Governor McDonnell’s Transportation Plan: A Bold Concept Worthy of Consideration

Two years ago when the General Assembly adopted the Governor’s transportation bonding package, everyone acknowledged that a sustainable funding initiative was necessary to meet the Commonwealth’s ongoing transportation needs.

The needs of our transportation system are undeniable: We have taken more than $3 billion out of our road construction program in the past 10 years to fund basic maintenance. Our secondary road program is defunct due to a lack of funding. Our debt service is $300 million a year and growing. The estimated economic loss due to congestion is over $3 billion a year. We are 40th in the nation in per capita spending on transportation.  Our road construction money will be gone in a few years.

Over the past two years we have seen about 20 pieces of long term funding legislation fail. The main reason for that failure is that legislators have become entrenched in positions that ensure failure. On one side there is the argument that no general funds should be used to fund transportation. On the other a refusal to accept any new revenues.

In his bill, the Governor proposes a bold new approach and asks all legislators to take two steps toward the middle to reach a compromise. The Governor’s proposal is a sincere effort to think outside the box, address one of Virginia’s most pressing problems and break the gridlock gripping the General Assembly.  It has merit and should be given serious consideration.

Substituting a sales and use tax (SUT) increase for the gas tax is reasonable. While many will argue that the gas tax is still the best user fee, the viability of the gas tax as the state's primary revenue source for transportation has been eroded by greater vehicle fuel mileage, the introduction of alternative fuel vehicles and the impact of inflation. Replacing the current gas tax with a 0.8 cent increase to the SUT provides a reliable, predicable and sustainable revenue source. As the economy grows, the revenue from the SUT grows with it. As a percentage of the price of a product or service procured, the SUT inherently accounts for inflation. These are factors missing from the current gas tax. In addition, we must remember the nexus between the sales tax and transportation.  All goods sold in Virginia use our transportation infrastructure to get to their point of sale.

The motor fuels tax on diesel will remain unchanged.  About 20 percent of fuel tax revenues are from diesel sales, with 68 percent coming from long haul truckers.  In addition, heavy trucks have a disproportionately large impact on the deterioration of Virginia's highways.

Increasing vehicle registration fees and dedicating the revenue to intercity passenger rail and transit provides a long term and substantial funding source for public transportation in Virginia, something missing from the Commonwealth’s current transportation funding scheme. There is a strong and growing demand for public transportation in Virginia, both within and between the state's regions, and Governor McDonnell’s proposal would go a long way to support that demand.

Allocating an additional .25 cents of general sales and use tax to transportation is also reasonable. Transportation is a core state function as was recognized more than 25 years ago when the General Assembly allocated .50 cents of the sales and use tax to transportation. With the state running budget surpluses in the hundreds of millions, we should all reject the premise that we can’t find an additional $50 million a year for transportation.

The 113th Congress will consider the Marketplace Equity Act, which would grant states the legal authority to collect out-of-state sales taxes. The Governor’s proposal would conform the Code of Virginia to any changes in federal law, contingent upon the Marketplace Equity Act being adopted by Congress. Potential revenues will be dedicated to transportation, public education and localities consistent with formulas already in existence.

If all the provisions of this bill are adopted by the General Assembly, we will see $3.1 billion in new funding over the next five years for our critical transportation needs. After that, we could see those numbers grow to nearly a billion dollars a year investment in transportation.

The Governor’s proposal is about investing in the Commonwealth’s future…investing in jobs, in economic development, in safety, in our quality of life.  When fully implemented, this bill will generate nearly 20,000 jobs, create more than $2.5 billion in economic activity in the Commonwealth and generate over $150 million in new tax revenues.  More importantly, this bill will improve mobility, reduce congestion, promote further economic activity, and improve safety on our highways—all factors that will improve the quality of life in Virginia for today and years to come.

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About Jeff Southard:
Jeffrey C. Southard is the Executive Vice President of the Virginia Transportation Construction Alliance, a position he has held for more than six years. Prior to joining the Alliance he was VDOT’s Assistant Commissioner/Chief for Environment, Transportation Planning and Policy. Prior to joining VDOT, Mr. Southard was a Divisional Vice-President for a Fortune 200 company for 12 years during which time his responsibilities included business development,project management, legislative and regulatory affairs, and community relations. Before joining the corporate world, Mr. Southard was an attorney with a major Virginia law firm where he specialized in environmental, administrative, franchise and antitrust law. A Virginia native, Mr. Southard holds Bachelors and Masters Degrees from the University of Virginia, and a LawDegree from the University of Richmond.

3 Responses »

  1. As a strong conservative, I oppose the approach the governor has taken to meet our transportation needs. This article in the Hampton Rhodes Pilot outlines a lot of good points against it:
    http://hamptonroads.com/2013/01/gastax-plan-draws-reaction-transportation-world

    I have a hard time understanding why Bill Howell is supporting it other than for political reasons.

    The primary points I see against this approach:
    1) Those who use and cause the most damage to our roads should pay most heavily for them. That goes along with vehicle weight and correlates with fuel used.
    2) We do want to encourage reduced fuel usage - attaching road construction and repair costs to fuel helps to accomplish that end.
    3) Moving the fuel cost to a sales tax means that out-of-state drivers get to come in and use our infrastructure without helping to pay for it.

    Stan Huie, Fredericksburg

  2. I'm not sold on the Governor's plan. I will agree there is a need for improved roadways but, I prefer to keep the same gas tax system (if you use the roadways (buy gas) you pay for it) - if a person does not use the roadways he is not burdened with having to pay for someone else's transportation. I also see this as a means to fund Northern Virginia and Tidewater's projects - at the expense of the remainder of the states traffic congestion problems. My suggestion would be reigning in the spending waste of the transportation departments - and this does exist. I also contend that it would only be a matter of time that the .08% SUT - would be a tempation for future politicians to raise this figure - and more spending (and waste) would continue on - as in times past.

  3. I believe a VMT would be more appropriate. A system based on size and weight would put the costs on those who cause the most damage. It would require that those with high efficiency vehicles pay accordingly. It would be a very simple system, pay a portion of the tax at the pump like the current system. This will get the out of state drivers to pay something. The current vehicle mileage to be required when re-registering a vehicle. The difference is the tax due. And like income tax certain credits, i.e. farm or other off road use, could be applied. The difference is tax due or a refund.
    The first step is to come up with a fair system for all road users. Publish it and allow enough time for comments. Then modify as required.
    No special equipment required.