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CHIP IN VT Assistance: Helping Communities Turn Infrastructure Into Housing

Need One-on-One Help Understanding CHIP or Advancing Your Efforts? *

If so, meet with VLCT's Project & Funding Specialist! Whether you are just in the idea phase, have started to gain momentum, have a housing or infrastructure project defined, or are ready to submit a CHIP application, let us help you. We will talk with you about your CHIP project, initiative or problem to help you:

  • Understand how CHIP works and whether it's a good fit,
  • Identify infrastructure investments that could unlock housing development,
  • Plan projects that are financially and operationally sustainable,
  • Prepare strong CHIP applications,
  • Navigate financing, compliance, and long-term program responsibilities, and
  • Learn from peers and statewide experts.

Whether you’re just learning about CHIP or moving your infrastructure project forward, you can schedule a convenient time to meet with our Project & Funding Specialist by booking time directly into her calendar or emailing bwaninger@vlct.org.

 

* Member-Only Service

This service is available only to individuals who hold an official role (selectboard, town manager/administrator, clerk, treasurer, planning commissioner, assessor, etc.) with a VLCT member.

Publication Date
02/20/2026

February 17: Special Funding Proposals – Opioid Abatement, Appraisal, and Town Highways

Member for

3 years 1 month
Submitted by iminot@vlct.org on

Given the constrained state budget this year, we thought lawmakers might be open to discussing municipal revenue streams, and, oh boy, are they ever. The good news is that some committees are open to exploring new non-property tax revenue ideas. The bad news is that the appropriations committees are discussing new ways to spend local monies. 

In this Weekly Legislative Report, we discuss proposed appropriations from the Opioid Abatement Fund and PILOT Special Fund, announce a new proposed municipal revenue authority for town road spending, and provide an update on the ongoing debate about the timing for implementing Act 181.

The House is expected to take action later this week on H.660, an act relating to fiscal year 2027 opioid abatement special fund appropriations.  

Revenues to the opioid abatement special fund come from a number of negotiated settlement agreements with pharmaceutical companies and pharmacies understood to be at fault in the national opioid overdose crisis. Recommendations for how the state should spend its share of these settlement monies annually are made by the State Opioid Settlement Advisory Committee (OSAC), which includes seven members appointed by VLCT to represent local interests. The OSAC recommendations for FY27 are available here. 

The appropriations for FY27 made in H.660 total $6,317,277 (including prior year adjustments) and are generally in line with the committee’s recommendations, and include: 

Annual funding to Vermont Department of Health (VDH): 

  • $455,000 for outreach and engagement: funds 26 outreach/case management staff in preferred provider network 
  • $1,600,000 for VARR‑certified recovery residences 
  • $850,000 for syringe services programs  

One-time funding for existing programs: 

  • $1,100,000 for peer recovery coaches at the Deptartment of Corrections 
  • $250,000 for homeless shelter harm‑reduction supports with the Office of Economic Opportunity 
  • $900,000 for new recovery residence beds (via VDH) and $300,000 for new NARR‑certified beds in Brattleboro, Middlebury/Addison, Randolph, Chester, St. Albans, or other identified regions 

One-time funding for new programs: 

  • $248,000 for EMS Buprenorphine PREVENT Program (via VDH) to expand EMS training to administer buprenorphine after naloxone 
  • $35,000 for Rutland Mental Health Services transitional housing room & board subsidies 
  • $237,646 for Springfield Project Action – a Public Safety Enhancement Team – to support coordinator positions in Bennington, Springfield, Brattleboro, St. Johnsbury, and Central Vermont (via VDH) 
  • $288,935 for Elevate Youth Services (Barre) for a low‑barrier drop‑in teen center 
  • $124,999 for Greater Falls Connections for expanded youth engagement, staffing, and prevention programming space 
  • $200,000 for Friends for Change (Windham County) for youth access to therapy, crisis, housing, medical, recovery, and employment supports 
  • $26,697 for Winooski Partnership for Prevention for medicine‑safety education for elementary‑aged youth 

Last week the chair of the Senate Committee on Transportation, Senator Richard Westman, revealed a new outside-the-box proposal to help municipalities fill transportation funding shortfalls.  

In Governor Scott’s proposed budget, total proposed “Town Highway” program aid is down by over $7 million, or -7.3%, from $96,665,344 in FY26 to $89,648,226 in FY27. As we reported in our Legislative Preview, the overall $30 million revenue gap in the state Transportation Fund is made even more concerning as transportation construction and paving project costs have risen by 40-60% over the last five years.   

The Senate proposal includes a new municipal authority to assess a “Local Option Municipal Services Tax”. The new taxing authority would work like a 1% Local Option Tax (LOT), but the portion retained by the state would be dedicated to a new “Local Option Municipal Transportation Special Fund” instead of funding going to the Payment In Lieu Of Taxes (PILOT) fund. In the current draft language, first introduced on Wednesday, February 11: 

  • Municipalities would be allowed to hold a vote to impose an additional 1% local option tax on one or more of the currently allowed taxes (Rooms, Meals, Alcohol, and Sales). 
  • 50% of the collected tax would be returned to the municipality without charging an administrative fee (whereas the current Vermont Dept of Taxes LOT fee is $5.56 per return).  
  • 40% of the collected tax would be deposited into the new Local Option Municipal Transportation Special Fund and that fund would be used solely to provide state transportation aid to municipalities. 
  • 10% of the collected tax would be deposited into the PILOT fund. 
  • Future disbursements from the Special Fund would be in addition to the existing statutory minimums for Town Highway Aid funding.  
  • $3 million would be appropriated from the FY27 PILOT fund to the Agency of Transportation to provide additional grants through the General Sate Aid to Town Highway program. 

Since the start of the session, we have said we would support any effort to address this year’s transportation fund budget shortfall and minimize its effect on municipalities. VLCT is always supportive of efforts to grant new municipal revenue funding authority.  This proposal might not be perfect, but it’s a good place to start!  

We will be working, over the next few weeks, with both transportation committees to suggest improvements and maximize the municipal benefits in this proposal. Stay tuned and give us your thoughts at jhanford@vlct.org and ssheehan@vlct.org. 

According to the state’s FY25 end-of-year Special Fund Report issued in November, the PILOT Special Fund (SF#21485) has a surplus of more than $15 million. This money is from local revenues generated by Local Option Taxes (LOT) on meals, rooms, sales, and alcohol and retained by the state for the purpose of making annual Payments in Lieu of Taxes for state-owned buildings and lands. 

As the PILOT surplus has grown over the last two years, VLCT has held concerns that legislative appropriations would rob the special fund for non-municipal purposes or priorities – and has advocated that the surplus be returned to the more than 30 municipalities that raised it.  

In the governor’s FY27 budget, he recommends that $3.5 million of PILOT surplus be used for the state expenses related to property appraisal and the equalization study which is used to set the state education fund property tax rate. The House Committee on Appropriations agreed with this $3.5 million in their version of the budget, and doubled down, taking another $3.5 million for the same purpose in their FY26 Annual Budget Adjustment (BAA), which has passed the House. These appropriations would use half of the available PILOT Special Fund surplus for the purpose of setting the statewide grand list.  

Municipal leaders understand the acute budget challenges facing state appropriators this year. As state property taxes have increased more than 40% over the last five years, local budgets have suffered under the same driving budget pressures including the rising cost of health insurance and other benefits, high interest rates, sustained inflation, and increased salary and professional costs from a diminishing local workforce. That is why so many more towns are voting on create or add a Local Option Tax at their town meeting this year. Waitsfield, Milton, Swanton, Chester, and Morristown will consider LOT adoption. The town of Stowe will take up a charter change that would establish a unique 2% LOT authority.  

Local Option Taxes are one of the rare non-property revenue authorities that Vermont municipalities can use to alleviate the ever-growing property tax burden on Vermont families and businesses. VLCT objects to appropriation of the existing PILOT Special Fund surplus for annual payments to municipalities for property valuation and grand list maintenance.   

The work of maintaining and setting up the state’s grand list falls primarily on volunteer municipal listers and appraisers, many of whom are unpaid or receive moderate stipends. The current annual per parcel payment amounts granted to municipalities fall far short of the true cost of mass reappraisal, now required to be conducted every six years. Municipal governments are obligated to set the grand list for the purpose of setting the state education tax rate – and are required to collect those taxes. Furthermore, municipalities must remit state property tax payments regardless of whether the property owner falls delinquent.   

Given the high rate of state property tax increase over successive state budgets, more Vermonters are unable to pay their taxes, which creates an added cost for municipal budgets. Many municipalities are carrying forward hundreds of thousands of dollars of deferred revenues from delinquent property taxes in their FY27 municipal budgets. This burden is in turn passed on to Vermont taxpayers through the municipal property tax rate.   

Revenues created by the 38 Vermont municipalities using LOT should not be paying for any statewide expense – least of all for the current statewide property valuation and tax collection system which already overburdens local budgets. These are local revenues created by voter authority.   

We urge the legislature to reverse course and find a more appropriate revenue source from within the state’s general fund or education fund to support costs related to the state’s property valuation system.   

Last week opened with a press conference hosted by the leaders of the nonpartisan Rural Caucus calling for legislative action to slow down Act 181 implementation for the Road Rule and Tier 3 jurisdiction.  

VLCT Director of Intergovernmental Affairs Josh Hanford spoke at the press conference saying: “When town officials look at the draft Tier 3 map, they fear that this sweeping new Act 250 jurisdiction will freeze their community in amber. The draft rule would create new duplicative permit requirements along key highways and in existing neighborhoods for types of construction as incidental as a garden shed or one-car garage – as well as for the new housing that towns need, want, and allow in local zoning. If the state is going to apply Act 250 to 80% of the land area in Vermont, then local officials and citizen planners need time to see and understand what the LURB [Land Use Review Board] proposes while they make decisions about future Tier 1 areas that could be Act 250 exempt. VLCT urges the legislature to take action this session to slow down Act 181 and make sure we are striking the right balance between environmental protection and smart growth.” 

At least Senate leaders have heeded their call, as the Senate Committee on Natural Resources and Energy continued to hold joint hearings throughout the week on Act 181 along with the committees on transportation and economic development.  

The VLCT advocacy team testified twice at the joint hearings, first on Tuesday regarding our concerns related to the Road Rule and Tier 3, and again on Friday regarding the process for the adoption of Tier 1A and Tier 1B areas.  

VLCT is calling for legislative action this session to:  

  • extend temporary Act 250 exemptions to the end of 2030 or until a municipality receives Tier 1A approval, 
  • eliminate requirement for Tier 1A municipalities to enforce existing Act 250 permits,  
  • delay Tier 3 Rule and Road Rule Guidance to November 2026, and  
  • delay Tier 3 and Road Rule implementation to July 2027 (currently road rule to take effect July 2026, Tier 3 December 2026). 

Most stakeholders who have testified, including the Vermont Natural Resources Council (VNRC), have agreed that the current timeline for Act 181 implementation is misaligned and will support deadline extensions for the Road Rule and Tier 3 rulemaking and guidelines.  

With work in the State House underway, the most important key to our success is your input and participation in VLCT’s advocacy work. Don’t forget to register to attend our Advocacy Chats to learn what mid-session progress has been made on the issues that matter most to local government. Also, hear what your municipal colleagues from around the state have to say about the hot topics and share your concerns for the legislature. You can register here to join us on Monday, February 23 at 1 PM.  

  • You can find (and share) this legislative preview, last month’s advocacy update, and future reports and alerts on our main Advocacy webpage.  
  • To support VLCT’s advocacy work; participate in policy development, testimony, and legislative actions; or just learn more, reach out to Josh and Samantha by email at jhanford@vlct.org and ssheehan@vlct.org. 

Common FEMA PA Audit Compliance Findings and How to Respond

Municipalities across the state are facing an uptick in program compliance audits tied to FEMA’s Public Assistance (PA) program. These reviews are an important part of ensuring federal funds are used appropriately, but they can also create uncertainty for local governments already managing complex recovery efforts. Municipalities that are not rated as “low risk” are more likely to be audited.

To support communities navigating this process, VLCT has compiled practical, ready‑to‑use response language and strategies to address the most common compliance questions raised during state audits. This resource is designed to help municipalities respond confidently, clearly, and consistently while maintaining alignment with FEMA PA requirements.

 

Audit Questioned Compliance

The following text can be added to one of the municipality’s Procurement Policy, Internal Controls, Financial Management/Accounting Manual, Grant Management Policy or Procedure, or similar written document.

To determine cost allowability when expending Federal award funding, the municipality will consider Federal Cost Principles, the notice of funding opportunity or award announcement, the award application, the applicable funding agreement, and its own policies.

Federal Requirement: 2 CFR § 200.302(b)(7)

You can use VLCT’s Model Procurement Policy or add the following text to the municipality’s Procurement or Conflict of Interest Policy:

Definition of Conflict of Interest. A conflict of interest occurs when the employee, officer, agent, or board member of the Municipality, any member of their immediate family, their partner, or an organization that employs or is about to employ any of the parties indicated herein, has a financial or other interest in or a tangible personal benefit from an entity considered for a contract.

Policy Text for Conflict of Interest. See Definitions section. Any employee, officer, or agent of the Municipality who participates in the procurement process must make reasonable efforts to avoid real or apparent conflicts of interest, must disclose any potential conflicts of interest in writing, must refrain from participating in procurement decisions where such conflicts exist, and must comply with other requirements of 2 CFR § 200.318(c). If the municipality has an affiliate or subsidiary organization that is not a State, local government, or Indian Tribe, the Municipality also must maintain written standards of conduct covering organizational conflicts of interest. Any actual or potential conflict of interest must be disclosed to the funder. If a conflict exists between the Federal requirements and the Municipality’s requirements, the most restrictive requirement must be used. Disciplinary actions shall be the enforcement actions in the Municipality’s adopted investigation and enforcement ordinance, personnel policy, or rule Code of Ethics Investigation and Enforcement Ordinance. Disciplinary actions of Appointed Officers shall apply to non-employee agents.

This text blends Federal Conflict of Interest requirements with requirements of Vermont’s Municipal Code of Conduct.

Federal Requirement:  2 CFR § 200.318(c)

If the municipality has not developed detailed, written internal controls, the municipality can provide the State’s audit staff with the most recently completed internal financial controls document provided by the Treasurer to the Selectboard. A template of this document is available on the Vermont State Auditor’s website at Internal Financial Controls Checklist for Municipalities. 

Municipalities can use VLCT’s Internal Financial Controls Checklist for Municipalities to assess their internal financial controls.

Federal Requirement:  2 CFR § 200.1 and § 200.303

The DPS Risk Assessment Survey asks questions about your municipality’s financial systems and policies. It should be filled out by people who understand these areas well. Wrong or guessed answers can cause the municipality to have “Questioned Compliance” findings or be treated as a “high‑risk auditee”, which can affect future grants.

To address this Questioned Compliance, send a corrective action response saying the municipality will review all survey answers for accuracy before it is signed and submitted. Explain how this will be done. For example: “Two knowledgeable staff members (such as the Town Clerk/Treasurer and the Selectboard Chair or Town Manager) will complete and check the Risk Assessment Survey.” Whatever process you choose, it should become part of the municipality’s internal controls. Keep a copy of each completed survey for your records.

DPS only requires one signature on the Risk Assessment. The VT Department of Environmental Conservation (DEC) requires two. DEC asks that the person authorized to sign the agreement sign as the “Chief Officer,” and that the Treasurer or Finance Director sign as the “Chief Fiscal Officer.”

Federal Requirement:  2 CFR § 200.332

Federal regulations (2 CFR § 200.302) require municipalities to track Federal award activity in their financial management systems, including:

  • Assistance Listing title and number,
  • Federal award identification number,
  • year the award was issued, and
  • name of the Federal agency or pass-through entity.

These requirements apply once a Federal award exists. They ensure that Federal revenues and expenditures can be clearly identified, reported, and supported for monitoring and audit purposes.

Before a federal declaration or award is issued, some of this information may not be available. During that period, municipalities may track emergency or event‑related costs using their normal accounting practices (e.g., event‑based or date‑based accounts).

Once a Federal award is issued or an event becomes eligible for Federal assistance, municipalities must ensure that required award information is clearly associated with related revenues and expenditures. This can be done through the accounting system structure, tracking fields, or other controlled records linked to the underlying accounts.

If the financial system cannot capture all required award information through account attributes, the VT Department of Public Safety recommends incorporating it into the account naming convention in the following order (example shown):

  • Federal agency (FEMA)
  • ALN title/award title (DR4810)
  • ALN (97.036)
  • Pass‑through entity (DPS)
  • State grant agreement number (02140‑84810‑XXX)
  • Federal Award Identification Number / FAIN (FEMA‑DR‑4810‑VT)
  • Award year (2024)

GFOA guidance generally favors maintaining a stable chart of accounts and tracking grant‑specific details through system attributes, project codes, or supplemental records rather than lengthy account titles. As an alternative to a long account name, municipalities may maintain the required Federal award information in a controlled supplemental record (e.g., spreadsheet BW1.1) that is clearly linked to the relevant accounts. In this case, the fund or account may be named based on the event or incident date, with the supplemental record used to document the required Federal identifiers once known. VLCT’s Model Account Naming Spreadsheet can get you started.

Whichever method is used, it must allow the municipality to accurately identify, report, and substantiate Federal award activity while maintaining consistency and integrity within the chart of accounts.

Federal Requirement:  2 CFR § 200.302(a) and (b)(1)

Federal awardees must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation.

To address this Questioned Compliance, municipalities should track each disaster event and all other grants separately. You can do this by creating a dedicated fund or, for smaller one‑year grants, by using a spreadsheet that lists all required information. The goal is to make sure every expense can be clearly linked to the grant money that paid for it.

Federal Requirement:  2 CFR § 200.302(b)(3)

This questioned compliance may be described as “Accounting reports detailing federal and non-federal share of expenditures for Public Assistance award”

Make sure your accounting system can show the federal share and the local match share for every FEMA PA expense. Record each transaction so the two parts are clear.

If your system cannot do this, keep a separate spreadsheet that shows the match breakdown. You can use VLCT’s Model Grant Match Tracking Spreadsheet. Add each reimbursement request to the same spreadsheet, and total the columns for Total Expenditures, Federal Share, and Match Share. At closeout, the total Federal Share must match the amount FEMA paid the municipality.

FEMA funds Small Projects based on the approved Project Worksheet estimate, not the actual cost. Municipalities must provide a 25% match on the FEMA‑funded amount, even if the real cost is lower. This may require using extra match. The total match you document must meet or be higher than the required non‑federal share shown in your financial reports.

Federal Requirement:  2 CFR § 200.306 and 2 CFR § 200.302(a)

You can use VLCT’s Model Procurement Policy or add the following text to the municipality’s Procurement Policy:

Requests for proposals or bids will incorporate a clear and accurate description of the technical requirements for the property, equipment, or service being purchased. The description may include a statement of the qualitative nature (ex. size, appearance, value, etc.) of the property, equipment, or service to be procured. When necessary, the description must provide minimum essential characteristics and standards to which the property, equipment, or service must conform. Detailed product specifications will be avoided if at all possible. When it is impractical or uneconomical to clearly and accurately describe the technical requirements, a “brand name or equivalent” description of features may be used to provide procurement requirements. The specific features of the named brand must be clearly stated. Requests for proposals or bids also will incorporate any additional requirements which the offerors must fulfill, such as insurance requirements and bonds, and all other factors that will be used in evaluating bids or proposals.

When writing requests for proposals or bids, include enough technical detail for bidders to understand the scope of work. For larger projects, describe the general services required (e.g., design, permitting, construction) and expand as needed. For smaller projects, list the specific tasks and any required standards or specifications, such as dimensions, materials, or applicable municipal or permit requirements. Clear, accurate technical requirements help ensure compliant procurement and consistent bids.

Federal Requirement:  2 CFR § 200.319(d)(1) and (2)

You can use VLCT’s Model Procurement Policy, which is federally compliant, or ensure the municipality’s current policy includes the following language: 

When expending Federal funds, purchases must follow the municipality’s purchasing policy and Federal Procurement Standards per 2 CFR §§ 200.318 – 200.327.

Federal Requirement:  2 CFR § 200.318 and § 200.320

You can use VLCT’s Model Contract Award Summary, which lists all required contract information and helps you show the municipality completed all required checks and verifications. Keep the documents that prove these checks and verifications were done in the procurement file.

Federal Requirement:  2 CFR §200.214

You can use VLCT’s FEMA Public Assistance Program Compliant Contracts You also must add the text from item #19 (“Sub-Agreements) in the State of Vermont Attachment C: Standard State Provisions For Contracts And Grants . You can find Attachment C your grant agreement with the state.

Both the State and Federal provisions must be included in the contract, whether the purchase follows your normal procurement process or is an emergency one.

Federal Requirement:  2 CFR § 200.327

State Requirement:  State of Vermont Agreement, Attachment C, #19 Sub-Agreements

Moving Forward with Confidence

Preparing for and responding to compliance audits doesn’t have to be overwhelming. By understanding the issues most frequently flagged and having well‑structured responses at hand, municipalities can streamline the audit process and reduce the risk of delays or misunderstandings. We hope this resource empowers local officials to approach audits with greater clarity and assurance as they continue the essential work of disaster recovery. Our team will continue updating this guidance as policies evolve and new audit trends emerge.

Publication Date
02/09/2026

Small Project Pitfalls: New FEMA PA FAQs

Member for

3 years 1 month
Submitted by bwaninger@vlct.org on
multicolored arrows with the word "update" in them

VLCT has updated its FEMA Public Assistance FAQ webpage to address two issues related to FEMA’s Small Project procedure: changes to project scope and what happens when a Small Project costs less than expected.

Changing How a FEMA PA Project Is Completed

Several municipalities have asked whether they can adjust how a FEMA‑funded project is carried out. The answer is simple: contact the State of Vermont before making any changes.

FEMA must approve any modification to the scope of work written in the project worksheet. This includes changes to materials, methods, or hazard mitigation components. Scope changes must be approved in writing through a revised project worksheet. Completing work differently than approved – even if the project still functions as intended – can put funding at risk.

During final inspection, if the completed work does not match FEMA’s approved scope, the state may:

  • Request a FEMA scope change, which could result in partial repayment
  • Determine the project is ineligible, requiring full repayment
  • Investigate potential misuse of federal funds

Misconduct is treated seriously under federal law. Improper use of FEMA funds can lead to repayment, state or federal debarment, civil penalties, or criminal charges. Early communication with the state is the best way to avoid these outcomes. Best practice is to put your scope change question in writing and get any scope change approval response in writing too.

What If a Small Project Costs Less Than the FEMA Payment?

Under FEMA’s Small Project rules, municipalities may keep excess funds only if:

  • The project is completed exactly as described in the FEMA project worksheet,
  • All costs are properly documented, and
  • The state verifies completion during closeout.

For highway projects, VTrans will confirm that the work matches the approved scope. Once the state closes the project, any remaining funds may stay with the municipality, but they may still be subject to adjustment later.

To avoid complications, municipalities are encouraged to wait until they receive the final closeout letter for the entire disaster grant before treating any funds as surplus.

These updates are designed to help communities avoid common pitfalls and stay compliant with FEMA requirements. Municipalities are encouraged to review the full FAQ page and reach out to their State Public Assistance Coordinator with questions as projects move forward.

Meeting Federal Grant Requirements for Cybersecurity Internal Controls

The federal government has strengthened cybersecurity expectations for all recipients of federal financial assistance. As of October 1, 2024, municipalities must include cybersecurity as part of their internal control systems. This change reflects the growing risk that cyberattacks pose to public services, financial systems, and sensitive community data.

Why This Matters

Cyberattacks, especially phishing and ransomware, are increasingly targeting small towns. The updated federal rules recognize this risk and require municipalities to take reasonable steps to safeguard financial systems, grant records, and sensitive data.

Controls Municipality Can Use

Even with limited staff and tight budgets, there are practical steps every municipality can take to meet this requirement and protect its systems. The controls listed below are examples of reasonable controls a municipality could use. They are not intended to be one-size-fits-all or a compliance checklist. 

These low cost, low staff-time actions offer strong protection and are easy to implement.

  • Strong Passwords - Use long, unique passwords. Encourage password managers.
  • Multi‑Factor Authentication (MFA) - Turn on MFA for email, financial systems, and grant‑related accounts.
  • Basic Cybersecurity Training - Teach staff and elected officials how to spot phishing emails. Free training resources are widely available.
  • Limit System Access - Give access only to people who need it. Remove access immediately when roles change.
  • Automatic Software Updates - Enable automatic updates on all municipal computers and devices.

These steps may require some planning or help from an IT provider.

  • Regular Data Backups - Back up financial systems and grant files. Keep at least one backup offline or in secure cloud storage.
  • Antivirus and Firewall Protection - Ensure devices have up‑to‑date security tools. Many are low‑cost or included in existing IT contracts.
  • Written Cybersecurity Policies - Create simple policies for passwords, acceptable use, remote access, and data handling.

These tools can be phased in over time.

  • System Monitoring - Track login attempts and unusual activity. May require IT support.
  • Vendor and Third‑Party Oversight - Review IT vendor contracts to ensure they follow strong cybersecurity practices.
  • Incident Response Plan - Create a plan for responding to a cyberattack. Conduct a simple annual tabletop exercise.
Bottom Line

You don’t need a large IT department to meet the new federal requirement. Start with the low‑cost steps, build gradually, and use partners for support. For example, PACIF offers grants for IT consultation services for cybersecurity risk assessments. Strong cybersecurity protects your municipality, your data, and your ability to receive federal funding.

VLCT Resources

 

This document was created in part with artificial intelligence and was reviewed by a human subject matter expert.

Publication Date
02/02/2026

Testimony to Senate Government Operations Committee Regarding Municipal Unassigned Fund Balance Authority, 1/8/26

Member for

3 years 1 month
Submitted by iminot@vlct.org on

Testimony to the Senate Committee on Government Operations
Regarding Municipal Unassigned Fund Balance Authority
Josh Hanford, Director of Intergovernmental Relations, VLCT
Samantha Sheehan, Municipal Policy and Advocacy Specialist, VLCT
January 8, 2026
 

Act 57 of 2025 “The Flood Bill”

The Flood Bill included several actions targeting support to municipalities to enable the preparation, emergency response, and recovery from flood disasters and other all hazard events and changed the LOT withholding formula from 70/30 to 75/25.

  • Act 57 also enacted three new municipal finance authorities which were jointly developed and recommended by VLCT and the Vermont Bond Bank.
  • Section 6: Unassigned Fund Balance
  • Section 7: Emergency Borrowing; all-hazard event or state emergency
  • Section 8: Denominations; Payments; Interest (level debt service)
     

Types of “Fund Balances” Used in Governmental Finance

Think of these more like an adjective…..less like a budget line or bank account.

  • Restricted: resources that can only be used for specific purposes dictated by external parties (like grants or laws). In the municipal context, this can include charters. TIF revenue is an example of restricted funds.
  • Committed: resources set aside for specific purposes by the municipal legislative body requiring the same level of formal action (typically ordinance) to change or remove the commitment. Housing Trust Funds are a common example of committed funds.
  • Assigned: resources intended for a specific purpose, but not legally constrained. For example, recreational program revenues retained for same future purpose (this year’s parade registrations pay for next year’s parade).
  • Unassigned: the leftover, spendable amount in the General Fund after accounting for restricted, committed, and assigned funds.
     

Definition of a “Fund Balance”

Fund balance is a key component of municipal financial management, providing resources that help manage risk, stabilize tax rates, and maintain services.

  • Fund balance is the mathematical difference between assets and liabilities in a governmental fund, resulting in a surplus or deficit.
  • It is not a cash account and should not be equated with a municipality’s bank balance.
  • Fund balance reflects the financial position of a municipality and helps indicate overall financial health.
  • Fund balance is reported in accordance with Generally Accepted Accounting Principles (GAAP) and GASB Statement No. 54, which classifies fund balance based on legal and policy constraints.
     

Definition of an “Unassigned Fund Balance”

An Unassigned Fund Balance is not excess money accumulated unnecessarily to reduce or “buy down” taxes.

  • Is the residual category of the General Fund.
  • Represents resources available for general governmental purposes.
  • Is not restricted, committed, assigned, or non-spendable.

Adequate fund balance allows the municipality to continue public services during periods of constrained cash flow (before propertytax payments) without relying on short term debts such as a Tax Anticipation Note (TAN).

Graph: Healthy Municipal Budget Cycle - Fund Balance Covers Expenses
Image from New Hampshire Municipal Alliance

 

How Does It Work?

Act 57 grants the municipal legislative body control over these funds without additional voter approval.

Selectboards are encouraged to adopt a formal fund balance policy that:

  • Defines target fund balance levels (such as a percentage of the GF; VLCT recommends 15-17%)
  • Establishes conditions for use and replenishment
  • Identifies corrective actions if fund balance falls below targets.
  • Addresses treatment of excess fund balance (e.g., one-time uses, capital needs, tax stabilization).

Fund balance levels should be reviewed regularly and adjusted based on:

  • Economic conditions.
  • Revenue and expenditure patterns.
  • Debt obligations.
  • Identified financial and operational risks.
     

Benefits of Maintaining a Healthy Unassigned Fund Balance

Municipal cash flow is uneven, with expenses incurred year-round and revenues collected at specific times. In Vermont, municipal revenue authorities are very limited, and most municipalities rely primarily on municipal property taxes.

  • Supports stable and predictable tax rates over time.
  • Provides flexibility to respond to emergencies, economic downturns, and unforeseen events.
  • Ensures sufficient cash flow during periods when revenues are not yet collected.
  • Reduces or eliminates the need for short-term, emergency borrowing and associated interest costs.
  • Strengthens credit ratings and lowers interest rates for borrowing. From Moody’s Investors Service, “a fund balance between 15% and 30% of revenues is needed to receive a scorecard value of “Aa.”
     

What Else Should Vermonters Know About Unassigned Fund Balances?

  • The State of Vermont, like all 50 states, maintains a very healthy fund balance which contributes to our excellent state credit rating.
  • Maintaining a UAF is a prudent fiscal practice recommended by governmental finance organizations and auditors. The
    Governmental Finance Offers Association (GFOA) says “It is essential that governments maintain adequate levels of fund balance to mitigate current and future risks.”
  • Actions by the legislative body to maintain or expend funds are subject to all normal requirements of the law (such as public records law, open meeting law, ethics law), policies of the town, and rules adopted by the body.
  • Act 57 created this new authority and does not require towns to use it ... but they should!


What’s Next?

The Unassigned Fund Balance authority created by Act 57 became effective July 1, 2025.

  • Town Meeting Day 2026 will be the first opportunity for many municipalities to utilize this new authority for their fiscal year 2027 budget.
  • VLCT will soon issue a new model Fund Balance Policy with guidance, available to all Vermont municipalities.
  • All members may consult with VLCT’s Municipal Operations Support team for questions, concerns, and assistance in establishing an unassigned fund balance and/or adopting a governing policy.

 

Links and Resources

“Fund Balance Guidelines for the General Fund” Government Finance Officers by GFOA

Taking the Mystery Out of Fund Balance, New Hampshire Municipal Association

Moody’s Rating Methodology, US Local Government General Obligation Debt

Act 57 of 2025 as enacted

Example fund balance policy, City of Burlington

Attachments
Presentation used by Josh Hanford and Samantha Sheehan during their testimony

Federal Spending Limits Increase for Purchasing

Member for

3 years 1 month
Submitted by bwaninger@vlct.org on
stacks of coins with the word "inflation"

Effective October 1, 2025, the dollar limits that govern how federal funds can be spent were updated. These limits – called thresholds – determine which purchasing rules a municipality must follow based on the size of the purchase. With the new updates, local governments can now use higher dollar amounts before more formal purchasing steps are required.

This matters because any purchase made with federal dollars (such as FEMA Public Assistance, many transportation grants, or Community Development Block Grants) must follow these federal spending rules. Using outdated limits can lead to compliance issues and may put federal funding at risk.

What Has Changed?

The federal spending limits have increased to keep pace with inflation. As a result, some purchases that previously required a more complex process may now qualify for simpler procedures. Municipalities are allowed to adopt stricter (lower) limits in their own policies if they choose, but they cannot set limits higher than the federal rules.

Purchasing  TypePrevious ThresholdNew Threshold (Effective Oct 1, 2025)Why It Matters for Local Governments
Micro-Purchase$10,000$15,000Purchases below this amount can be made without competitive quotes if the price is reasonable, making small buys easier.
Simplified Acquisition$250,000$350,000Purchases below this amount can use simplified procedures, reducing paperwork and speeding procurement.
Large PurchasesGreater than $250,000Greater than $350,000Any purchase above this amount must use a sealed bid process. Construction projects of more than $2,000 must use a sealed bid process.
Construction Threshold (for bonds, etc.)$150,000$175,000This change impacts requirements for payment or bonds in federally funded construction projects.
Purchases that involve State of Vermont funds or municipal funds may have different purchasing thresholds.
 
The federal threshold increase do not affect Davis-Bacon wages rates. Those rates apply to federally-funded construction projects and are set through a different law.
What Actions Can or Should Municipalities Take?

Local governments can update their procurement or purchasing policies to reflect the new thresholds if they want to use the higher federal thresholds. Updating policies to the new thresholds is not required. 

The update process should include:

  • Revising written policies and manuals related to purchasing.
  • Communicating changes to elected and appointed officials, volunteers, and staff that regularly use federal funds.
  • Training staff and volunteers on the updated limits so they can apply the correct rules when handling federal funds.

The new thresholds are already in effect. By updating local procurement (purchasing) policies now, municipalities can continue to make the most of federal funding opportunities.

Is There a Model Policy We Can Use to Help Ensure Compliance with Federal Requirements?

Yes! VLCT has published a Model Procurement Policy with guidance on its website. Both this policy and its accompanying guidance have been updated to reflect these federal changes.

Municipalities should keep in mind that adopting a procurement policy is the first step in meeting federal requirements. Federal rules include taking other actions during purchasing. Click through any links in the model policy to learn more about other federal requirements.

Next Steps for Towns Impacted by July 2025 Flooding

Member for

3 years 1 month
Submitted by bwaninger@vlct.org on
broken pavement on flood damaged highway

In late October, Vermont's request for a federal disaster declaration for rainfall and severe flooding on July 10, 2025, was denied. What should impacted municipalities do next?

Municipalities should contact their VTrans District Office, if District staff haven't contacted them since the federal denial was received. 

District staff can:

  • help you file for Federal Highways Administration Emergency Relief assistance if a federal aid highway was damaged in your community.
  • keep you updated on whether the State will be appealing FEMA's decision.
  • discuss potential coverage through Vermont's Town Highway Emergency Fund. This State funding assistance is available for repair, reconstruction or replacement of highways and bridges on Class 1, 2, or 3 town highways outside federally declared disaster events.

The Town Highway Emergency Fund may not have sufficient funds to cover all eligible costs for affected towns. If cash flow is a challenge, the Vermont Bond Bank may be able to assist with a loan. Contact Ken Linge at ken@vtbondagency.org. 

VLCT Annual Report 2024

2024 Audit Numbers

Dear VLCT members, 

VLCT’s staff take immense pride in being your resource. From our municipal attorneys to our intergovernmental relations team to our risk management team, they do this work because they believe in the work you do. Vermonters have your back too. Despite the volatile and uncertain times we live in, and the skepticism so many feel about government, local government continues to get high marks here in Vermont – with an increasing number of Vermonters reporting they trust local government year-over-year. This year we worked hard to help you earn that trust. 
 
We focused on increasing your capacity. We stood up a new Municipal Operations Support Team with a focus on the practical – such as municipal finance, procurement, management, and grant funding. And we nearly doubled our training and networking opportunities – all at no additional cost to the member. 

We championed local government in the Legislature, helping them understand both the constraints and opportunities that municipalities face. This included expanding local option tax authorities, making changes to the Open Meeting Law (and defeating unfunded mandates), and engaging in difficult but important discussions about regional governance. 
 
And our risk management department processed yet another year of flood claims, all while working hard to ensure pricing stability and predictability in a global insurance market that is anything but predictable or stable.  

As you can see from our financials, we’re working to prudently put your dues and member contributions to work by leveraging state and federal grants. Thanks to our administrative team – especially our finance department – VLCT is in a financial position to answer your call – whether one of your 3,000-plus legal inquiries, thousands of event registrations, or hundreds of policy questions and claims.   
 
Thank you for being a member of VLCT. We hope you feel the value we aim to deliver. 

Until next time, 

Ted Brady  
Executive Director 

Download the full 2024 financial statements here.

Publication Date
10/06/2025

Tools & Tips for Building Capital & Operating Budgets

Ever wish you could brush up your budgeting skills and deepen your understanding of the process with the help of a trusted partner?  Or you could learn more about the critical role of capital planning in your municipality's future but don't know how to implement it or take what you might have to the next level without a little bit of insider knowledge or guidance?  Well, consider VLCT your new budget-best-friend. 

This page is dedicated to providing those of you involved with municipal money matters with tips and tools to help grow your knowledge and skills base for successful budget building.  

Webinars:  

Muni Mornings + Money Matters: Tools & Tips for Capital and Operating Budgets (August 28, 2025)

Recording:  Muni Mornings with Kathleen - 8.28.25

Slide deck: Muni Morning + Money Matters Slides

Legal Parameters of Budgeting, Spending, and Borrowing (September 17, 2025, Presented by Susan Senning, Staff Attorney II, VLCT Municipal Assistance Center) - available for free download from the VLCT Store.  

Tools & Tips:

Budgeting

Borrowing

Capital Budgeting

 

Having a tough time getting started?  

VLCT’s Municipal Support Team is here to help!  Government Finance Specialist Marguerite Ladd, mladd@vlct.org, and Municipal Operations Specialist Kathleen Ramsay, kramsay@vlct.org. 

 

* VLCT Tools are to be used for informational and general guidance purposes only. It is your responsibility to verify the results, adapt the tool(s) to your specific circumstances, and ensure that any data entered is accurate and appropriate for your intended use. By using VLCT Tools, you acknowledge and agree that any reliance you place on their functionality or outputs is strictly at your own risk.  Use at your own discretion.

Publication Date
08/21/2025
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