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Transportation funding on legislators’ agenda

BY CHELYEN DAVIS

State lawmakers say they’ll revisit the persistent question of transportation funding in the upcoming 2013 legislative session.

Gov. Bob McDonnell has indicated an openness to indexing the gas tax—making it a percentage tax that rises and falls with fluctuations in the economy—while at least one lawmaker has already announced that he’ll propose applying a sales tax to gasoline.

McDonnell’s administration is also proceeding with an application to put tolls on Interstate 95.

But how much money is needed, and how much can the different proposals generate?

During transportation debates in 2006, lawmakers said the state transportation system required another $1 billion a year to pay for all its needs. That same figure was used in the 2009 governor’s race.

Proposals so far don’t hit that total, but they do add up. Sen. John Watkins, R–Richmond, proposes putting a sales tax on gasoline at the wholesale level, eliminating some tax exemptions and lowering income tax rates for those with the lowest incomes in Virginia—moves that would generate about $733 million a year.

Regardless of the number, there are a lot of ways to get there.

According to a report from the Senate Finance Committee, every 1-cent increase on the 17.5-cents-per-gallon gas tax would generate about $50 million. Overall, the motor fuels tax is expected to bring in $819 million this budget year, which began July 1.

If lawmakers were to increase the 3 percent motor-vehicle sales tax, every 1 percentage-point increase would generate $182 million.

A 1 percentage-point increase in the statewide sales tax of 5 percent would generate about $1 billion.

It currently costs $40.75 a year to register a passenger car in Virginia; every $1 added to that would generate about $6 million.

One cent added to the tax for recording land deeds would generate about $13 million.

And an additional 1 percentage-point increase in the 3 percent motor vehicle rental tax would generate about $8 million.

AN ONGOING PROBLEM

And then there are tolls. Anti-tax Republicans have generally been more open to tolls, as a more direct user fee on those using the roads. But McDonnell’s proposal to toll existing roads has met with opposition, particularly from people who live where the toll booth would be located (currently the administration is looking at placing one tolling location on Interstate 95, in Sussex County).

Earlier this year, a report from the Virginia Department of Transportation on tolling I–95 said that over the next 25 years, that road alone would need $12.1 billion in funding to pay for maintenance of the pavement and bridges and to deal with congestion.

Under current formulas, the report said, I–95 is due to receive just $2.5 billion over 25 years for those needs, leaving a $9.6 billion gap.

The state is proposing to levy tolls of $2 to $4 per car, generating $30 million to $60 million in the early years and possibly more later on.

State leaders have been talking about transportation revenue issues for years, with numerous proposals to raise taxes ranging from the gas tax to recordation and sales taxes for transportation. But with the House Republican majority generally opposed to tax increases, most of those proposals have gone nowhere. Lawmakers have agreed to little in the way of permanent new revenue. Instead, more bond packages and more public–private deals have been used to build roads.

Proponents of a gas tax increase have long called it a user fee, saying that the only people who buy gas are those who are driving and using the road system. In addition, they point out that travelers would also buy gas, allowing the state to get some revenue from out-of-state drivers.

Supporters of tolls say the same thing—that tolls are user fees that would require out-of-state drivers to pay.

Watkins, R–Richmond, estimated that about 30 percent of the fuel tax in his proposal would be paid by out-of-state tourists and truckers passing through.

MAINTENANCE NEEDS RISING

The problem is largely one of dwindling revenue streams and increasing needs. The state gas tax of 17.5 cents a gallon is dedicated to transportation, but hasn’t been raised since 1986.

McDonnell said recently that the gas tax brings in about 30 percent of the revenue for the transportation fund. Given the rise in the number of fuel-efficient vehicles and the increasing cost of road construction, that tax revenue buys a lot less than it did in 1986—less than half, according to McDonnell, who said the gas tax is now worth about 45 cents for every dollar it was worth originally.

Another issue is that state law requires transportation funding to first go to maintaining existing roads. Maintenance needs are increasing, and have already drained off all new local construction funding from the state’s road construction formula.

According to the Virginia Department of Transportation’s $4.1 billion fiscal 2013 budget, maintenance and operations will take $1.8 billion—$51 million more than last budget year. That’s about 44 percent of VDOT’s 2013 budget.

The construction budget, meanwhile, is $1.6 billion for fiscal 2013—$643 million less than last year, and about 39 percent of the VDOT budget.

Because of aging infrastructure and revenue shortages, the state has had to transfer money from the construction budget to road maintenance every year since 2002, although VDOT has said that this year’s transfer should be less because of increased federal funds available for maintenance needs.

Chelyen Davis: 540/368-5028

cdavis@freelancestar.com

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