At the June 16 meeting of the Commonwealth Transportation Board (CTB), staff from the Virginia Department of Transportation proposed significant changes to how it funds projects through the Revenue Sharing Program.
A formal resolution for the CTB to consider adopting the changes is expected in September. If adopted, the new process would take effect in the spring 2027 application cycle.
Current Revenue Sharing Program
The Revenue Sharing Program provides funding to localities for the construction and/or improvement of highway systems that are smaller and more locally focused. The Program offers a 50/50 state/local match and localities can receive up to $10 million per locality per application cycle. $200 million in total is available each round. Projects are ranked in priority tiers:
- Priority 1 — Projects that have previously received Revenue Sharing funding
- Priority 2 — Construction projects that address a need identified in the Statewide Transportation Plan or that will be accelerated in a locality’s capital plan
- Priority 3 — Deficient pavement resurfacing or bridge rehabilitation projects
- Priority 4 — All other eligible projects
Under the current process, Priority 1 requests are fully funded first. Priority 2 requests follow a two-step approach: all cumulative locality requests up to $1 million are funded, then requests from $1 million up to $10 million are funded. Priority 3 and Priority 4 projects have historically gone unfunded entirely.
What VDOT Is Proposing
The goal of the proposed revision is to fully fund applications to the maximum extent possible, rather than spreading partial allocations across many projects.
Priority 1 projects would remain the same with existing revenue sharing projects that were awarded funds in previous years receiving fully funded awards.
The proposed Priority 2 funding sequence would be very different. Priority 2 would be for projects that meet a VTRANS or locality CIP need and be awarded in this order:
- Step A — Fully fund all cumulative locality requests up to $1 million
- Step B — Fully fund all requests that were only partially funded under Step A
- Step C — Fully fund all requests for projects already in the Six-Year Improvement Program (SYIP)
- Step D — Fully fund all requests for projects identified as the preferred alternative in a local or regional study
- Step E — Fully fund all remaining requests
If funds are depleted before completing any category, the Board retains discretion to pro-rate the remaining allocation.
How Proposed Changes Would Have Impacted FY27 Project Selections
VDOT modeled the proposed approach against the FY27 funding cycle to show the practical difference. Under the current process, 33 Priority 2 projects were fully funded and 49 were partially funded. Under the proposed approach, 68 would have been fully funded, only 8 partially funded, and 6 would have received no funding with the same total dollar amount allocated ($239.3 million).
Essentially, slightly less projects would be funded overall, but far more of them would be fully funded or put in a position to move forward.
Reasons for Proposed Change
The data presented to the CTB showed that for each funding cycle, a large share of Priority 2 projects receive only partial funding. Issues arise when these partially funded projects tend to stall which increases project cost in the long run, further diluting an already shrinking (through inflation) pot of funds.
In the FY27 cycle, 49 of 82 Priority 2 projects were only partially funded, with VDOT covering $118.2 million of the $135.6 million requested. Similar patterns played out in FY23 and FY25. When projects are partially funded, localities generally can’t advance them until additional Revenue Sharing dollars are provided in a future cycle or they cancel the projects altogether.
VDOT also identified a related issue: local funds committed in applications are routinely replaced in future rounds with Revenue Sharing funds, effectively deferring the local match rather than accelerating investment.
Over the past three fiscal years, cancelled projects and surplus funds from completed projects have returned nearly $76.5 million to the program including $47.6 million from cancellations alone.
Why This Matters for Counties
VDOT outlined four key benefits of the revision.
- Localities would know at the time of application exactly how much local funding they’re committing.
- Fully funded projects can advance sooner, preserving the buying power of the investment.
- The new process places greater emphasis on projects already in the SYIP and those with a preferred alternative identified through a study.
- Localities that have multiple Priority 2 projects fully funded in a cycle will generate fewer Priority 1 carryover projects in subsequent rounds, freeing up more capacity for new applications.
What’s Next
VDOT began stakeholder engagement following the June workshop. A July CTB presentation will focus on Revenue Sharing project delivery expectations that are to work in tandem with the proposed funding changes, which VACo will report on in July. The CTB will consider a resolution to formally adopt the policy changes in September.
Please reach out to VACo to share comments or concerns regarding these proposed changes. The Revenue Sharing Program is one of the most popular funding programs available to localities and if these proposes changes negatively impact your locality, please contact Vaco staff.
VACo Contact: James Hutzler