Senate leaders say they have reached a deal with Gov. Phil Scott to take out a $35 million bond for more housing and pay for it with revenues originally meant for Lake Champlain cleanup.
The deal comes after months of negotiations between Senate leaders and Scott’s administration. All supported the idea of building more housing across the state, but funding the $2.5 million in annual bond payments remained a problem.
The Vermont Housing and Conservation Board had agreed to put $1.5 million from its annual budget toward the bond. That left leaders looking for an additional $1 million.
The deal announced Wednesday will involve using the clean water surcharge on the property transfer tax. In his original budget, Scott proposed extending that surcharge — instituted in 2015 and due to expire in 2018 — to help fund the federally mandated cleanup of Lake Champlain.
Senators had twice this year proposed paying for the housing bond with a new fee on hotel and motel stays. But the agreement does not include that so-called occupancy fee.
Rebecca Kelley, Scott’s spokesperson, said: “The governor is glad discussion of the housing bond he proposed continues in the Legislature. Based on the proposal and ongoing discussions, we’re optimistic we will reach an agreement before the end of the session.”
Senate Majority Leader Becca Balint, D-Windham, said the deal is “a win, win, win” that will build new housing and not involve new taxes, while still enabling the state to raise revenue for water cleanup later.
The deal would continue the clean water surcharge until 2039. Currently it raises about $5 million a year, but the Legislature would lower the tax starting in 2019 so it raises only $1 million a year.
Balint suggested that would still leave room to find revenue for lake cleanup. “It basically extends that particular payment so that in addition to being able to fund this housing upfront, it doesn’t mean that there’ll be less money for water quality in the long term,” Balint said.
On Wednesday, senators put the language into S.100, the omnibus housing bill that the Senate abandoned earlier this year because the Finance Committee wanted to fund the bond through a $2 occupancy fee.
In a preliminary vote, the Senate approved the bill 28-1. Sen. Dick Sears, D-Bennington, was the only no vote. The Senate then passed S.100 unanimously in a voice vote.
Vermont faces federal requirements that it reduce pollution in Lake Champlain. The state treasurer has said cleanup would cost $2.3 billion in public and private money over the next 20 years. The surcharge on the property transfer tax was created as one dedicated public funding source.
Before Wednesday’s floor votes, the Senate Finance Committee wrangled with whether it was making the right decision to divert money from clean water to housing. The whole seven-member committee nevertheless supported the proposal.
Sen. Ann Cummings, D-Washington, the chair of the Finance Committee, said the maneuver amounts to raiding a pot of money that has been sitting aside, not money that was already accounted for in the Senate’s proposed budget.
Cummings said she had “some issues” putting money into housing that had been planned for clean water. But, she said, “This is decimal dust compared to what we have to raise to clean up the lake.”
Sen. Brian Campion, D-Bennington, replied: “I understand that, and we’re still not cleaning up the lake, and we are making that decimal dust … dustier.”
Campion voted in favor of the proposal in committee, but said he did so “with concern.”
Senate Minority Leader Dustin Degree, R-Franklin, replied: “We share your concern.”
Sen. Ginny Lyons, D-Chittenden, said the occupancy fee made more sense to fund housing than money previously designated for clean water, but there was no political will to pass an occupancy fee.
Scott had repeatedly threatened to veto any budget that raised taxes or fees.
“The urgency of cleaning up blue-green algae can’t be overstated,” Lyons said. “But this (clean water surcharge) is not enough money to make a dent in that bucket, so then the question is, housing is an urgent need in this state.”
James Ehlers, the executive director of the advocacy group Lake Champlain International, called the deal “shameful,” “disgusting” and “wrong on so many levels.”
“Whoever was behind it should be absolutely ashamed of themselves to make Vermonters choose between affordable housing and clean water,” he said. “It’s totally unacceptable.”
“For Republicans, it’s fiscally not conservative,” he said. “It’s fiscally irresponsible to continue to defer maintenance on water and wastewater infrastructure.”
“For Progressives, it’s absolutely disgusting that they would pit people supporting affordable housing and people supporting clean water against one another,” he said. “For Democrats, they just got to do some soul-searching.”
Ehlers said the only reason the funding could be considered “a drop in the bucket” is that “the Senate has been negligent on addressing its legal and moral responsibilities” when it comes to the lake. He added: “It’s not like the need for water funding or the mandate for swimmable, fishable waters are a new thing. This is long past overdue.”
Balint, the Senate majority leader, said the parties to the deal recognized the importance of increasing housing in Vermont.
“For the last three weeks there have been numerous meetings in the speaker’s office, in the pro tem’s office,” Balint said. “We have had many, many hands in this to make it go because it’s something that we desperately, desperately need — is more housing.”
“I don’t see a downside,” Balint said. “I know that my committee, which is economic development, and we all run the gamut of the political spectrum there, is hugely supportive because we hear it year after year how much the need is for housing.”
“It’s holding back the economy,” she said. “It’s holding back our school population. It’s holding back employers in terms of being able to attract workers to the area because there’s not the housing in most parts of the state.”
Erhard Mahnke, the coordinator for the Vermont Affordable Housing Coalition, said the coalition is “absolutely thrilled that housing is moving forward,” but he said the deal is hard on the environmental community.
“I guess what I would say to them is that this will really move housing forward in a major way, and I’m not sure $1 million in environmental, in cleanup funds, would have done the same for lake cleanup,” he said.
He added: “It certainly keeps this surcharge alive — the idea of a surcharge alive — potentially for a number of years for them to come back and try and get an increase.”
S.100 now moves to the House, where the specific bill has not been considered, although a key committee has taken testimony on the housing bond.
The House could vote on the bill as early as Thursday.
