Vermont Lawmakers Propose New Local Option Tax for Town Road Funding

Opioid abatement funds and PILOT special fund also on the table for appropriations

Published on Feb. 21, 2026

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Vermont lawmakers are considering several proposals that would impact municipal funding, including a new local option tax for town road funding, appropriations from the opioid abatement special fund, and using funds from the PILOT special fund for state property appraisal costs. The Vermont League of Cities & Towns is advocating for these proposals to maximize municipal benefits.

Why it matters

These proposals could provide much-needed revenue for Vermont municipalities to address transportation funding shortfalls and other budget pressures, but there are concerns about the state appropriating local tax revenues for statewide purposes.

The details

The new municipal authority being proposed would allow towns to assess a 'Local Option Municipal Services Tax' of up to 1% on rooms, meals, alcohol, and sales. Half of the revenue would go directly to the municipality, 40% would go to a new Local Option Municipal Transportation Special Fund for state transportation aid to towns, and 10% would go to the PILOT fund. This could help offset a $7 million decrease in proposed town highway program aid in the governor's budget. Meanwhile, the state is looking to appropriate $3.5 million from the PILOT special fund surplus for state property appraisal costs, which VLCT opposes as these are local revenues that should not be used for statewide expenses.

  • The House is expected to take action on H.660, an act relating to fiscal year 2027 opioid abatement special fund appropriations, later this week.
  • The new 'Local Option Municipal Services Tax' proposal was first introduced on February 11, 2026.
  • The state's FY25 end-of-year Special Fund Report, showing a $15 million PILOT special fund surplus, was issued in November 2025.

The players

Vermont League of Cities & Towns (VLCT)

A nonprofit, nonpartisan organization that serves Vermont's municipal governments. VLCT has advocated for these municipal funding proposals and against the state appropriating local tax revenues.

Senator Richard Westman

Chair of the Senate Committee on Transportation, who revealed the new 'Local Option Municipal Services Tax' proposal.

Josh Hanford

VLCT Director of Intergovernmental Affairs, who spoke at a press conference urging the legislature to slow down implementation of Act 181.

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What they’re 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.”

— Josh Hanford, VLCT Director of Intergovernmental Affairs (VLCT)

What’s next

The Senate Committee on Natural Resources and Energy will continue holding joint hearings on Act 181 implementation, and VLCT will continue advocating for legislative action to slow down the timeline.

The takeaway

These proposals demonstrate the ongoing tension between state and local priorities when it comes to municipal funding and land use regulations. VLCT is advocating for solutions that maximize local control and revenue-raising authority to address Vermont's unique challenges.