Senate committee opts to defer CHIP statutory changes after auditors and lenders flag risks

At a Senate Economic Development, Housing and General Affairs committee meeting, lawmakers discussed proposed statutory amendments to the Community Housing Infrastructure Program (CHIP) and heard sharply divergent testimony from developers, PEPSI board members, the state auditor and the Joint Fiscal Office.

David White, a consultant with White and Burke Real Estate Advisors, told the panel he sent a draft ("CHIP proposal draft 1.1, dated 04/30/26") that would clarify whether infrastructure that supports CHIP-funded housing can be privately owned. "There has been ambiguity around what infrastructure can be privately owned versus publicly owned," White said, arguing the statute should treat the housing itself as the public good and allow either public or private ownership of infrastructure so long as it serves that housing.

White also sought to expand the statute’s definition of "related costs" to allow reimbursement for expenses initially paid by developers or sponsors — for example, attorney and consultant fees — provided municipalities include those terms in housing infrastructure agreements and maintain invoices and records for auditing. "If a developer shows legal fees for the attorney who wrote the infrastructure agreement, that is an eligible cost," he said.

PEPSI board members who worked on the program guidelines said the board built flexibility into its rules and launched the program on Jan. 30. Representative Abby Duke and Wendy Harrison said the board’s subcommittee and full board approved guidelines after public meetings and that the board is developing banknotes and a PAYGO model, modeled on Minnesota practice, to increase lender comfort.

"We don't think we should be making changes right now," Duke said, urging the committee to let PEPSI's guidelines and banknote tools address lender concerns in 2026 and revisit statutory adjustments next year after experience accumulates.

State Auditor Tanya Morehouse cautioned that the proposed statutory changes would lower existing guardrails. "Removing the public good criteria would essentially nullify what is in the existing guidelines," Morehouse said, warning that without the public-good test CHIP funds could subsidize market-rate or otherwise non-public-benefit infrastructure. She recommended deferring statutory amendments until the state gains implementation experience and urged clearer documentation and municipal validation if sponsor- or developer-paid related costs are to be allowed.

Ted Barnett of the Joint Fiscal Office told the committee analysts could not estimate a dollar fiscal impact for the amendments because effects depend on the number and types of projects, retention percentages and future tax rates. He noted that expanding permitted uses of tax increment would likely reduce dollars returned to the education fund during CHIP retention periods.

Throughout the hearing, committee members repeatedly pressed on enforcement and the practicality of requiring units to remain primary residences for the duration of CHIP debt. White and PEPSI staff acknowledged lenders’ concerns that long-term enforceability is difficult and said contractual banknote language and infrastructure agreements would be a key tool for managing risk.

After roughly two hours of testimony and discussion, the chair called for a straw poll on whether to include the proposed CHIP amendments in H.775. Committee members were asked to indicate support or opposition by raising their hands; the transcript records the poll being called but does not include a formal roll-call tally or an explicit recorded outcome.

The committee’s next procedural step — whether to formally table the amendments, carry them forward to another session for review, or include them in H.775 — was not recorded in the provided transcript.