Finance

See 24 V.S.A. Chapter 117 § 4303.

• Owner-occupied housing for which the total annual cost of ownership, including principal, interest, taxes, insurance, and condominium association fees, does not exceed 30 percent of the gross annual income of a household at 120 percent of the highest of the following:
  • the county median income, as defined by the U.S. Department of Housing and Urban Development;
  • the standard metropolitan statistical area median income if the municipality is located in such an area, as defined by the U.S. Department of Housing and Urban Development; or
  • the statewide median income, as defined by the U.S. Department of Housing and Urban Development.
• Rental housing for which the total annual cost of renting, including rent, utilities, and condominium association fees, does not exceed 30 percent of the gross annual income of a household at 80 percent of the highest of the following:
  • the county median income, as defined by the U.S. Department of Housing and Urban Development;
  • the standard metropolitan statistical area median income if the municipality is located in such an area, as defined by the U.S. Department of Housing and Urban Development; or
  • the statewide median income, as defined by the U.S. Department of Housing and Urban Development.

A housing development where at least 15% of the units are designated as affordable housing with a recorded covenant or deed restriction ensuring affordability until the Final Repayment Date. Units must be used as the tenant’s or owner’s primary residence during such time. An application serving an affordable housing development does not have to meet the “but-for” test. The municipality may retain up to 85% education tax increment and must retain at least 85% of the new municipal tax increment.

Committed means pledged and appropriated for the purpose of the current and future payment of financing and related costs.

The person or entity responsible for undertaking to construct the housing development. Developers must enter into a binding Housing Infrastructure Agreement with the municipality.

In the event of municipal financing of CHIP debt, the date on which the municipal debt is fully repaid, or in the event of non-municipal financing of CHIP debt, the date on which the municipality’s obligation to reimburse eligible infrastructure costs ends.

Financing means debt, including principal, interest, and any fees or charges directly related to that debt, incurred by a Sponsor, or other instruments or borrowing used by a Sponsor, to pay for a housing infrastructure project and, in the case of a Sponsor that is a municipality, authorized by the municipality pursuant to the law.

The construction, rehabilitation, or renovation of any building on an approved Housing Development Site. In connection with an approved Housing Development that is not an Affordable Housing Development or Moderate-Income Housing Development. A municipality may retain up to 75% of the education tax increment and must retain at least 85% of new municipal tax increment.

The whole parcel or parcels where the housing development will occur. If the development is to occur over multiple parcels, the parcels must be contiguous (i.e., a parcel may be separated by a road). Only parcels where the housing development is to occur can be included in the Housing Development Site, unless contiguous parcels are under common ownership and share a School Property Account Number (SPAN), in which case they must also be included. Housing Development Sites must be formally designated by the municipality (24 V.S.A. § 1908) and approved by VEPC. Housing Development Site boundaries define the area within which the original taxable value is established, and tax increment is generated. Once established, the boundaries of the Housing Development Site shall not change.

A homestead is the principal dwelling and parcel of land surrounding the dwelling, owned and occupied by the resident as the person’s domicile as defined by the Vermont Department of Taxes. Or, if the unit is a rental unit, the lease agreement stipulates that the tenant occupies the unit as their primary residence. Both owner-occupied and rental units must remain a primary residence until the Final Repayment Date.

A set of infrastructure improvements that support a specific CHIP housing development. These improvements must be directly tied to enabling the housing development. These improvements may or may not be located on the Housing Development Site.

The installation, construction, or reconstruction of infrastructure that will serve a public good and fulfill the purpose of the program; and the funding of debt service interest payments, or other financing, for a period of up to four years, beginning on the date on which the debt or other financing is first incurred. Improvements do not need to be within the Housing Development Site, but the applicant must demonstrate that the proposed improvements enable the proposed housing development.

For CHIP, “Legislative Body” means the mayor and alderboard, the city council, the selectboard, and the president and trustees of an incorporated village, as appropriate. (24 V.S.A. § 1906(12))

A housing development in which at least 25% of the units are for households earning 150% or less of area median income (AMI) and also subject to affordability restrictions until the Final Repayment Date. Units must be used as the tenant’s or owner’s primary residence during such time. A municipality with an application serving a moderate-income housing development may retain up to 85% of the education tax increment and must retain at least 85% of the new municipal tax increment.

The assessed value of taxable real property within the Housing Development Site on April 1 of the year the site is approved by VEPC.

A homestead is the principal dwelling and parcel of land surrounding the dwelling, owned and occupied by the resident as the person’s domicile as defined by the Vermont Department of Taxes. Or, if the unit is a rental unit, the lease agreement stipulates that the tenant occupies the unit as their primary residence. Both owner-occupied and rental units must remain a primary residence until the Final Repayment Date.

The public good will be considered met for improvements that directly support the housing development and are:

• publicly owned and publicly accessible; or
• privately owned and publicly accessible; or
• privately owned and privately accessible improvements may be eligible so long as they can demonstrate a community benefit from the CHIP-supported infrastructure project. The municipality shall articulate with evidence how the community needs or desires the planned improvements and that they are mutually beneficial for the municipality and developer. (i.e., private septic systems for a development in a community that does not have a municipal wastewater system, and/or the cost of connecting the development to an existing system would be cost-prohibitive for the developer and town.

Expenses incurred and paid by a municipality or Sponsor that are directly related to the creation, implementation, and administration of the Housing Infrastructure Project, including reimbursement of sums previously advanced for those purposes.

60% of the indoor floor area must qualify as housing. The housing must primarily serve residential uses. Floor area to be considered housing includes all housing units dedicated to primary residences, shared spaces that are accessible to residents or exist solely to serve residential units, including but not limited to hallways, elevators, stairwells, common rooms, or mechanical and utility spaces directly serving residential units. Space that does not count toward the 60% includes, but is not limited to: commercial space, or space operated by the municipality or another entity for uses not directly serving residential units. For further clarification for the purpose of calculating the eligible floor area, refer to the current International Building Code as adopted by the Vermont Department of Fire Safety.

Soft costs in construction are indirect, non-physical expenses essential for a project's completion, covering services like architectural/engineering fees, permits/inspections, legal, accounting, financing, insurance, and project management, unlike hard costs which pay for tangible materials and labor. The majority of soft costs typically occur prior to the start of the construction phase of a project. 

Examples of soft costs may include:

• Permits and licenses
• Legal fees
• Insurance premiums
• Taxes
• Architectural and engineering fees
• Environmental evaluations
• Feasibility studies
• Surveys and assessments
• Construction loan interest
• Loan origination fees
• Project management fees
• Consultancy fees (ex. environmental, historic preservation, etc.)
• Marketing and sales expenses

The person or entity undertaking to finance the Housing Infrastructure Project. This may be the municipality, a developer, or an independent agency that meets State lending standards.

The difference in property tax revenue generated by the increase in assessed value over the OTV. A portion of the increment may be retained by the municipality to service debt on eligible infrastructure costs, pay for eligible related costs, reimburse a non-municipal Sponsor or developer for eligible costs of the Housing Infrastructure Project, and/or pay for eligible direct costs associated with the eligible infrastructure project. Municipalities whose infrastructure projects will result in an affordable or moderate-income housing development are eligible to retain up to 85% of the education tax increment. Municipalities whose infrastructure projects will result in any other type of housing development are eligible to retain up to 75% of the education tax increment. All projects must retain at least 85% of the municipal tax increment.

CHIP = Community and Housing Infrastructure Program created in Act 69.

CHIP utilizes tax increment financing (TIF) for infrastructure improvements that support the development of new housing, with the preferential consideration of affordable and moderate-income housing. It is a targeted use of the tool (a.k.a. project-based TIF), allowing municipalities to retain a portion of the property tax revenue resulting from increased values within a defined Housing Development Site (project). These funds may be used to repay the debt incurred for or pay for eligible infrastructure improvements. 

CHIP is designed to complement local and state planning priorities and foster coordinated public-private partnerships. Projects must meet statutory criteria and be approved by the Vermont Economic Progress Council (VEPC) before municipal debt is incurred or a municipality is obligated to reimburse eligible infrastructure costs.

CHIP was created to “encourage the development of new primary residences for households of low and moderate income across both rural and urban areas of all Vermont counties that would not be created but for the infrastructure improvements funded by the Program.”

Vermont Act 69 (S. 127, 2025)

CHIP authorizes a Sponsor - a municipality, a developer, or an independent agency that meets State lending standards - to finance the costs of infrastructural improvements using future property tax revenues from the parcel or parcels on which a housing development is constructed, subject to Vermont Economic Progress Council (VEPC) approval and the terms of a housing infrastructure agreement that governs the relationship among the municipality, the developer constructing the housing development, and the Sponsor.

No. A developer and housing development plan is required to prove housing benefit.

Yes. Grants, loans, and other funding can be used in combination with CHIP tax increment. However, if a grant is used to pay some or all of the cost of an eligible CHIP infrastructure improvement, the portion of the cost paid by the grant cannot be reimbursed through CHIP (no double dipping).

Yes.

Generally, no. VEPC can approve multiple CHIP sites in a community.

As VEPC nears the maximum CHIP allocation for a year, it may elect to prioritize approval of CHIP sites in communities with no or fewer approved CHIP sites.

Eligible applicants are Vermont municipalities (cities, towns, or incorporated villages) that seek to create a Housing Infrastructure Project.

Yes. And, only certain types of municipalities are eligible, specifically cities, towns, and incorporated villages.

Yes, unless the municipality will be the entity developing the housing development site.

To pursue a housing infrastructure project, a municipality must:

• develop and adopt a housing development plan, 
• designate the housing development site on which housing development will occur, 
• provide voter notice of a proposed housing infrastructure agreement,
• execute a housing infrastructure agreement,
• hold an indebtedness vote if the municipality will incur debt,
• submit a CHIP Interest Form, and 
• apply to VEPC to use tax increment financing for the housing infrastructure project.

Municipalities must complete a CHIP Interest Form and submit it to VEPC staff for review prior to submitting a full application to VEPC.

See VEPC FAQs. There is no deadline to submit the interest form; however, municipalities should submit the form within a year of the CHIP project being "shovel ready".

Projects must satisfy the “But-For” Test, certain process requirements, and the housing development either dedicates at least 60 percent of its floor area to housing or meaningfully addresses the purpose of CHIP.

Yes.  VEPC may annually approve not more than $200,000,000.00 in aggregate lifetime education property tax increment retention.

CHIP is not a permanent program. Currently, the final application date deadline for tax increment financing under CHIP is December 31, 2035.

Yes.

It depends. VEPC staff must determine that an application is complete and schedule a site visit. Once the site visit has occurred, VEPC has no more than 90 days to approve or disapprove a CHIP site.

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.

Tax increment may be retained for a period of up to twenty (20) years from the year in which debt is first incurred.

75 percent (75%)

Yes. Projects meeting certain affordability criteria are eligible to retain an additional 10 percent (10%) for a total of 85 percent (85%).

VEPC will review each application - other than those for which the housing development is an affordable housing development - to determine whether the infrastructure improvements proposed to serve the Housing Development Site and the proposed housing development would not have occurred as proposed in the application or would have occurred in a significantly different and less desirable manner than as proposed in the application but for the proposed utilization of the incremental tax revenues.

A non-exhaustive list of factors VEPC may consider around the question of what is a “significantly different and less desirable manner” may include, but is not limited to: 

• a housing development occurring significantly later than it could occur with CHIP financing, 
• a housing development that would include fewer units without CHIP financing, 
• a housing development that is significantly less affordable than could occur with CHIP financing.

1. Moderate-Income - A housing development in which at least 25% of the units are for households earning 150% or less of area median income (AMI).
2. Market Rate – A housing development in which there are no income restrictions on any of the units. 

Area Median Income (AMI) is the midpoint household income for a specific geographic region, meaning half of families earn more and half earn less, used primarily to determine eligibility for affordable housing and other federal/state programs.  Calculated annually by the U.S. Department of Housing and Urban Development (HUD), AMI adjusts for household size, with various income levels (like 30%, 50%, 80% AMI) defining different tiers of affordability.

The Vermont Housing Data website, also known as HousingData.org, provides Vermonters with tools for making more informed decisions about affordable housing. This website is loaded with valuable data and information.

Area median Income can be found by following this path:  Home>> Vermont Community Data Profiles>>Income & employment>> Area Median Income (AMI). You also can use this simple table for quick reference: Home Purchase Price & Rental Affordability Thresholds by Income Level and Household Size.

Improvements may include, but are not limited to, the following: 

• Utilities, such as power distribution and transmission lines and conduit, telecommunications lines and conduit, telecommunications towers, digital infrastructure, and power or telecommunications equipment; drinking water, wastewater, and storm water, infrastructure including: water sources; green and gray stormwater practices; distribution/collection and conveyance piping and pump stations; and treatment systems, facilities, and regulatory required pertinent equipment.
• Thermal energy networks, waste heat recovery, and community-scale geothermal.
• Transportation improvements such as publicly accessible roads, streets, bridges, parking lots, facilities, garages, and structures, multimodal facilities, public transit stop equipment and amenities, street and sidewalk lighting, roundabouts, crosswalks and/or other pedestrian crossing treatments, traffic calming features, sidewalks, streetscapes, way-finding signs and kiosks; traffic signals, medians, turn lanes, and property acquired or used for right of way such as hiking and biking trails,  pathways to facilitate multimodal transportation, bicycle and pedestrian lanes, paths, and bridges, street furnishings.
• Site preparation for development or redevelopment including acquisition, demolition, environmental remediation of contaminated property, and mitigation of a flood-prone area.
• “Soft costs” such as consulting, design, architects, engineering, accounting, legal, project management, associated application fees, or other professional services directly related to the implementation and construction of eligible site improvements.

It depends. If the CHIP project will be the only development served by the expansion (now and into the future), the full cost may be an eligible CHIP cost. If other development will be served by the expansion, the full cost must be prorated because only the portion to be used by the housing development project is an eligible CHIP cost.

Please contact VEPC staff to discuss your project.

Yes, but these costs may only be paid with the municipal tax increment.

Yes.

Yes

There is no set amount of land required to create a “housing development”. A housing development can be as small as two units, such as a duplex.

The following text can be added to one of the municipality’s written policies or procedures, such as its Procurement Policy, Internal Controls, Financial Management/Accounting Manual, or Grant Management Policy or Procedure.

To determine cost allowability when expending Federal award funding, the municipality will consider Federal Cost Principles, the notice of funding opportunity or award announcement, the award application, the applicable funding agreement, and its own policies.

Federal Requirement: 2 CFR § 200.302(b)(7)

You can use VLCT’s Model Procurement Policy or add the following text to the municipality’s Procurement or Conflict of Interest Policy:

Definition of Conflict of Interest. A conflict of interest occurs when the employee, officer, agent, or board member of the Municipality, any member of their immediate family, their partner, or an organization that employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from an entity considered for a contract.

Policy Text for Conflict of Interest. See Definitions section. Any employee, officer, or agent of the Municipality who participates in the procurement process must make reasonable efforts to avoid real or apparent conflicts of interest, must disclose any potential conflicts of interest in writing, must refrain from participating in procurement decisions where such conflicts exist, and must comply with other requirements of 2 CFR § 200.318(c). If the municipality has an affiliate or subsidiary organization that is not a State, local government, or Indian Tribe, the Municipality also must maintain written standards of conduct covering organizational conflicts of interest. Any actual or potential conflict of interest must be disclosed to the funder. If a conflict exists between the Federal requirements and the Municipality’s requirements, the most restrictive requirement must be used. Disciplinary actions shall be the enforcement actions in the Municipality’s adopted investigation and enforcement ordinance, personnel policy, or rule Code of Ethics Investigation and Enforcement Ordinance. Disciplinary actions of Appointed Officers shall apply to non-employee agents.

This text blends Federal Conflict of Interest requirements with requirements of Vermont’s Municipal Code of Conduct.

Federal Requirement:  2 CFR § 200.318(c)

If the municipality has not developed detailed, written internal controls, the municipality can provide the State’s audit staff with the most recently completed internal financial controls document provided by the Treasurer to the Selectboard. A template of this document is available on the Vermont State Auditor’s website at Internal Financial Controls Checklist for Municipalities. 

Municipalities can use VLCT’s Internal Financial Controls Checklist for Municipalities to assess their internal financial controls.

Federal Requirement:  2 CFR § 200.1 and § 200.303

The DPS Risk Assessment Survey asks questions about your municipality’s financial systems and policies. It should be filled out by people who understand these areas well. Wrong or guessed answers can cause the municipality to have “Questioned Compliance” findings or be treated as a “high‑risk auditee”, which can affect future grants.

To address this Questioned Compliance, send a corrective action response saying the municipality will review all survey answers for accuracy before it is signed and submitted. Explain how this will be done. For example: “Two knowledgeable staff members (such as the Town Clerk/Treasurer and the Selectboard Chair or Town Manager) will complete and check the Risk Assessment Survey.” Whatever process you choose, it should become part of the municipality’s internal controls. Keep a copy of each completed survey for your records.

DPS only requires one signature on the Risk Assessment. The VT Department of Environmental Conservation (DEC) requires two. DEC asks that the person authorized to sign the agreement sign as the “Chief Officer,” and that the Treasurer or Finance Director sign as the “Chief Fiscal Officer.”

Federal Requirement:  2 CFR § 200.332

Federal regulations (2 CFR § 200.302) require municipalities to track Federal award activity in their financial management systems, including:

• Assistance Listing title and number,
• Federal award identification number,
• year the award was issued, and
• name of the Federal agency or pass-through entity.

These requirements apply once a Federal award exists. They ensure that Federal revenues and expenditures can be clearly identified, reported, and supported for monitoring and audit purposes.

Before a federal declaration or award is issued, some of this information may not be available. During that period, municipalities may track emergency or event‑related costs using their normal accounting practices (e.g., event‑based or date‑based accounts).

Once a Federal award is issued or an event becomes eligible for Federal assistance, municipalities must ensure that required award information is clearly associated with related revenues and expenditures. This can be done through the accounting system structure, tracking fields, or other controlled records linked to the underlying accounts.

If the financial system cannot capture all required award information through account attributes, the VT Department of Public Safety recommends incorporating it into the account naming convention in the following order (example shown):

• Federal agency (FEMA)
• ALN title/award title (DR4810)
• ALN (97.036)
• Pass‑through entity (DPS)
• State grant agreement number (02140‑84810‑XXX)
• Federal Award Identification Number / FAIN (FEMA‑DR‑4810‑VT)
• Award year (2024)

GFOA guidance generally favors maintaining a stable chart of accounts and tracking grant‑specific details through system attributes, project codes, or supplemental records rather than lengthy account titles. As an alternative to a long account name, municipalities may maintain the required Federal award information in a controlled supplemental record (e.g., spreadsheet BW1.1) that is clearly linked to the relevant accounts. In this case, the fund or account may be named based on the event or incident date, with the supplemental record used to document the required Federal identifiers once known. VLCT’s Model Account Naming Spreadsheet can get you started.

Whichever method is used, it must allow the municipality to accurately identify, report, and substantiate Federal award activity while maintaining consistency and integrity within the chart of accounts.

Federal Requirement:  2 CFR § 200.302(a) and (b)(1)

Federal awardees must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation.

To address this Questioned Compliance, municipalities should track each disaster event and all other grants separately. You can do this by creating a dedicated fund or, for smaller one‑year grants, by using a spreadsheet that lists all required information. The goal is to make sure every expense can be clearly linked to the grant money that paid for it.

Federal Requirement:  2 CFR § 200.302(b)(3)

This questioned compliance may be described as “Accounting reports detailing federal and non-federal share of expenditures for Public Assistance award”

Make sure your accounting system can show the federal share and the local match share for every FEMA PA expense. Record each transaction so the two parts are clear.

If your system cannot do this, keep a separate spreadsheet that shows the match breakdown. You can use VLCT’s Model Grant Match Tracking Spreadsheet. Add each reimbursement request to the same spreadsheet, and total the columns for Total Expenditures, Federal Share, and Match Share. At closeout, the total Federal Share must match the amount FEMA paid the municipality.

FEMA funds Small Projects based on the approved Project Worksheet estimate, not the actual cost. Municipalities must provide a 25% match on the FEMA‑funded amount, even if the real cost is lower. This may require using extra match. The total match you document must meet or be higher than the required non‑federal share shown in your financial reports.

Federal Requirement:  2 CFR § 200.306 and 2 CFR § 200.302(a)

You can use VLCT’s Model Procurement Policy or add the following text to the municipality’s Procurement Policy:

Requests for proposals or bids will incorporate a clear and accurate description of the technical requirements for the property, equipment, or service being purchased. The description may include a statement of the qualitative nature (ex. size, appearance, value, etc.) of the property, equipment, or service to be procured. When necessary, the description must provide minimum essential characteristics and standards to which the property, equipment, or service must conform. Detailed product specifications will be avoided if at all possible. When it is impractical or uneconomical to clearly and accurately describe the technical requirements, a “brand name or equivalent” description of features may be used to provide procurement requirements. The specific features of the named brand must be clearly stated. Requests for proposals or bids also will incorporate any additional requirements which the offerors must fulfill, such as insurance requirements and bonds, and all other factors that will be used in evaluating bids or proposals.

When writing requests for proposals or bids, include enough technical detail for bidders to understand the scope of work. For larger projects, describe the general services required (e.g., design, permitting, construction) and expand as needed. For smaller projects, list the specific tasks and any required standards or specifications, such as dimensions, materials, or applicable municipal or permit requirements. Clear, accurate technical requirements help ensure compliant procurement and consistent bids.

Federal Requirement:  2 CFR § 200.319(d)(1) and (2)

You can use VLCT’s Model Procurement Policy, which is federally compliant, or ensure the municipality’s current policy includes the following language: 

When expending Federal funds, purchases must follow the municipality’s purchasing policy and Federal Procurement Standards per 2 CFR §§ 200.318 – 200.327.

Federal Requirement:  2 CFR § 200.318 and § 200.320

You can use VLCT’s Model Contract Award Summary, which lists all required contract information and helps you show the municipality completed all required checks and verifications. Keep the documents that prove these checks and verifications were done in the procurement file.

Federal Requirement:  2 CFR §200.214

You can use VLCT’s FEMA Public Assistance Program Compliant Contracts You also must add the text from item #19 (“Sub-Agreements) in the State of Vermont Attachment C: Standard State Provisions For Contracts And Grants . You can find Attachment C your grant agreement with the state.

Both the State and Federal provisions must be included in the contract, whether the purchase follows your normal procurement process or is an emergency one.

Federal Requirement:  2 CFR § 200.327

State Requirement:  State of Vermont Agreement, Attachment C, #19 Sub-Agreements

These low cost, low staff-time actions offer strong protection and are easy to implement.

• Strong Passwords - Use long, unique passwords. Encourage password managers.
• Multi‑Factor Authentication (MFA) - Turn on MFA for email, financial systems, and grant‑related accounts.
• Basic Cybersecurity Training - Teach staff and elected officials how to spot phishing emails. Free training resources are widely available.
• Limit System Access - Give access only to people who need it. Remove access immediately when roles change.
• Automatic Software Updates - Enable automatic updates on all municipal computers and devices.

These steps may require some planning or help from an IT provider.

• Regular Data Backups - Back up financial systems and grant files. Keep at least one backup offline or in secure cloud storage.
• Antivirus and Firewall Protection - Ensure devices have up‑to‑date security tools. Many are low‑cost or included in existing IT contracts.
• Written Cybersecurity Policies - Create simple policies for passwords, acceptable use, remote access, and data handling.

These tools can be phased in over time.

• System Monitoring - Track login attempts and unusual activity. May require IT support.
• Vendor and Third‑Party Oversight - Review IT vendor contracts to ensure they follow strong cybersecurity practices.
• Incident Response Plan - Create a plan for responding to a cyberattack. Conduct a simple annual tabletop exercise.