Virginia Transportation Funding Legislation

So the respective houses in the Virginia State Legislature passed a bill, different from that originally proposed by Gov. McDonnell, to increase the funding available for roads and transit ("Va. Senate sends sweeping road legislation to McDonnell" from the Norfolk Virginian-Pilot; "Va. approves transportation plan," from the Washington Post).

The final bill calls for (1) a wholesale tax on gasoline; (2) that is indexed to inflation; (3) an increase in sales taxes; (4) an increase in titling costs; (4) a separate fee for hybrid vehicles; (5) diversion of general fund monies to transportation projects; and (6) an additional local sales tax levy in Hampton Roads and Northern Virginia.

McDonnell's original proposal called for elimination of the gas tax to be replaced by an increase in the sales tax and use of other tax monies, including an expectation that the US Congress will pass legislation requiring that all online commerce transactions pay sales taxes.

While the Post columnist Robert McCartney, in "Virginia transportation deal shows virtues of compromise" lauds the bill, not perfect, as an illustration of compromise, an op-ed in today's Post, written by two academic economists based in California, "Why Sales Taxes and Gasoline Don't Mix," makes the point that all the Legislature needed to do was to raise and index the gasoline tax to get the same result.

From the op-ed:

It’s easy to beat up on today’s policymakers for raising taxes, but the true fault here lies with 25 years of Virginia leaders who watched inflation eat away at the value of the gas tax and did nothing. Virginia would be best served by an approach that asks people to pay for what they use, assumes inflation will occur and accepts that transportation infrastructure costs money. To do that, all that was needed was indexing the per-gallon gas tax to inflation.

It sure seems like the Legislature and Governor went through a lot of extra and unnecessary work to get to the same point.

Plus, the local sales tax revenues generated in Hampton Roads and Northern Virginia are limited to road projects, when the reality is that in dense areas, the best way to deal with "congestion" is to shift more people to transit and away from a reliance on the automobile.

And, the State could have also addressed the control of local roads, which for the most part, are under the State DOT, and should be shifted to local control and maintenance.

From the NVP article:

The compromise legislation replaces the state's 17.5-cents-per-gallon gasoline tax with wholesale taxes on gasoline and diesel, and raises the state's sales tax rate to 5.3 percent from 5 percent, among other revenue-raising provisions.

It also boosts several regional taxes in Hampton Roads and Northern Virginia to generate extra money for priority road projects in those regions... motorists in Hampton Roads and Northern Virginia will pay a 5.6 percent wholesale gasoline tax, and see their sales tax rate go from 5 to 6 percent. That will raise about $200 million annually for the region.

The original bill called for scrapping the state excise tax on gasoline, replacing it with increases in the sales tax and the expectation of new tax receipts related to online commerce transactions, pending changes in federal law.

From "What does transportation package mean locally?" (NVP):

The legislation also creates an annual $100 fee for alternative energy vehicles. That means hybrid vehicles that use gas will have to pay the fee in addition to the fuel taxes they pay.

The legislation includes an increase in the titling tax on car purchases to 4.3 percent from 3 percent, phased in over four years. ...

-- The money is not close to enough to solve all of the region's transportation problems, Farmer said, but "it makes it much easier to make a number of these projects happen." It will make "a serious, historic dent" in the backlog of work facing Hampton Roads.

-- Public-private partnerships that rely on tolling likely still will be explored for expensive projects, but the additional public money available could be used to buy down the cost of those tolls.

-- The new regional taxes cannot be used for public transit projects, such as light rail, ferries or enhanced bus service. The legislation says that money can be used only for new construction on new or existing roads.

-- The legislation includes upwards of $110 million in statewide money for intercity passenger rail and mass transit. Hampton Roads Transit stands to receive some portion of that, but it is too early to guess how much, and a great share is likely to go to Northern Virginia, said Brian Smith, an HRT spokesman. He voiced frustration that the legislation bars local leaders from considering public transit projects when they dole out the new regional tax revenue: "The region's long-range transportation challenges are not going to be solved only by building new roads."