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Senate committee weighs mileage-based fee to shore up shrinking gas-tax revenue
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Summary
The Senate Transportation Committee reviewed a bill to create a municipal transportation special fund, authorize transportation bonding and phase in a mileage-based user fee starting with electric vehicles in 2027. Lawmakers questioned equity, out-of-state coverage and near-term revenue projections.
The Senate Transportation Committee on Tuesday examined a transportation bill that would redirect local option tax surpluses to a new municipal transportation special fund, give tentative authority to issue transportation infrastructure bonds and phase in a mileage-based user fee (MBUF) beginning with battery electric vehicles in 2027.
Damien Leonard of the Office of Legislative Council walked committee members through the bill’s key provisions, including a pilot special fund that would transfer 75% of excess local option tax revenue to the new fund while leaving 25% in the pilot account, and a five‑year-plus plan for transitioning purchase-and-use revenues that currently support transportation. "This would provide that 3 quarters of that excess amount be transferred to the local option municipal transportation special fund," Leonard said while describing the bill’s language.
The bill would also authorize the state to issue transportation infrastructure bonds, subject to Capital Debt Affordability Advisory Committee (CDAC) reporting and treasurer consultation, and directs the Agency of Transportation and the DMV to develop transition plans and reports before the fee reaches all light‑duty vehicles.
The central and most contested element is the proposed mileage-based user fee. The construct would be phased in: mandatory for battery electric vehicles starting Jan. 1, 2027; expanded to plug‑in hybrids and high‑mileage combustion vehicles in 2029; and extended to nearly all light‑duty vehicles by 2031. Under the bill, the base MBUF rate is up to 1.4¢ per mile with a $178 annual cap included in the initial design.
Patrick Murphy of the Agency of Transportation, the agency’s witness, described the intended mechanics: odometer readings already collected through the state’s vehicle inspection program would establish mileage reporting periods, and owners could pay via a lump sum at the end of the period, estimated payments, pay‑as‑you‑go installments where system capability allows, or a flat capped fee. "If you don’t drive a lot, you don’t pay a lot," Murphy said, summarizing the policy objective of tying payments to road use.
Joint Fiscal Office staff cautioned that the near‑term revenue picture is modest and highly dependent on which payment options motorists choose. The JFO estimate shows little or no net revenue in 2027 (many EVs would pay the existing transition charge), an estimated $1.1 million to $1.3 million in 2028, and a range of about $1.8 million to $2.9 million in 2029 depending on uptake of flat‑fee versus mileage options and the pace of EV adoption. The analysis also notes a revenue loss from repeal of the current EV infrastructure fee (about $600,000 in early years), which offsets some MBUF receipts.
Committee members raised equity concerns and technical questions. One member said lower‑income workers who must commute long distances could be disproportionately affected; another asked how the state would account for travel outside Vermont. The counsel and agency witnesses said the bill applies only to Vermont‑registered vehicles but requires transition reports to propose options — including systems that can differentiate in‑state and out‑of‑state miles and credit estimates of gas tax already paid — before broader rollout.
Members also pressed agency staff on implementation costs and federal grant support. Murphy and Agency of Transportation staff said the program planning and early implementation are supported by a Federal Highway Administration grant of about $3 million and that a vendor contract to modify DMV systems already exists. "The Federal Highway Administration grant of $3,000,000 is, fully obligated," Murphy said; Agency staff cautioned that if the program were not implemented as proposed, federal rules could require returning funds and contractual obligations would remain.
Other provisions drew attention: a proposed 2% surcharge on jet fuel to be used for aviation infrastructure (estimated at roughly $600,000 annually), protections for town highway base appropriations, and authorizations to study bonding as a way to accelerate projects that otherwise would be delayed under pay‑as‑you‑go funding.
Committee members stressed the need for longer‑range financing plans. The committee chair warned that pavement and bridge backlogs are growing — noting that current paving levels cover a small fraction of the miles needed to sustain an 8–10 year maintenance cycle — and urged multi‑year revenue solutions so the state does not face higher reconstruction costs later. "So you can pay me now or you can pay me big time later," the committee chair said when describing the cost of deferred maintenance.
The committee paused the discussion for a short break and planned to continue with remaining bill sections and a scheduled witness later in the session. The bill requires multiple reports and implementation plans from the Agency of Transportation and DMV before the fee expands beyond the initial EV phase, leaving lawmakers opportunities to refine mechanics, equity protections and revenue offsets in the months ahead.
