State Treasurer Urges 'Extreme Caution' As Lawmakers Contemplate Housing Bond

Feb 26, 2019

Vermont lawmakers this year are considering another major affordable housing bond, but State Treasurer Beth Pearce said taking on more long-term debt now could compromise the state’s financial position.

Two years ago, lawmakers and the governor approved a $38 million affordable housing bond. That investment has won praise from both economic officials and housing advocates, but Chittenden County Sen. Michael Sirotkin said the expenditure hasn’t resolved the shortage of housing stock in the state.

“So I said, ‘Why not reload? And do it again?’” Sirtokin said Tuesday. “Everybody’s coming into us, from the homeless to the business community and everybody in the middle, saying: ‘We really need more affordable housing in the state of Vermont.’”

Sirotkin is leading the push for a second major housing bond. He’s identified two new revenue sources he said could pay off the debt service: one would assess the property transfer tax on certain kinds of transactions that aren’t currently subject to that tax, while the other involves the collection of the rooms tax from online booking agents.

State Treasurer Beth Pearce, however, said lawmakers should tread carefully.

“I think that there are a lot of issues with this, to be very frank, and I would recommend extreme caution in looking at this,” Pearce said.

Pearce was a key supporter of the 2017 bond initiative, and she said Tuesday that the 2017 bond allowed for a needed infusion of cash into the affordable housing economy. But, she said, it came at a cost.

“When you borrow money, you pay interest on those dollars,” Pearce said.

And not an insignificant amount of interest, it turns out: Of the $38 million Vermont committed for the 20-year bond, more than $14 million will go toward interest payments.

“So that’s about 38 percent of the bond is going to pay interest,” Pearce said. “You know at home, with your credit card, you try not to do that. And I would suggest that the state needs to continue to look at the same thing.”

"I think that there are a lot of issues with this, to be very frank, and I would recommend extreme caution in looking at this." — State Treasurer Beth Pearce

Pearce has other concerns as well. Last year, the Wall Street ratings agency Moody’s downgraded Vermont’s bond rating. Pearce said the timing isn’t ideal for Vermont to assume even more long-term debt.

“Issuing right after a downgrade with another revenue bond … is touchy. I’m not going to say it’s a deal breaker, but it’s a concern,” Pearce said.

Pearce said she wholly supports the Legislature’s desire to invest in affordable housing, but she said allocating smaller amounts annually over time could deliver the same benefits without compromising the state’s financial position.

Maura Collins, executive director of the Vermont Housing Finance Agency, said Vermont is badly in need of more public investment in affordable housing. However, Collins said, she’s agnostic on how elected officials go about appropriating the money.

Whether it’s a big one-time bond or an ongoing increase in annual appropriations to affordable housing, Collins said it’s the money that’s important — not the vehicle used to deliver it.