Committee debates returning 50% of local-option-tax surplus to town highway aid

The House Transportation Committee spent the bulk of its March 18 session weighing a proposal to direct 50% of each year’s surplus from the local-option-tax (LOT) pilot fund to Town Highway Aid, aiming to help municipalities facing growing road-maintenance costs.

Why it matters: Committee members and the Vermont League of Cities and Towns (VLCT) said municipal transportation budgets have not kept pace with demands from heavier delivery trucks and other pressures. VLCT representative Josh Hanford told the committee the change would return more money to the network that maintains local roads and bridges.

VLCT’s case and the committee’s goal "The law says nothing about using it for 1 time funds here and there," VLCT representative Josh Hanford said, arguing the pilot payments and current practice have diverted municipal LOT proceeds from their expected uses. Hanford said the 75/25 split leaves municipalities with 75% but that state actions have increasingly used the 25% pilot share for other appropriations; the committee’s draft would send half of each year’s surplus, after required pilot and grand-list stabilization payments, into Town Highway Aid so that municipalities see more direct benefit.

Numbers are illustrative, not final A committee member asked for a JFO example; the chair summarized JFO projections the pilot’s total revenues could rise from about $14.8 million to $16.2 million next year, producing roughly $1.3 million more in the state’s 25% share. Under the committee’s ‘50% of new revenue’ approach, the chair said that increase could yield about $675,000 for Town Highway Aid—figures committee members and staff described as estimates contingent on final budget decisions.

Fiscal caution over what counts as 'surplus' A fiscal office analyst warned the draft language does not account for an ongoing $3.4 million reappraisal-and-listing payment currently charged to the pilot fund. "That is an ongoing expense for the fund of $3,400,000," the fiscal staffer said, and if that obligation is subtracted before calculating surplus, the available amount that could be split 50/50 would be materially smaller and might leave the fund at risk if not carefully budgeted.

Distribution and fairness questions Committee members debated whether returning funds should prioritize the towns that adopt LOT or the broader road network that benefits from commercial centers and delivery traffic. Representative Ford (speaker identified in the transcript as a committee member) noted that residents of surrounding towns often pay LOT when they shop in commercial centers, stretching the case for a statewide distribution formula.

Unresolved issues and next steps Members did not finalize the definition of surplus or whether the reappraisal/listing payment should be included or excluded; the committee recessed to gather more fiscal information. The chair instructed legislative counsel to prepare language and additional analysis; the committee will reconvene to continue T bill markup and expected to address the outstanding budget-accounting questions before taking final action.

Authorities and proper names referenced in the hearing were the Vermont statutes governing LOT and the pilot fund, the Joint Fiscal Office (JFO) revenue projections, and references to the VLCT. Specific statutory citations were not provided during the committee discussion.

The committee recessed for a short break to gather additional fiscal clarifications and scheduled a return to T bill markup later that morning.