AOT presents statewide transportation funding study; recommends EV-targeted mileage fee pilot and multiple revenue options

Patrick Murphy, state policy director at the Agency of Transportation, told the Senate Transportation Committee that the agency’s transportation funding study — directed by last year’s transportation bill — quantifies expected gaps over a 10-year horizon and evaluates alternative revenue mechanisms.

"This is not sort of a budgetary exercise," Murphy said, explaining that the study models need estimates for core maintenance and capital obligations rather than agency budget requests.

Why it matters: the study projects growing gaps between projected revenues and projected program needs driven by rising fuel efficiency and increasing electric vehicle (EV) adoption. Murphy said prior AOT studies (2013, 2016) similarly projected out-year shortfalls, and the current study updates those estimates with contemporary inflation and electrification assumptions.

What the study covers: Murphy said the report reviews current funding levels and the sustainability of each major revenue stream (fuel taxes, purchase-and-use taxes, DMV fees, federal funds), evaluates future trends (electrification, vehicle-miles traveled, inflation), and tests a menu of revenue mechanisms. The study team engaged a consultant and program staff and solicited stakeholder input during its work.

Key quantitative framing in committee: Murphy said the study used several scenarios (low/medium/high adoption) and that Vermont is tracking at or above the medium electrification path used in modeling. He noted that the state’s existing federal funding structure means more than half of AOT’s spending is federal dollars but that state match and state-controlled revenue streams are critical to draw down federal grants.

Revenue mechanisms reviewed: the study examined gas and diesel tax indexing (to preserve purchasing power), mileage-based user fees (MBUF) — with a recommended near-term pilot focused on light-duty EVs — MBUF for medium/heavy-duty vehicles, retail delivery fees (modeled at 30¢ per package as an illustrative case), transportation network company fees, MPG-based registration fees (a higher registration amount for more fuel-efficient vehicles to offset fuel-tax revenue losses), and tire fees. Murphy highlighted implementation trade-offs: indexing yields modest revenues and still declines with vehicle efficiency; purchase-and-use tax is volatile; MBUF has higher revenue potential but requires upfront IT and administrative costs and careful privacy and border-travel design.

On MBUF timing and pilots: Murphy said AOT seeks statutory authority to implement an EV-only mileage-based program and that the agency had been awarded federal grant funding in November to continue implementation work. He told the committee AOT hopes to implement an MBUF for electric light-duty vehicles by July 2026 if statutory language is approved and noted a longer, more complex timeline for any fleetwide MBUF transition.

On retail delivery fees and other options: the study modeled a 30¢ per-package retail delivery fee (other states use similar approaches), noted possible exemptions for small businesses, and observed that transportation network fees are likely to yield modest revenue in Vermont because ride-hailing is concentrated in a small number of urban areas.

Equity and unintended consequences: the agency’s criteria rated mechanisms on equity, administrative feasibility, revenue sustainability and likely public acceptance. Murphy said tire fees could raise modest revenue but might have unintended safety consequences if they discourage timely tire replacement; similarly, MPG- or registration-based schemes can raise equity concerns for drivers who cannot afford newer vehicles.

Committee requests and next steps: members asked for additional context on whether state EV-targeted fees could materially damp EV adoption; Murphy said the study estimated that modest user fees (tens of dollars per month) were small compared with fuel and maintenance savings and would likely have limited effect on current adoption trends. Committee members asked for more state-level comparisons and examples from other states; Murphy and staff identified Hawaii, Washington, Oregon, Utah and Virginia as jurisdictions with active pilots, indexing schemes or registration approaches and offered to provide more detail from those implementations.

Ending: AOT will provide statutory language for a limited EV mileage fee and return with more detailed cost, equity, and implementation analysis during this legislative session as the committee continues to weigh options for closing projected revenue gaps.