You are here

Transportation network management is one of the top municipal responsibilities of every town, city, and village in Vermont. And while this paper – the first of VLCT’s Municipal Action Papers for 2022 – addresses only a few municipal road network issues, it does attempt to highlight the most pressing issues affecting local governments. VLCT Advocacy staff welcomes any questions you have regarding important transportation issues your communities are facing, and we thank you for working to help our municipalities better serve us all.  

The Basics

Vermont’s transportation systems are essential to the economic growth, vitality, and resilience of our communities. These networks need to provide safe travel for a variety of modes of transportation in downtowns and villages as well as rural areas of the state. Municipalities must operate, preserve, and maintain roads, bridges, and public rights-of-way in a cost-effective and environmentally responsible manner. Towns are statutorily obligated to maintain Class 3 roads so they are “negotiable under normal conditions all seasons of the year by a standard manufactured pleasure car” (19 V.S.A. § 302 (3)(B)). Their culverts and bridges must be able to withstand severe storm flows and limit any discharge or runoff that may impair state waters. Municipalities must keep their streets clear in inclement weather, provide an appropriate mix of treescapes, calm traffic, fill potholes, and grade or repave roads as needed. Vermonters expect local governments to attend to these seemingly mundane tasks. However, they also want them to address climate change and its negative effects on communities while at the same time ensuring that each town retain its own “Vermont” character.  

State and local governments must also maintain transportation infrastructure and operate transportation systems while oil prices remain unpredictable and transportation revenues based on fuel consumption continue to decline. Nearly 83 percent of all roads in Vermont are maintained by towns, cities, and villages. Of the 15,761 miles of Class 1, Class 2, Class 3, and Class 4 roads and state highways, only 2,872 are maintained solely or in part by state government. Local government expenditures for transportation infrastructure exceed half of most municipalities’ annual budgets. The upkeep is largely paid for by local property tax revenues, with additional funding coming from state and federal sources. 

Stagnant and Outdated Revenue Streams

Vermont’s transportation revenues are derived primarily from three sources: the gasoline tax, the purchase and use tax, and Department of Motor Vehicle (DMV) fees. For over a decade, Vermont has struggled to find new revenue sources to support our transportation needs as state revenue streams. Once merely stagnant, they now underperform and do not hit forecast goals. In FY22, the Transportation Fund was the only state fund to finish the year below target, missing it by 2.8 percent as high gas prices and limited vehicle production reduced revenues. Although inflationary price increases result in higher state tax receipts, they do not do so for taxes based on physical volume, such as fuel taxes, and almost all fee-based revenue sources such as DMV fees. Paired with the rising cost of transportation projects, this creates a sober and worrying future for the Transportation Fund in the near future and beyond.  

This year’s transportation budget was the largest in history, thanks to available funding from the American Rescue Plan Act (ARPA) and the Infrastructure Investment and Jobs Act (IIJA). These funds will help minimize the overall pressure on the Transportation Fund for FY23 to FY27. In the years that follow, however, there is no guarantee of significant infusions of federal funding to states and local governments, which only heightens the pressure on state and local governments to generate sufficient revenue to meet growing transportation obligations. Meeting the customary “match” obligation for certain state and federal funding opportunities will also cause towns to look to the local property tax for revenue. 

Vermont has commissioned several studies to identify alternative revenue sources to fund our growing transportation network needs. Of late, the Vermont Legislature has not implemented any new revenue sources identified in those studies except for modest increases to DMV fees and, in 2014, an increase to the gas tax. The 2016 Vermont Transportation Funding Option Final Report highlights some options Vermont has for new revenue sources, options that the legislature says must be implemented to keep pace with the financial needs of our airports, railroads, bridges, and roads. Besides raising the gas tax and DMV fees again, new revenue options could be fees on electric vehicles and bicycles, ad valorem, and on vehicle miles traveled (VMT). The state could also allocate portions of existing taxes and revenues to the Transportation Fund that don’t currently flow there such as the income tax, sales tax, corporate tax, or simply allocate money from the General Fund.  

Over the last decade, the Agency of Transportation has implemented policies to encourage Vermonters to purchase electric vehicles. Last March, the agency released the final report of its Electric and Highly Fuel-Efficient Vehicle Road Usage Charge Study. The report addresses the loss of revenue from electric vehicles that do not contribute to the gas tax and offers new funding structures (such as the road usage charge) for all-electric vehicles, plug-in hybrid electric vehicles, and high-efficiency hybrids. 

Federal and State Funding

In years past, the federal government funded 50 to 60 percent of Vermont’s transportation budget, compared to about 20 percent in other states. Most federal transportation dollars are directed to the state transportation network. Similarly, municipalities look to state funding to help pay for local transportation infrastructure. The Vermont state transportation budget has significantly increased over the years, from $553 million in FY12 to $868 million in FY23. Similarly, town programs received $43.7 million in FY12 and $83.5 million in FY23, with $25.5 million of that being one-time federal funding for off-network bridges and $4.3 million from the Clean Water Fund for clean water projects. 

Local Highway Aid (in millions of dollars):

Fiscal Year 

Town Hwy Structures 

Town Hwy Class 2 Roadway 

Town Hwy Aid 

Town Hwy Class I Supplemental 

Municipal Mitigation Grants1 

Town Bridge Grants1 
































































1. Includes federal funds
2. $973K from T-Fund; $921K from the Clean Water Fund; $156K from federal funds.
3. $1.42K from T-Fund; $683K from the Clean Water Fund; $520K from federal funds.
4. $946K from T-Fund; $357K Clean Water Fund; $614K from federal funds.
5. $770K from T-Fund; $845K from Clean Water Fund; $1.96 from federal funds.
6. $705K from T-Fund; $3.98M from Clean Water Funds; $845K from federal funds.
7. $705K from T-Fund; $4.32M from Clean Water Funds; 1.43M from federal funds 

In FY23, only $47 million in state Transportation Fund dollars was allocated to town highway programs. That represents a mere five percent of the entire transportation budget. Although other state and federal money flows to municipal transportation initiatives – particularly for bridges and clean water projects – these funds are generally small and are not guaranteed year in and year out. This puts tremendous pressure on the local property tax because local governments have no other means to raise revenues for transportation network needs. 

New Federal Funding

Thanks to last year’s IIJA, also known as the Bipartisan Infrastructure Law, and this year’s Inflation Reduction Act (IRA), both signed into law by President Biden, Vermont will receive billions of dollars over the next few years that will directly and indirectly go to transportation. 

The IIJA authorized $1.645 billion over five years for Vermont’s transportation network. Vermont will also see a still to be determined sum of money from the IRA. The IIJA increased overall funding to Vermont by $570.5 million (53 percent) compared to previous federal funding levels. The IIJA funded 26 competitive grant programs - twenty of which are brand new – that address highway and bridge projects (including downtown revitalization), resilience, carbon reduction, healthy streets (including bike and pedestrian), active transportation, and safe streets. Scant guidance has been provided to tell municipalities how to get the funding for these new programs, but Congress made clear that cities, towns, and rural areas are the intended recipients of much of the federal money. The IIJA created several new competitive grant programs – the Local and Regional Projects Grant, Bridge Investment Program, Rural Surface Transportation Grant Program, Stopping Threats on Pedestrians Grant, National Culvert Program, Safe Street, and Roads for All – plus several others designed to provide more funding to local transportation infrastructure. 

The IRA focuses on deficit reduction, domestic energy production and manufacturing, and reducing carbon emissions. The carbon emissions reduction provisions of the law address the transportation sector, with much of it targeting private industry and consumer incentives to purchase and manufacture clean vehicles. Some money is allocated to government investments. For example, $3 billion will be for Neighborhood Access and Equity Grants to help reconnect communities across the country divided by existing infrastructure barriers, mitigate negative impacts of transportation facilities or construction projects on disadvantaged or underserved communities, and support equitable transportation planning and community engagement. The IIJA and IRA funding pair well with ongoing state and local projects, and the infusion of this money should speed up the time to complete many of them. 

Clean Water Funding

In 2016, the U.S. Environmental Protection Agency (EPA) issued a Total Maximum Daily Load (TMDL) standard that caps the amount of phosphorous allowed to enter Lake Champlain. To comply with the EPA’s Lake Champlain TMDL and Vermont’s Clean Water Act, every city and town in Vermont must receive permitting for its paved and unpaved roads to address stormwater discharge. All Class 1-4 roads that are identified as “hydrologically connected” to surface waters through ditches, culverts, and other drainage structures must be upgraded and maintained to reduce phosphorus runoff. Every town and city must comply with the permit, which is mandated and must be renewed every five years in perpetuity. Known as the Municipal Road General Permit (MRGP) and first implemented in 2018, it will trigger the second cycle of mandated permitting for all cities and towns in 2023. Over the past five years, municipalities inventoried every roadway, prioritized road segments that need erosion and drainage upgrades, and began upgrading roads and drainage to ultimately implement road stormwater management plans to comply with the MRGP standards.  

The costs to implement and comply with the MRGP cannot be understated and must be prioritized, no matter other pressing transportation funding needs such as carbon emission reduction stand to compete for limited funds. The MRGP requires permitting fees from all municipalities, and road erosion inventories and implementation costs are ongoing. Although the administrative costs are not significant (for example, an annual permitting fee costs between $500 and $1,800, based on population and road miles), the implementation and maintenance costs are significant. Annual costs that the state and municipalities must carry to administer and implement the MRGP currently run in the millions of dollars  

A vitally important source of funding to municipal and other clean water projects tied to the Lake Champlain TMDL is the Vermont Clean Water Fund (CWF), which consists of revenue allocations from the meals and room tax, a property transfer tax surcharge, and unclaimed bottle deposits. Along with the state Capital Fund, the CWF provides core funding to clean water projects, including a variety of municipal programs and initiatives. The FY23 CWF allocated $3.3 million to the Municipal Grants-in-Aid Program, which provides technical support and grant funding to support MRGP compliance, and $1 million to the Municipal Better Roads Program, which supports MRGP and other water quality projects. In prior years, similar appropriations were made to both programs –around $3.2 million to the Municipal Grants-in-Aid Program and $800,000 for the Municipal Better Roads Program. While this funding is vital, it does not come close to covering the ongoing costs of MRGP compliance for project implementation to improve, upgrade and maintain roads, culverts, ditches, catch basins and other drainage and infiltration structures. Local municipal budgets, almost wholly funded by the property tax, are left to absorb the remaining costs of MRGP compliance. 

Climate Change

Over the past three years, initiatives to reduce greenhouse gas (GHG) emissions and reduce fossil fuel use have arguably eclipsed clean water and pre-existing transportation priorities in the transportation budget. In the FY22 budget, $7 million was set aside for such measures, and in FY23, the legislature increased the funding to $31 million in one-time investments. Both the IIJA and the IRA provide more federal funding for GHG emission reduction initiatives. The two acts allocate hundreds of millions of dollars to the public and private sectors to invest in public transportation, bicycle and pedestrian programs, Climate Pollution Reduction Grants, and incentives to increase zero-emission vehicle use on Vermont roads. This money will also help Vermont build off the foundation of carbon reduction measures and programs that pre-date the new federal funding, which puts Vermont in a favorable position to get the money quickly into existing programs and projects. These transportation investments will further the state’s Comprehensive Energy Plan and Climate Action Plan and satisfy commitments of the Vermont executive and legislative branches to the climate change goals of the Paris Agreement. 

VLCT Legislative Policy Priorities for Transportation

  1. Ensure state agencies collaborate and communicate among themselves and with municipalities to eliminate redundant and contradictory oversight of municipal projects, streamline and expedite permitting processes, and ensure effective technical assistance and efficiency in implementing transportation projects. 

  1. Fully fund all existing municipal transportation programs and associated projects, including compliance with stormwater management mandates, prior to funding new transportation programs and initiatives.  

  1. Implement one or more of the new or adjusted revenue sources identified in the 2016 Vermont Transportation Funding Options Final Report  

  1. Encourage the Agency of Transportation to maximize federal funding from the American Rescue Plan Act, Infrastructure Investment and Jobs Act and the Inflation Reduction Act, and free up more state revenue for municipal programs and projects. 

  1. Expand the Agency of Transportation technical and administrative support services and implement grant management support services to local governments currently lacking that capacity. 

Resource Category: