In the past 21 years, the Vermont Bond Bank and United States Department of Agriculture — Rural Development have lent between them $2.2 billion to towns, cities, schools and fire districts. How the pandemic, with accompanying trillions of dollars in federal aid, will affect that, is unclear at this point.

The Vermont Bond Bank was created by the General Assembly in 1970.

“‘Bank’ is a little bit of a misnomer,” said Michael Gaughan, executive director of the Vermont Bond Bank, on Thursday. “What we’re banking are the local bonds of municipalities and school districts that we finance. We use those as collateral when we issue municipal bonds to the wider market ... we sell those bonds, and we use the proceeds to make loans to local communities.”

Municipal bonds have to be approved by a town’s voters, who often make that call on Town Meeting Day.

Gaughan said the Vermont Bond Bank and USDA Rural Development often work hand-in-hand to finance municipal projects.

“Vermont is unique in that we have a lot of public lenders doing the majority of the local infrastructure lending and USDA is one of those key partners,” Gaughan said.

The Vermont Bond Bank is only allowed to lend to Vermont municipalities, said Gaughan. It does so at extremely low rates, as it’s not like a bank which has to sustain itself on what it makes back from loans.

“It’s a fascinating time to be in infrastructure finance,” he said. “Initially, the pandemic projects were delayed because of the construction holds. What we are seeing more recently is that project costs have escalated significantly, so in some cases folks have had to put their projects on hold. But then at the same time you have these grant dollars from the American Recovery Plan Act, and then we’re going to see what shakes out here with the infrastructure bill.”

Congress is currently arguing over a $3.5 trillion infrastructure bill. Towns and counties across the country, meanwhile, are talking about how they will use funds from the American Recovery Plan Act. Mostly they’re questioning what, exactly, the funds can be used for, and how they might be paired with other avenues of funding.

Fair Haven Town Manager Joe Gunter said Wednesday he doesn’t believe the pandemic will have much of an impact on towns looking to the Vermont Bond Bank or the USDA.

“Large projects like this, it’s not like a year or even a 6-month project, it’s something that’s planned out for several years in advance,” he said.

Fair Haven is planning a $6 million upgrade to its wastewater treatment facility. The USDA has granted $2.65 million for the project, and loaned the town $3.72 million. Town voters approved a bond that will pay back the USDA $152,000 annually over the next 30 years.

Projects like these wouldn’t be possible without the USDA and the Bond Bank, Gunter said.

Town Manager John Haverstock, of Pittsford, said Wednesday he could see towns’ appetites for borrowing going a few different ways.

“You might argue that if we felt that with COVID there will be an economic slowdown you might expect there to be more of an appetite to do projects on the theory that contractors would be hungry for the work in a down economy,” he said. “On the other hand, we have been concerned that with the impact on the job market and the unemployment benefits going to people and perhaps disincentivizing some from returning to work it might be harder for contractors to find enough workers to get the job done at a reasonable price, so I think I can certainly see how it could play out in several different ways.”

He noted that infrastructure breaks down and needs repairs and replacement, something towns will be mindful of when they use federal funds.

Gaughan said the Bond Bank isn’t expecting much of a slow-down in municipal bonding, but wouldn’t be bothered too much if there was one. The ARPA awards, generally, aren’t large enough to fully cover a big infrastructure project and some might spur work that requires a bond at some point.

“That’s where we see a role for ourselves is really helping finance sense-of-place investments that make our rural communities stand out,” he said. “You have broadband investment that’s coming into homes, you have water and sewer investments that are coming underground to facilitate more activity, but keeping that sense of place is an important part of the equation if we are to attract people to Vermont.”


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