April 20: Big Moves – House Reverses Course on the Road Rule, Senate Adds Local Option Tax Funding to Town Highway Aid in T-Bill

As we have reported for the last several weeks, opposition to certain provisions of Act 181 continued to grow and intensify among the public and within professional advocacy groups working within the State House. Groups that testified against the road rule and Tier 3 included the Land Access Opportunity Board, the Vermont Farm Bureau, the Vermont Conservation Districts, the Vermont State Chamber, and Let’s Build Homes.  

Lawmakers heard testimony and received letters, calls, and emails from farmers, foresters, selectboards, realtors, business owners, and homeowners. Although many of these commenters shared enthusiasm for the intent of Act 181 – to protect vital natural resources while encouraging new housing development along historic settlement patterns – nonetheless, most opposed the road rule and Tier 3 framework. Just a few months ago, Act 181 was a relatively obscure and largely unknown land use law. The rapid coalescing of such a diverse range of stakeholders around a unified policy position is something rarely seen in Montpelier, and it was impossible to ignore.  

Last Friday, House Enviornment Committee Chair Amy Sheldon said “We don’t need our shared interest in protecting our environment to divide Vermont, particularly at this moment,” and went on to say “I’m looking at repealing the road rule and the Tier 3 and revisiting how we structure that.” 

The committee discussion that followed was at times mournful, with several Democratic representatives lamenting that a failed public process created by Act 181 and administered by the LURB had come up short. The committee agreed that the road rule and Tier 3 had become toxic, that public trust had been lost, and that the best way forward is to repeal the two provisions and start over. Lawmakers reassured each other that repeal would not be a roll backbecause municipal regulations, state environmental permitting, and the prior Act 250 jurisdictional triggers would all remain intact.  

Later, Speaker of the House Jill Krowinski said “These conversations have highlighted a critical issue: while some aspects of the law are working, there are some that are not. Following extensive feedback from communities across Vermont, it is clear that the ‘Road Rule’ and ‘Tier 3’ need to be repealed”. 

These statements are extraordinary.  

Act 181 was passed in 2024 by a veto-override of the super majority. The law represented the first significant change to the Act 250 regulatory regime in over 50 years – and was itself the culmination of more than a decade of legislative study and public debate. Some elements of Act 181 had made it past rule making and were in the early stages of implementation (such as future land use area mapping and Tier 1b approval) while the rules and guidelines for the road rule and Tier 3 were still in draft form. Such a dramatic mid-stream shift by legislative leadership is extremely rare and certainly could only be achieved with the support of a broad, multi-partisan coalition.  

Since crossover, the Senate Transportation Committee has been diligently working to advance the annual transportation bill, H.944, which is in a race to beat the more controversial education reform package to hearings in the Senate Finance and Appropriation committees.  

Late last week, the committee discussed draft language to create a new Local Option Municipal Transportation Special Fund. This fund would:  

This proposal closely reflects one made by the House Transportation Committee that was later stripped from the House version of the bill by the Ways and Means committee. See the new proposed language beginning on page 12 of draft 3.1 of the transportation bill here.  

Although VLCT originally supported the concept of using new future years’ surplus to increase town highway aid funding, the current proposal has a “flaw in the slaw”: the committee's discussion of the new projections for the PILOT Special Fund balance made clear that they expect the Senate Finance and Appropriations Committees to also make a new statutory use of the LOT revenues for the state’s expenses for reappraisal and property tax setting.  

You may remember from our crossover week reporting that the governor’s recommended budget included making the state’s annual per-parcel payments for reappraisal and grand list equalization an ongoing use of the PILOT Special Fund. The House Committee on Ways and Means included this change in the miscellaneous tax bill – and as a result of VLCT’s advocacy and opposition, a floor amendment brought forward by Representative Sibilia was accepted, to keep the one-time appropriation of $3.4 million but remove the provision to make this an annual use of the fund. It appears that the Senate money committees wish to put that ongoing appropriation back in.  

This means that these local option tax revenues held by the state would first be used for PILOT fee payments, then for reappraisal costs, and 75% of the remaining surplus would go to the Local Option Municipal Transportation Special Fund. JFO projects that figure would be only $486,000 of the total $16,650,000 revenues in FY28. Furthermore, under this appropriation framework, the PILOT Special Fund would continue to carry a more than $10 million surplus.  

VLCT has long advocated that to address the growing surplus the legislature should (1) first adjust the LOT withholding formula so the state would take less and more money would stay in the local communities that have adopted LOT, and (2) return future surplus revenues to municipalities as new appropriations – not as replacement revenue to fund the state’s current obligations for fees and payments related to reappraisal.  

While the Senate Transportation Committee will continue to discuss other sections of the transportation bill this week, they officially voted the bill out on Friday, and it has been referred to the Senate Finance Committee.  

If you serve a municipality that has authorized local option taxes and you have ideas about how the state should spend those revenues, contact your state Senator today!

Last week, we reported on bill S.218, an act relating to reducing chloride contamination of State waters, and a proposed amendment to the bill sponsored by Rep. Michael Boutin of Barre and supported by VLCT.  

The proposed legislation would create a new chloride reduction program at the Agency of Transportation, initially costing VTrans $700,000, and would create an “affirmative defense” for salt applicators who complete the trainings – to protect against liabilities from slip and fall events or traffic accidents. However, VLCT assesses the liability protection provided in S.218 to be totally inadequate.    

Over the course of the week, the VLCT advocacy team toured House committees with two separate proposed amendments, each that we supported, and that would have provided municipal salt applicators with the same liability protections that state government has enjoyed for all tort claims since 1961. In our testimony to the House Judiciary Committee (at 1:07:10) and House Environment Committee, we made it clear that while VLCT shares support for the intent of the bill, we have been unable to support it due to the inadequate liability protections for municipalities. 

In order to be protected from lawsuits under S.218, a municipality would have to prove that:  

The proposed amendments would have made sure that if a municipality facing a tort claim resulting from the chloride reduction program failed to meet the standard for the “affirmative defense”, they would be provided the same liability caps that state government receives for all property and causality liabilities under the Tort Claims Act. The only testimony offered to oppose the amendment was given by the Vermont Association for Justice.  

Lawmakers who discussed the proposed Boutin amendment* stated that the issue of tort liability and insurance was too complex to be considered through amendment and they once again pledged to take up the issue next session. Allow us to remind you that we testified on this issue several times last session, in both committees. Regardless, the committees failed to find the amendment favorable by straw poll votes and the amendment failed on the House floor on third reading of the bill.  

The House passed S.218 along party lines, with 85 yeas and 54 nays, and the Senate later voted to concur – sending the bill to Governor Phil Scott. The governor has five days to sign the bill into law, allow it to pass without signature, or veto it. 

*Copy/paste link into your browser to view. https://legislature.vermont.gov/Documents/2026/Workgroups/House%20Judic…

Join VLCT for our State House Municipal Advocacy Day on Thursday, April 23.  This is your opportunity to meet directly with your state representatives or senators, attend a joint committee hearing on municipal transportation topics, and help Vermont’s communities inform critical policy decisions before the legislature this session. 

This is a come-and-go opportunity: whether you participate in breakfast, networking, meetings, or hearings, your engagement strengthens VLCT’s collective voice and amplifies the priorities of Vermont’s towns and cities. Register Now!

Tentative* Agenda for State House Municipal Advocacy Day April 23, 2026 

8 AM to 9:30 AM in the State House Cafeteria: Network with legislators, enjoy a light breakfast (coffee, tea, pastries), and mingle with your peers. 

10 AM to 11:30 AM: Attend a joint hearing of the House and Senate Transportation committees. Local officials interested in testifying on transportation related issues, opportunities, and challenges will please register and let us know your interest in testifying. Email jhanford@vlct.org and ssheehan@vlct.org.

11:00 AM to 11:30 AM group photo in the Cedar Creek Room  

With work in the State House continuing apace, 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 to attend our next bi-monthly chat here, or join us in person in Montpelier on April 23.