Thanksgiving is not just about turkey and back yard football. It’s also a chance to select legislative priorities and review potential bills.
The #1 unfinished business item for the McDonnell administration is transportation. The administration has shown the ability to spend money (e.g. the 2011 Transportation Bond). It has shown zero ability, thus far, to develop sustainable state revenues so that our highway department is not dependent on Federal stimulus packages.
Let’s look at the numbers. The current transportation budget is $4.5B annually. That arises from Federal spending (24%), motor fuels tax (19%), titling tax (13%), the 1% from retail sales tax (12%) and various other revenue streams.
A large portion of that money ($600m) is dedicated to paying off bonds issued for current projects, such as the I-66 widening or Fair Lakes interchange. The remainder must cover the highway maintenance & operating fund (“HMOF”), which services our existing road inventory, and the Transportation Trust Fund, which supports new road construction, mass transit, ports, and airports.
Here’s the problem: the current model is based on frequent fuel purchases and new vehicle sales. But the trend line is the other way. Modern-day cars are more fuel-efficient and last longer. So our state revenues have been stagnant (or declining) for years.
In the short term, we have bridged this problem by shifting up to $500M annually from the Trust Fund to HMOF, so that our existing highways would be paved. We call this the “cross-over effect” and it has effectively wiped out our new construction funds.
That strategy cannot last in the long term, as our need for highways and transit increases in eastern Virginia. We must have funds set aside for new projects.
For years, we pretended this construction deficit was a “regional” problem. It’s not. The regional tax authorities were a lousy idea and, fortunately, are now defunct. This is a state problem, and the majority of the state’s population is directly impacted.
This year, State Senator John Watkins (R-Powhatan) is proposing a bill that will apply the state’s 5% sales tax to fuel purchases at the wholesale level. That will raise approx. $730M annually for state and local governments, of which about 30% is generated from out-of-state users. The majority of this money will be applied to the HMOF, so as to obviate the “cross-over effect.” The rest will be spread to localities and other state agencies.
Watkins’ bill brings new revenue to the table. One problem: he doesn’t deal with the fundamental issue of reforming Virginia’s transportation hierarchy, which is still based upon a 1930′s vision of the Commonwealth.
In January, I will also be prefiling a transportation bill similar to Watkins’. However, instead of applying the sales tax (and thus a new layer of taxation), my bill will simply increase the existing fuels tax by a dime to 27.5 cents — still well below the national average of 31 cents per gallon. (It will also include a nominal charge on electric cars which use little or no gas). My bill will also include an indexing so that the fuel taxes are pegged to highway usage and adjust automatically based on fixed percentages.
That new money, approximately $500M annually, will then be pledged to the HMOF in order to wipe out “the cross-over effect.”
In addition, my bill will reform the Commonwealth Transportation Board, which administers the HMOF and Trust Fund, in order to give proportional (i.e. greater) representation to Richmond, Hampton Roads and northern Virginia.
These regions account for 69% of Virginia’s transportation revenues and a like percentage of its population – but only one-third of the CTB’s membership. That ain’t right!
To me, reforming the CTB is a key part of any new transportation bill. (I hope that the gubernatorial candidates are smart enough to realize this also).
In summary, the 2013 session will be a foreshadowing. For years, the House has defeated any attempt to improve transportation in the eastern half of the state, which is where 2/3 of Virginia now lives. The Senate can raise the stakes by pushing a bill for transportation finance and reform – and then daring the House to kill it in an election year.
If they do, the 2014 Assembly may have a very different make-up.