Municipal Road Aid (MRA): City Payments Fall Short of Local Needs

Maintaining Kentucky’s city streets is essential to the commonwealth’s economic future. City roadways support nearly 75% of Kentucky’s economic activity and 80% of employment opportunities. Yet despite this significant role, cities face increasing difficulty maintaining their streets due to revenue limitations, rising maintenance costs, and longstanding inequities in the distribution of state road funding. A more equitable approach to Municipal Road Aid (MRA) allocations is necessary to keep local streets safe, functional, and prepared for future growth. 

Inequity in the Local Share of Gas Tax Revenue 

One of the major sources of funding for cities’ streets and roads is the MRA program. Under Kentucky law, cities receive only 7.7% of the state’s gas tax, while counties receive 18.3% through County Road Aid (CRA). This imbalance exists even though urban and rural roads experience nearly identical average daily traffic (ADT) levels, maintain only 13% of Kentucky’s total road mileage, and carry over 40% of the state’s traffic volume. 

 Discrepancy Between Need and Funding 

 The table below details the percentages of road expenditures paid for by MRA and CRA payments.

The table shows that cities have greater annual road expenditures and receive a smaller share of road aid than counties(1). Between fiscal years 2018 and 2024, the average annual increase in total road expenditures was approximately 8.8% for cities. The increasing cost to maintain city roads becomes more alarming considering the limitations on cities to raise additional revenue to offset the increased cost.  

Due to the inadequacy of state funding, cities must supplement their local road expenditures with municipal general fund revenues. From 2018 to 2024, MRA payments covered 15% of total local road expenditures (2).  However, shares of MRA payments to total local road expenditures have continued to decline over the last five fiscal years. 

KLC supports a comprehensive review of Kentucky’s road funding allocation to ensure cities receive a fair and equitable share of the local portion of the state gas tax. Despite having less total mileage, city streets carry comparable traffic volumes and face significantly higher maintenance costs. As governmental costs rise and revenue options remain restricted, it is vital that Kentucky cities receive adequate funding to maintain the safe, durable, and economically essential road networks on which residents and businesses depend.