FUNDING: Va. governor wants to eliminate state gas tax in favor of other funding measures

McDonnell proposes .8% increase in sales tax in the hopes of generating $3.1 billion over five years

Funding News Virginia DOT January 09, 2013
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With legislators and transportation leaders by his side, Virginia Gov. Bob McDonnell announced Jan. 8 a plan that would provide more than $3.1 billion in transportation funding for the Commonwealth over the next five years, tying transportation funding to economic growth and replacing the state's outdated gas tax revenue model with a 0.8% increase in the state’s sales tax dedicated to transportation. The proposal would make Virginia the first state in the nation to eliminate the state tax on gasoline, allocates additional general funds to transportation, capitalizes on revenues being lost on out-of-state sales, and creates a long-term revenue system to fund Virginia’s highway, rail and transit needs.

 

Virginia’s current transportation maintenance funding shortfall means that in FY 2013 $364 million must be transferred from the state’s construction account to pay for road maintenance. That transfer amount is anticipated to grow to $500 million by FY 2019 unless new funding is provided. In short, Virginia has to use money meant for construction for paving and potholes. The governor’s plan fixes the problem by generating $844 million in new funding per year for transportation by FY 2018, eliminating the state maintenance crossover and contributing to construction, rail, transit and other priorities. By eliminating crossover and with proposed revenue growth, this plan provides an additional $1.8 billion for highway construction over the next five years.

 

“Transportation is a core function of government. Children can’t get to school; parents waste too much time in traffic; and businesses can’t move their goods without an adequate and efficient transportation system,” McDonnell said. “My 2013 transportation funding and reform package is intended to address the short and long-term transportation funding needs of the Commonwealth. Declining funds for infrastructure maintenance, stagnant motor fuels tax revenues, increased demand for transit and passenger rail, and the growing cost of major infrastructure projects necessitate enhancing and restructuring the Commonwealth’s transportation program and the way it is funded. We simply cannot continue to do what we have always done and expect this problem to go away.”

 

The governor’s 2013 Transportation Plan proposes to make these fundamental changes:

 

  • Eliminate the current 17.5 cents per gal motor fuels tax on gasoline;
  • Replace the current gas tax with a 0.8-cent increase to the Sales and Use Tax (SUT) dedicated to transportation;
  • Dedicate an additional .25 cent of the state’s portion of the existing SUT to transportation: Transportation currently receives 0.5 cents of the SUT, and the governor proposes to phase in this share to 0.75 cents over five years. When combined with the 0.8-cent SUT increase, transportation will receive approximately one-quarter of SUT proceeds, thus ensuring a sustainable transportation revenue stream for the future. All of the revenues from the additional .25 cents will be dedicated to support maintenance and operations;
  • Increase vehicle registration fees by $15 and dedicate the revenue to intercity passenger rail and transit: There is a strong and growing demand for public transportation in Virginia, both within and between the state’s regions. The successful passenger rail services to/from Washington, D.C., and Lynchburg, Richmond, and Norfolk, and the dramatic growth in transit in Virginia (especially in northern Virginia and Hampton Roads) requires greater financial support from the Commonwealth. This need is anticipated to grow as passenger rail services are extended to Roanoke, light rail is extended to Virginia Beach, and Metrorail is opened to Dulles Airport and beyond. Revenues generated by the fee will be split between passenger rail and transit; and
  • Impose a $100 annual Alternative Fuel Vehicle Fee and dedicate the revenues to transit: The governor is a strong supporter of alternative fuel vehicles. He has directed that Virginia’s state fleet be converted to natural-gas vehicles. And he knows that alternative fuel vehicles will only continue to grow in popularity and use in the years ahead. In fact, over the past four years, as gas prices have grown from less than $2 per gal to as high as $4, more Virginians have turned to alternative-fuel vehicles.
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