Liquid fuels is part of the gas tax that is distributed back to municipalities for use on roads.  You can use it for payroll (only for the portion used to fix or maintain roads), to do road projects or buy materials to fix or maintain roads, you can put up to 20% per year away to put towards road equipment (you can hold the 20% and add to it each year to build up a bigger amount for a large purchase so you could take 20% for 3 or 4 years in a row and hold it in your account until you make a large equipment purchase etc.) 

The townships used to get 20% of the taxes collected but the State has taken more and more out and it is now down to 14 to 16%.  The monies are then allocated based on 50% population and 50% road mileage (only township roads, not state roads) located within your municipalities. 

You must keep the liquid fuels funds in a separate account from general funds and can only use it for proper allocations.