)]: Knowing that you'll submit it means that my notes will be different while you're talking.

[Mark Higley (Member)]: That's fine.

[Emilie Kornheiser (Chair)]: And I'll be able to listen better. Thank you.

[John Gray (Office of Legislative Counsel)]: That's fine. Good.

[Abby Shepherd (Department of Taxes)]: Anyway. Another potential intent through the bill is perhaps to allow more mobile homes to take advantage of that very recent, I think it was '24, property transfer tax exemption for energy star mobile homes. So there was a full exemption enacted two years ago. So mobile home transfers subject to property transfer tax. If they're energy star rated, they are allowed a full exemption. So if you shift all mobile home sales to that, they would be able to take advantage of that. However, if you wanted to keep tax treatment aligned with how property is treated under other areas of the law, you could also create a sales tax exemption for mobile homes that are energy star rated. So that's another option. Could I then just walk through the different sections where I'm seeing different tax issues and wanted to flag some concerns that we had? I know you also had some questions I wanted to look back to, but I'll try and stick to the bill structure as it is. The very small issue that you had talked about with Cameron was in section three, where these limited equity cooperatives will be designated as nonprofits at their mobile home parks. We weren't really clear if the intent here was to not. It sounds like the intent was not to touch any tax treatment, but it should probably be clarified in the bill. It's not really clear as drafted. That could be potentially concerning if there would be tax benefits available to these. And we would just like clarity to understand how those would be administered. So section five and six that deal with the sales tax exemption. I guess that's more towards what I was just saying about if you are creating a new exemption, perhaps consider just doing a sales tax exemption for ENERGY STAR homes. And making this full wholesale shift would be pretty unusual to have all mobile homes treated as property. We could also change the Energy Star part to an exemption from the property transfers tax for Energy Star. So that existing law has the full exemption for transfer tax. We were also concerned about, again, I keep reiterating how strange it would be not to have tangible personal properties that were due to sales tax. Shifting all of these sales might be very confusing for administrators, mainly town clerks. So we would recommend hearing from them. We are not real estate attorney specialists in any way, so definitely recommend hearing from real estate attorneys about these sort of transactions and any complications this might raise. We also have a few technical drafting suggestions if the language stays as is, but it sounds like you might be making some changes throughout. And then those are really all the main points I wanted to make about the shift from sales and use tax to property transfer tax. And then I have many thoughts on the report and what our understanding that the bill was trying to get at there, but I just want to pause for any questions on it.

[Charles Kimbell (Ranking Member)]: So from your perspective, real property versus tangible property. So what you're saying is, and our attorneys alluded to it, tangible property, mobile homes are really tangible property and not treated as real property.

[Abby Shepherd (Department of Taxes)]: I'm sorry. So under current law, there's a distinction between when they're fixed, that is clear established law. When they're fixed, they are real property. They are transferred as real property. They're subject to property transfer tax. But when they're sold off the lot or being moved, then they're mobile. So they're TPP. Great. So in section 12, I know that we often get questions about what's the department's role in just very high level in informing towns or doing any sort of auditing function of towns valuation. And just to be clear, PVR's role is very much a guidance, not an auditing function. And the report is drafted currently really feels to us like it's asking us to go audit towns, how currently appraising these mobile home parks that are registered as LECs. So that was concerning to us. Currently, under current law for limited equity cooperatives, the general rule applies where property is valued at fair market value, unless there's some sort of special appraisal. And to our knowledge, there is no special appraisal that applies to LECs. So there isn't any current statute that would allow towns to aberraze in any way other than fair market value. And towns certainly do have different approaches to reaching a fair market value number for a property. There are special appraisals like for affordable housing. There's a bunch of different statutes, but none of them really seem to apply to LECs. So in our reading, towns are appropriately appraising these at fair market value. So that was just one table setting. The way that the report is drafted, it's asking us to go out and inventory and look at all LECUs that are mobile home parks. And then analyze their current valuation, which would require us to really dig in with town officials. PVR would have to really interview the town officials to find out how they came up with their values. There's nothing in the Canvas system. It's not detailed enough to give PVR. We couldn't just neatly pull out, Oh, this is how they set this value. They would have to go and do interviews. Assuming as well that we could identify them because the grand list does not clearly indicate when an owner is an LLC. It does appear that the Secretary of State has a list. So that would certainly help that way. But there's no other way for PVR to know. This is a town LLC. Function. So we were concerned about the workload. Also, again, the role of PVR is not auditing. We do set, I know you're all aware, we do set a few types of properties' values, like utility and the communications property, which is new. But it's unusual for us to go and say, we think you did or did not do that. So we would assume if this were a charge we were taking on, it would likely require us contracting with an independent expert.

[Unidentified Committee Member]: Thank you. Nice meeting committee. With regards to appraisals and camera, you said that they, I guess, maybe the listeners or somebody were

[Cameron Wood (Office of Legislative Counsel)]: interested in

[Unidentified Committee Member]: interviewed. Would that be on a case by case basis, or would there be something that could become more universal?

[Abby Shepherd (Department of Taxes)]: To be able to meet the charge in the report, we're imagining how we would identify these properties and then go talk to the town. We don't have access to their records to be able to say, This is how the town set this value. One at

[Unidentified Committee Member]: a time, basically. Exactly. Thank you.

[Emilie Kornheiser (Chair)]: Person wants to add?

[Unidentified Committee Member]: Just

[Unidentified Committee Member]: It seems like we know that Okay, I

[John Gray (Office of Legislative Counsel)]: have something to ask.

[Unidentified Committee Member]: Now, get back to the LEC. I feel like the ask is not to go to different camp that are crazy LEC's and say, You're doing what's wrong. It's to say, How are you doing it? So it seems like it would be simple enough, like a decent amount of hours, yes, but simple enough to pull the list from the Secretary of State of where the LCs are, go to those town's listers and just say like, hey, how are you doing? That seems relatively straightforward to me. I'm just trying to understand what the tax department's concerned. I guess it's just the amount of hours that

[Abby Shepherd (Department of Taxes)]: That's certainly part of it, but not the only reason. It does require an examination of any justifications for differences in approach, which is where we were getting sort of Where there was a distinctive PBR reaction of, We provide guidance. We don't audit. And also, in general, the PBR, even the district attorneys who are very knowledgeable folks, if I don't know if he's familiar. They are not specialists in these sort of appraisals, so they wouldn't want to be stepping out of bounds there.

[Charles Kimbell (Ranking Member)]: They seem like totally different animals. I mean, with a limited equity cooperative, because if you want to transfer your interest on it, really are left, as far as I understand, from people who have an interest in a limited equity cooperative, don't really get to take much value with them if they sell them. So the actual value to that person who's a participant is almost zero. So the question is how do you value that consistently?

[Abby Shepherd (Department of Taxes)]: I don't know that I can answer that. Think that current statute What I come back to is current statute doesn't make it clear other than doing fair market value. So it is really left up to the expertise of the appraiser to try and determine that. And if the legislature wanted to create a different type of clearer appraisal for these particular properties, it would

[John Gray (Office of Legislative Counsel)]: be helpful to have that

[Emilie Kornheiser (Chair)]: clarified. I think about other parallels that accomplish maybe where the committee was intending. If we think about affordable housing, where there's the fair market value of the highest best use fair market value, and then do a value discount in statute for those properties, rather than saying it's actually the value is diminished, This value is still at highest best. Exactly.

[Abby Shepherd (Department of Taxes)]: I actually pulled that up just kind of. This is for owner occupied housing appraised between sixty percent and seventy percent of fair market value is current statute. And it just doesn't The language around what qualifies for this special appraisal does not seem to apply to limited equity cooperatives. It seems pretty clear that they don't qualify, so they are getting that lower.

[Charles Kimbell (Ranking Member)]: Like on a shared equity model, is that what you're looking at?

[Abby Shepherd (Department of Taxes)]: Is within the definition of appraisal value, which sets up the general rule, and then you have all these special appraisals, and affordable housing is one of them. So just comparing the LEC statute that Cameron was walking you through, it doesn't seem to meet this particular appraisal requirement in statute.

[Emilie Kornheiser (Chair)]: I think this would be really interesting information to have, and I wanna offer representative Waszazak that I think it's significantly more complicated than it seems. I know that the committee and CAM spent a bunch of time trying to understand even just a few of them, because they talked to a bunch of folks in my town to try to figure out what happened in happens in Brattleboro, and it was I don't know

[Abby Shepherd (Department of Taxes)]: if they got clarity.

[Lou Reichardt (Joint Fiscal Office)]: I think that's why they asked tax to do this.

[Emilie Kornheiser (Chair)]: Anything else?

[Abby Shepherd (Department of Taxes)]: You did have one question I heard about the grand list, how the bill would impact the grand list. And I wasn't sure I fully understood it, but did was reminded that within the statute that sets out what's in the actual grand list, the grand list content statute section 40 one-fifty two, it does specifically address mobile homes on the grand list. So it says when the grand list of a town contains a description of a mobile home, whether or not it's considered real or personal property. The description, if available, includes manufacturer model number, serial number, and dimensions of the home. So it's not I'm not sure if that's exactly what your question was, but this bill does not impact that statute at the moment, and that's

[Unidentified Committee Member]: current statute.

[Emilie Kornheiser (Chair)]: I think I was wondering more process wise, where the store assessor would get all of that information if the bill of sale didn't have all the information.

[Abby Shepherd (Department of Taxes)]: One, it wouldn't be on the grant list until it were affixed to the property anyway. I don't know.

[Emilie Kornheiser (Chair)]: Think that's more of the boutique weeds of

[Abby Shepherd (Department of Taxes)]: the assessors. I think that that would be more of a listserv. Maybe somebody at ABR has an intelligent answer I could get for you.

[Emilie Kornheiser (Chair)]: Yeah. Thank you. And you're gonna send us your thoughts?

[Abby Shepherd (Department of Taxes)]: I will send you my not all of my notes because you don't wanna look at all of I'll send you my high level of thoughts.

[Emilie Kornheiser (Chair)]: Cool. Thank you very much.

[Lou Reichardt (Joint Fiscal Office)]: Thanks.

[Emilie Kornheiser (Chair)]: Really? Oh, and Dawn's still here.

[Rebecca Holcombe (Member)]: Do you wanna do the personal guess, or do you want them?

[Charles Kimbell (Ranking Member)]: It could be.

[John Gray (Office of Legislative Counsel)]: For intro.

[Emilie Kornheiser (Chair)]: Okay. Yeah. Sure. Would that be yes?

[John Gray (Office of Legislative Counsel)]: Yes.

[Unidentified Committee Member]: Okay.

[Emilie Kornheiser (Chair)]: Folks, we are going to take a deep breath, switch gears. That devotional yesterday was so nice, all that breathing. H seven fifty. All that breathing. John, do you wanna take us can you take us through that? Okay. Yeah. Thank you.

[Abby Shepherd (Department of Taxes)]: Thanks, Ted.

[Emilie Kornheiser (Chair)]: And for next Don's making his way up here. Just for next steps, Orson Waszazak is the liaison for this committee, for the housing committee. And so he's gonna check-in with the reporter and try to sort of bring some of our questions to them and then work on an amendment

[Abby Shepherd (Department of Taxes)]: and bring it back to us.

[Rebecca Holcombe (Member)]: Hello

[Cameron Wood (Office of Legislative Counsel)]: again. Hello. Still hi, Greg? Greg.

[John Gray (Office of Legislative Counsel)]: H seven fifty. This one, I think, relatively simple to explain, but could have a meaningful impact. So the genesis of this is how to deal with proceeding with construction during the currently existing moratorium. Are there things that could be done to remove existing disincentives? It doesn't necessarily incentivize, but I would say it's an attempt to remove some of the disincentives due construction commencing today. So, first, is seven fifty, an accolade to school districts pursuing school construction projects during the moratorium on state aid. Section one amends the definition of education spending, which includes the way that we define what counts toward excess spending. So on page two, as you'll know, under existing law, this is lines 11 through 14, under existing law, all bonds approved by voters prior to 07/01/2024, those voter approved bond payments for principal and interest will not be included in education spending for purposes of calculating excess spending. So that's existing law, but those approved prior to 07/01/2024, you're not subjected your school district is not subjected to double taxation for those pieces through the excess spending application. The tweak that's done here is to remove the specific deadline. So this would say that all voter approved bond payments for principal and interest shall not be included in education spending for purposes of calculating excess spending, essentially saying that if you approved one today or you approved one last year, you approved bond payments, those would not subject your district to double taxation through the excess spending. That's the first change. And, of course, the consequence of that is that because your district doesn't bear as much of the liability for those costs, they're shifted statewide. The funds are still raised statewide in the way that education spending is.

[Mark Higley (Member)]: John, could you just quickly explain excess spending in the current law? Yes. That's what we're dealing with here, correct? Yep, okay.

[John Gray (Office of Legislative Counsel)]: So the way it works for excess spending is above a given threshold, I think 118% of statewide, if you're spending for people, above that excess spending threshold, any education spending that you have is added to the, just to call it the calculation, the way that your local tax rate is set, you take your education spending and you divide it by the yield rates. You get a per pupil figure of your per pupil spending in your district and you divide it by the yield to produce your rate. So, it gives you a Your rate is a function of how it relates to the yield, basically. The way that the excess spending is dealt with is your numerator becomes education spending plus excess spending. Excess spending is already captured in your education spending, so the material effect of that is to subject excess spending twice to the taxation rate. Double counting it in terms of the per pupil spend that you have. And so, it means that your district bears a greater share of the liability. Your tax rates go up higher than they would if you were under the excess of the congressional.

[Rebecca Holcombe (Member)]: Did this bill get from house education?

[Cameron Wood (Office of Legislative Counsel)]: Yes, yes. Did you say it?

[Unidentified Committee Member]: Did she go through there? No. No.

[Emilie Kornheiser (Chair)]: No, it was referred to house education. Representative Kimbell introduced it, it was referred to House Education, and they transferred it back to us, because they decided it was our responsibility. They didn't do hearings on it. Right? Yes. They didn't vote on it. They just decided it was ours and sent it to us.

[John Gray (Office of Legislative Counsel)]: We both spoke in there, but nothing happened.

[Unidentified Committee Member]: The first point you made, I bet that, the second point you made, it's already a shift to be born statewide. Can you give an example with numbers?

[Cameron Wood (Office of Legislative Counsel)]: I cannot.

[Emilie Kornheiser (Chair)]: But Julia, I can, later. Great. I

[Unidentified Committee Member]: keep hearing different things. Thank you.

[Emilie Kornheiser (Chair)]: Back to you, Jamie.

[Cameron Wood (Office of Legislative Counsel)]: Okay.

[John Gray (Office of Legislative Counsel)]: Section two, this one's slightly harder to explain and I may need to pull up section 30 four-forty five, but I'll come to that in a second. So, 30 four-forty five is a section that is in the new state aid for school construction program that was enacted in Act 73. And much like the existing program, which is under moratorium, and this is what I can pull up the statute to show you, but just to explain, You may know that the state aid program requires a preliminary approval. You submit a preliminary application and you also receive a final approval. So, there's two applications that go to the Secretary of Education. Under the final approval section, some of the language speaks to the fact that you need to receive final approval before you actually commence construction. And the final subdivision of that section points out that if you do commence construction before you receive that final approval, you will not be reimbursed for any debt that you incurred in anticipation of that final approval. So the way that I think about it, just my read of the section, trying to prevent kind of bad faith acting in this space, that you could submit the final approval, but just start doing the digging, and then you're going to pick up those costs later, regardless of whether or not you had actually waited for that final approval. So, what this section is intended to do is to remove a disincentive to current construction, which would necessarily commence before final approval because you couldn't receive final approval under the program that doesn't yet exist. It's designating that any construction you commence today, you have good cause for doing so. You're not gonna be dinged for commencing that construction today. So that's what this section is saying. Bottom of page two, final approval for construction aid. Unless approved by the secretary for good cause in advance of commencement of construction, a school district shall not begin construction before the secretary approves the final application. And the new language provided that any school district that commences construction before 07/01/2026 shall be deemed to have good cause. School district may submit a written final application to the secretary at any time following approval of a preliminary application. I can pull up the section, if helpful, just so you can see the full of Subdivision 5. I also see hands.

[Abby Shepherd (Department of Taxes)]: Oh, sorry.

[Unidentified Committee Member]: The

[Rebecca Holcombe (Member)]: timeline. So not this apply to projects that were approved last year. This would only apply to projects being approved in the current budget.

[John Gray (Office of Legislative Counsel)]: This would apply to last year. This would say that if you're seeking state aid, any project is gonna need to go through the state aid program. But as long as If you commence construction for 07/01/2026, you're picked up by this callout. You would still need to go through the standard process, but you wouldn't be hurt during the process for the fact that you've already commenced construction. So, you approved last year, started digging today, that would conceivably fit within this. You'd still need to receive the approvals. It's still dependent on receiving that secretary approval under the program. But assuming you did receive that approval, you would not be perked by the fact that you had already started construction in advance of that final approval. That's all that this is intended to do, is to say, you're not gonna be hurt. You still gotta go through all of the normal process, but you won't be hurt for the fact that you've commenced construction.

[Rebecca Holcombe (Member)]: That's still not understanding. I think I just need to go back and reconcile, because I thought in the other language on school construction, were allowing retroactivity, and this is additional

[John Gray (Office of Legislative Counsel)]: So this is unrelated to the pieces we've done on forgiveness.

[Rebecca Holcombe (Member)]: And then why is this necessary then if we've already got those other pieces? So once we

[Emilie Kornheiser (Chair)]: understand what John did, it's representative Kimbell's bill, he can answer those questions.

[John Gray (Office of Legislative Counsel)]: I think of this as

[Unidentified Committee Member]: separate from

[Emilie Kornheiser (Chair)]: Okay, they're totally separate pieces of legislation. I know

[Rebecca Holcombe (Member)]: they're separate pieces I'm of just not sure why we would vote.

[John Gray (Office of Legislative Counsel)]: I'm gonna pull up the broader section just so you can see the context.

[Mark Higley (Member)]: So John too, if that approval doesn't come, what happens?

[John Gray (Office of Legislative Counsel)]: You would then not be receiving state aid. That's correct, so that's part of the genesis of the bill too, is that it's really difficult to provide any meaningful assurances to districts because there's so much uncertainty in the school construction space. But this is a bill that makes targeted interventions where you can offer something, the way that I would.

[Mark Higley (Member)]: Just to follow-up, is there anything in here that states that the school district has to approve of that project?

[John Gray (Office of Legislative Counsel)]: You would have to have the bond approved by the voters of the district to be. Yep, that's one of the requirements for seeking approval. Here is the section, it's title sixteen, three thousand four hundred forty five. We were just looking at amendment to subdivision A. So unless approved for good cause, school districts shall not begin construction. And you can scroll down quickly to D, which is the relevant piece here. A district may begin that construction upon receipt of final approval. However, a district shall not be reimbursed for debt incurred due to borrowing or funds in anticipation of aid, which is we're sticking to that bad faith piece, but this is saying you have good cause to commence if you've commenced before a given date, 07/01/2026, shouldn't be hurt for that very reason, but still need to comply with everything else about the the program. And that is it. Cool.

[Emilie Kornheiser (Chair)]: Does this mean, Franklin like, that if a district provides If a district votes a bond before we set up an entire school construction program, then it's treated as if it went through the entire program?

[John Gray (Office of Legislative Counsel)]: It's not treated as if it went through the program. It would still have to jump through the hurdles of receiving approval from the secretary, doing all the standard pieces here. It's just that this piece A is saying you're not gonna get money back if you've taken out debt expecting to be reimbursed for it, right? But of course, you would necessarily be doing that if you're commencing construction today and the program doesn't yet exist. I guess you could make the alternative argument that because you commenced today and no program yet exists that could support it, how could you possibly be anticipating reimbursement? But this is to be clear that you're saying.

[Unidentified Committee Member]: Sir? Welcome to an area code.

[Mark Higley (Member)]: So I'll stay here, yeah, yeah.

[John Gray (Office of Legislative Counsel)]: Does that mean I need to sit

[Unidentified Committee Member]: here? This

[Charles Kimbell (Ranking Member)]: proposal recognizes kind of the current state we're in and also recognizes there is a future state down the road. And that in the current state, there are school facilities that need to

[Mark Higley (Member)]: be

[Charles Kimbell (Ranking Member)]: improved, but because it is either unhealthy for the students to continue in there or they're falling apart. And so it's to remove that penalty for excess spending. The penalty is, I think, 16,400, 700, 400, somewhere around there. And that debt service would definitely kick a lot of those schools into the excess spending threshold. In my district, I happen to represent one such project, which is going to vote next week on a $111 $111,000,000 bond to rebuild the school. Also recognizing that we're in the state where we haven't yet designated what that school configuration looks like for the future, and knowing that state aid would be dependent on it complying with all of those things we've envisioned in Act 73, that it would be part of that total regional solution. So that was the purpose in doing this. Mountain View School District defeated their school bond vote of $99,000,000,000 two years ago, and it was a couple of towns voted enough, we have seven member towns, 20 communities send students to that school. So it's already kind of a hub school. And the school board felt like it was really important to come back because a number of things have happened recently. The sewage was backing up in the locker room during one of the basketball games. It also does back up in the cafeteria. The heating system has to be replaced. The 1958 boiler has finally shot the bed. So it's a number it doesn't really meet a

[Cameron Wood (Office of Legislative Counsel)]: lot of fire codes.

[Charles Kimbell (Ranking Member)]: So the building itself needs a total revamp. So that's from a very local standpoint, but it's not different around different places in the state. Hartford needs to address its own PCB issues. We were talking before about what's going on in Newport. So this is really to provide some kind of avenue for those schools that need to make that improvement. Removing the excess spending threshold is a part of that, so that you're not spending more, taxing twice those students that really need it. So that's the proposal. If the school does meet those criteria in the future state, then it would be eligible for state aid. So that's the whole

[John Gray (Office of Legislative Counsel)]: proposal. Really simple.

[Unidentified Committee Member]: And Chairman So far.

[Charles Kimbell (Ranking Member)]: Charlie, 07/01/2026 date. So the state aid for school construction is supposed to be effective 07/01/2026. So this is saying that that program doesn't exist yet, but it will exist after 07/01/2026. As we know, we have not yet found a funding source for it, so we don't know what might be available. So that's why 07/01/2026.

[Emilie Kornheiser (Chair)]: Representative Higley?

[Mark Higley (Member)]: Okay, and Kimbell, so I think you said it as well. So these folks that proceed on their own and start this through bonding or whatever it is, and there is some money eventually that they would qualify. What's the anticipation of not even if there's so many of these folks that actually do it and sound like they aren't that much and there's not nearly enough money to do it. Is there a setup for first come first serve or partial payments? Any projections as to how that would work?

[Charles Kimbell (Ranking Member)]: That's a great question. I think that's an Us question. We haven't figured that out as a body as to how to look at that. It's a first come, first served, we're serving a fixed amount per year. And then we had a discussion we looked at the other day that was looking at a grant that would pay for 100% of the debt service. So recognizing that that is far off, thinking that as long as the program may exist sometime in the future, because in the bill, Act 73, it says 20 to 40% of whatever the debt service costs will be supported by the state. So it's really trying to recognize what is in that bill.

[Mark Higley (Member)]: So really, this is just covering the first part, which is, yes, excess spending, not being being hit twice in a sense?

[Charles Kimbell (Ranking Member)]: Excess spending, yes. And then anything that may be available in the future from state aid, if it is in that form of debt service, payments from the state or whatever that looks like.

[Mark Higley (Member)]: So again, I guess my question there is, well, shouldn't there be a qualifier for that?

[Charles Kimbell (Ranking Member)]: There is, in that sense, that it would have to receive preliminary approval and otherwise qualify for a restructuring aid.

[Emilie Kornheiser (Chair)]: And so in the example, you used an example of White River having needs, sorry, Hartford. Hartford. Hartford having needs and Woodstock having needs. And in most scenarios I've seen for regional high schools, Woodstock and Hartford share a regional high school. And so what happens if they both move forward with this, qualify for that, and then?

[Charles Kimbell (Ranking Member)]: Yeah. So Woodstock definitely wants right now, Mountain View, just wants to be the regional high school, recognizing that that is not a shared opinion right now. And so but it would have to, in the future configuration, meet whatever the district needs, whatever that district configuration is. So that is a big unknown.

[Emilie Kornheiser (Chair)]: I guess I'm worried about us, if approving this, spending statewide Ed Fund dollars on both of those scenarios and creating a situation where, frankly, two districts, two existing districts are fighting it out by investing early, hoping that one of them will within a day on where their school is located.

[Charles Kimbell (Ranking Member)]: Yeah, I understand that. And again, coming back to what does that regional solution look like, we don't yet know.

[Emilie Kornheiser (Chair)]: I know, it's really we are stuck in

[Unidentified Committee Member]: a holding pattern. Reason that we put the date in that we did, so it wouldn't be a rush to the ballot box to build before we had the brass

[Rebecca Holcombe (Member)]: There of the already has been a rush to the ballot box, and this is actively discussed in her side of the street. People are absolutely rushing for that, to do construction, absolutely, because then you are likely to be the designated high school.

[Charles Kimbell (Ranking Member)]: I don't know if that's in the cards or what's the strategy for the school that I represent. But they know that this has been in the making since 2016 in terms of evaluating the school, having full engineering report, coming to the voter response, coming back to the voters again. So it's not coming out of the blue.

[Unidentified Committee Member]: Thanks. I have a question, if that's what's happening, but they aren't covered if it's going to be counted toward excess spending, but they're willing to spend the cap toward excess spending, thinking that when they're going to be okay with kids, they'll be covered with state aid education. Put that through.

[Rebecca Holcombe (Member)]: We also have a finite, well, I mean there's a finite number of high schools working the bill. That's what this is about. And so the issue is if you have a finite number of schools that make sense as regional high schools, and we have a finite number of facilities we can support. The reason I asked if this had gone to house education, is it seems like this decision should be part of that broader conversation than regional high schools. And I say that with deep love and appreciation. Your building has

[Emilie Kornheiser (Chair)]: been failed for years.

[Rebecca Holcombe (Member)]: I mean, I want to acknowledge that. But I also know other districts who held off and didn't rush to vote this year because they feel like the universe turned upside down. So I don't know what the fair thing is to do.

[Emilie Kornheiser (Chair)]: We've left buildings and districts in

[Abby Shepherd (Department of Taxes)]: a holding pattern on this for an extraordinarily long time. But it's worse than that. We have abandoned them, but we also have no ability, this

[Rebecca Holcombe (Member)]: is again, why support. I think we need to talk about regional shared services, because we actually had no vehicle for having regional conversations around what made sense. I'll take another region, this region, to go out with a bond proposal for a CTE center that adds 300 seats when you've already got 800 too many seats in this or whatever it is, 700 in this region. We need to have the ability to talk about how many seats we need in the region and what is the right physical configuration to support that. Absolutely. And my fear of this is that it's getting out of the gate, but it's not part of a cohort made strategy. And districts can't do this by themselves. They need some kind of regional capacity to have those conversations. I think that

[Emilie Kornheiser (Chair)]: folks had some questions for Julia, so I'm gonna ask her to join in.

[Charles Kimbell (Ranking Member)]: I appreciate the concerns, absolutely.

[Rebecca Holcombe (Member)]: And here, I hear the septic issues you described, it's not just this year. I know it's been going on very well.

[Lou Reichardt (Joint Fiscal Office)]: Hi, I'm Lou Reichardt, JFO. There is a fiscal note for H750 on the committee page under my name. I don't know if you want me to walk through that, or if you want me to talk more high level or answer questions. What works best?

[Emilie Kornheiser (Chair)]: I think we don't have time for a full fiscal note, and I feel like there was one very specific question that I don't remember who it was from or what it was.

[Abby Shepherd (Department of Taxes)]: I don't think it was yours. Okay.

[Emilie Kornheiser (Chair)]: That's okay. But no one? Okay. Thought it was Marks.

[Rebecca Holcombe (Member)]: You were asking the Oh, was your question, yes. It's your question about self, the fund being self balancing, and so cost being shared across the other fund, is your question. It's cost being shared across the

[Unidentified Committee Member]: other fund. Someone tells me it's a certain way, I hear it's not that way, I want

[Rebecca Holcombe (Member)]: to know what? Your opinion. One question.

[Lou Reichardt (Joint Fiscal Office)]: Happy to about what?

[Unidentified Committee Member]: You're

[Unidentified Committee Member]: building a high school, but Charlie's, Representative Kimbell, I hear you, starts to build a high school.

[Emilie Kornheiser (Chair)]: Who pays the bond?

[Unidentified Committee Member]: Somebody's already built

[Rebecca Holcombe (Member)]: from high

[Unidentified Committee Member]: school, a Windham School, and they're spending x amount of dollars a year to do that, and this doesn't involve the excess spending threshold, this is just how is the ed fund helping them or is it not to build that high school? Where is the burden falling for those? Assuming

[Lou Reichardt (Joint Fiscal Office)]: that there's no federal dollars going to that high school To no federal dollars. Going to that debt service, the Ed Fund is covering the entirety of the debt service because we have a statewide education fund. The question is, how are tax rates impacted by the debt service? So we have our statewide education fund. And if you think about the way that the homestead property tax rate is calculated, it's a district spending per pupil divided by the statewide homestead yield, which you all are grappling with studying. The statewide homestead yield is a direct function of how much needs to be raised in the education fund. The lower the yield, the higher the homestead property tax. So the more that needs to be raised for the education fund, because absent anything else, the more cost in the education fund, like debt service, the lower the yield needs to be to raise sufficient funds for debt service. So everybody's property taxes across the state are going up to support that debt service, that bond. The next step, though, is, well, what about the homestead property taxpayers in the district with the debt service? They too are seeing a lower yield because there's more cost to be paid out of the education fund. But they also are increasing their education spending, all else equal, by adding that debt service, which means an increase in per pupil spending. So that district that is carrying the bond that is responsible for paying the debt service, even though it is all statewide education dollars, that debt service cost is sitting in both per pupil spend, which is the numerator, and in the statewide yield, which is in the denominator.

[Emilie Kornheiser (Chair)]: I think that is a great place for us to stop. And I'm going to encourage folks to read the fiscal note. You can have Julia actually go into it in more depth. And we can maybe see what happens when we have this conversation combined with our other school construction conversation forward for all

[John Gray (Office of Legislative Counsel)]: of

[Cameron Wood (Office of Legislative Counsel)]: the kids.