Many CHIP projects involve borrowing funds to pay for important infrastructure improvements. Understanding how debt works can help municipalities make informed financial decisions and plan for future costs. The information below explains how debt may be used in CHIP projects and what municipalities should consider before taking on financial obligations.
VEPC's CHIP webpage may have additional FAQs related to this topic.
Sponsors may incur debt eligible for tax increment financing for a period of up to five years following creation of the housing development site. VEPC may extend this for up to three years.
Calendar year.
For example, if the CHIP starts 04/01/26, the municipality has until 03/30/31 to incur debt.
No. Debt eligible for tax increment financing cannot be incurred until the Housing Development Site is approved by VEPC.
Yes, municipal voters must approve each instance of municipal borrowing in a warned vote.
Information that must be provided to the public includes:
- The amount and type of debt and related costs to be incurred including, principal, interest, and fees,
- The term of the debt,
- The Housing Infrastructure Project to be financed,
- The Housing Development Project that will occur due to the Housing Infrastructure Project,
- A public notice that if the tax increment received is insufficient to pay debt costs in any year, the municipality remains liable for the debt, and
- If interfund loans within the municipality are used, the information must include the terms and condition of the loan.
In the event of municipal financing, the first issuance of debt must be incurred within five years of CHIP site creation (April 1 in the year the application was approved by VEPC). VEPC may issue an extension for up to three years (for a total of eight years).
Allowed instruments include bonds, loans, interfund loans (interest-free), and bond anticipation notes.
Bond anticipation notes or other forms of temporary financing may not be used as a first incurrence of debt.