The Vermont Housing Finance Agency is prepping the state’s first sustainability bond sale.

The agency’s board of commissioners approved last week plans to sell $37 million of “sustainability” bonds in a negotiated sale during the week of Jan. 8 funded through a portion of Vermont's property transfer tax revenue included in the state legislature's “Housing for All” initiative enacted in 2017. The Vermont Housing & Conservation Board will administer bond proceeds to create 550 to 650 homes statewide for low- and moderate-income residents.

Phil Scott, a Republican, was elected Vermont governor in 2016.
"This investment will help create much-needed homes that are affordable for working Vermonters at the middle and lower end of the wage scale," said Gov. Phil Scott. Phil Scott For Vermont

“We consistently hear how widespread the lack of affordable, decent housing is in many parts of Vermont, so I’m pleased our proposed housing bond was supported by the Legislature and appreciate the hard work by our private partners in getting it passed and putting the investment to work for Vermonters,” Gov. Phil Scott said in a statement. “By leveraging other funds, this investment will help create much-needed homes that are affordable for working Vermonters at the middle and lower end of the wage scale."

The bonds will not be externally certified as sustainable. In the official statement, VHFA said it will track sustainability guidelines adopted by the International Capital Markets Association, and will post annual updates on its website until all proceeds have been expended.

The VHCB plans to create 25% of the new housing from the bonds to those with incomes below 50% of the state’s area median, which officials said was $69,300 in 2017 for a family of four, according to estimates from the U.S. Department for Housing and Urban Development. The board will also fund targeted housing projects that incorporate environmental benefits including "smart growth" locations and projects meeting green building and design standards.

Sarah Carpenter, VHFA executive director, said People’s United Bank has committed to directly purchase $5 million of the bonds. The transaction, which is rated Aa2 by Moody’s Investors Service, will be underwritten by lead managers Morgan Stanley and Raymond James. Piper Jaffray is the financial advisor for the deal with Kutak Rock LLP working as bond counsel.

“We think that VHFA’s designation of the bonds as sustainability bonds is important in showcasing the high impact of VHCB’s program in the context of social, environmental and economic impact,” Geoff Proulx, executive director and head of the public finance housing group at Morgan Stanley, said in a statement. “These three elements will be particularly powerful in promoting sustainable communities in Vermont, and we think the Sustainability Bonds designation is forward looking both from the perspective of VHFA and from the investors who purchase the bonds.”

Morgan Stanley was also senior manager on the state of Vermont’s $28.52 million green bond sale held in late 2015 to fund drinking water and water pollution control projects. Vermont bonds are rated triple-A by Moody’s Investors Service and Fitch Ratings. S&P Global Ratings rates Vermont debt at AA-plus.

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