Virginia road funding plans plentiful

By Keith Goble, Land Line state legislative editor | 1/25/2012

Virginia lawmakers are looking for methods to address the state’s needs for sustained funding for transportation projects.

Gov. Bob McDonnell last week announced additional components of his transportation agenda for the 2012 regular session. Among the highlights that the Republican governor is asking lawmakers to approve are plans to change how the state funds transportation and to do so without a tax increase.

Democrats at the Virginia statehouse say they are concerned about portions of the governor’s plans to divert revenue from other budgets in lieu of raising taxes. They say his plans do not do enough to address long-term funding needs.

Alternatives offered to fund transportation work include raising the state’s fuel tax, tying the tax rate to inflation, and adding a sales tax to fuel purchases.

Delegate Kenny Alexander, D-Norfolk, introduced a bill to apply the state’s 5 percent general sales tax to all fuel purchases. To offset some of the additional cost for truckers and motorists, HB892 would reduce the fuel tax rate from 17.5 cents to 12.5 cents per gallon.

It is estimated the change in tax collections could add $550 million each year for new construction and maintenance work. About 38 percent of the new funding would be used for projects in Northern Virginia. Another 31 percent would be routed to Hampton Roads and the remaining balance would be divvied up for the rest of the state.

Alexander’s bill would also authorize the issuance of up to $5 billion in bonds to be repaid from the net new revenue.

Delegate Vivian Watts, D-Fairfax, is also calling for a 4 percent sales tax to be added on fuel purchases. The tax would be phased in over four years.

After the tax is fully phased in, the tax would be indexed to the national producer price index for road work.

Supporters say indexing the fuel tax would enable the state to keep pace with costs.

In addition, HB422 would increase the sales tax in Northern Virginia by 0.5 percent and apply the extra revenue to transportation projects in the area. Projects there would also benefit from an additional recordation tax.

A separate effort would charge an additional dime per gallon for all fuels. Sponsored by Algie Howell Jr., D-Norfolk, HB393 would require the additional revenue to be used for “operation, maintenance, and expansion” of the state’s transportation system.

The push to generate more money through taxes at the pump follows the release of a study that showed Virginia is overdue to raise the fuel tax.

The Institute on Taxation and Economic Policy’s analysis showed that state governments are losing, on average, $201 million in annual fuel tax revenues because of a reluctance to update tax rates.

Virginia was identified as having lost out on the most fuel tax revenues. Neighboring Maryland was second on the list.

The Owner-Operator Independent Drivers Association remains committed to the fuel tax as the primary way to fund highways.

“OOIDA recommends the next federal highway bill contain a provision requiring that highway users be reimbursed for any state and federal fuel taxes they pay on miles driven on any existing toll roads or future toll roads,” Association leadership states in its list of highway funding principles.

To view other legislative activities of interest for Virginia, click here.

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