Gov. Bob McDonnell unveiled a plan Tuesday to redesign the state’s transportation funding to raise $3.1 billion over five years while scrapping the state’s gas tax.
Over the next five years, McDonnell wants the state to replace its current revenue stream – the 17.5-cent per gallon gas tax – with a 0.8 percent increase in the state’s sales tax.
The increased Sales and Use Tax would be dedicated to transportation, tying the fund’s success to the economy’s success. If passed by the General Assembly, Virginia would become the first state to eliminate its gas tax, according to McDonnell’s administration.
McDonnell also proposes increasing how much of the Sales and Use Tax revenue goes to transportation, from 0.5 cent to 0.75 cent over five years, to create “a sustainable transportation revenue stream for the future.” All of the revenues from the additional 0.25 cent would support maintenance and operations, although up to $300 million will be committed to the Dulles Metrorail Extension Project in the first three years.
To provide a funding source for intercity passenger rail and transit, McDonnell’s plan would increase vehicle registration fees by $15. Revenues generated by the fee would be divided between passenger rail and transit.
Del. Mike Watson (R-93) said he will push for the Historic Triangle’s transportation needs to rank high on the list of priorities.
“I’m glad to see that the governor has made transportation a priority for this session as have many legislators who have put forth ideas of their own. I look forward to working with him and my colleagues in the General Assembly to develop a sound, reliable funding strategy to support both maintenance and new construction,” he said in a statement to the press. “I will also work to make sure that I-64 on the Peninsula is treated as a priority.” He said he only received the proposal Tuesday, and will be reviewing the components over the coming weeks.
Much of McDonnell’s plan was driven by the need to revamp the transportation funding to account for the increasing popularity of alternative fuel vehicles. He suggests imposing a $100 annual Alternative Fuel Vehicle Fee, noting alternative fuel vehicle drivers are not paying fuel taxes at the state or federal level and “thus do not contribute to the primary means of funding the roads.”
Revenues from the alternative fuel vehicle fees would be dedicated to the Commonwealth Mass Transit Fund. Legislation passed in the 2012 General Assembly session already required a fee for electric vehicles; this legislation would extend the fee to all alternative fuel vehicles.
If Congress passes the Marketplace Equity Act, which would give states the authority to require online retailers to collect and remit state taxes, McDonnell also wants Virginia to receive more sales tax revenue from online sales. His 2013 Transportation Funding Plan would allocate a portion of the collected sales tax to local transportation priorities, estimated at $138 million over five years, and to the Transportation Trust Fund, estimated at more than $1 billion over five years. In addition, some of the funding would go to public education.
McDonnell’s transportation plan is meant to address the state’s transportation funding shortfall that, in the current fiscal year, transferred $364 million from the state’s construction account to pay for maintenance. If Virginia continues at that pace with no new revenue, the transfer amount is expected to grow to $500 million by 2019, according to the administration.
If all elements of his transportation plan are passed, Virginia would generate $844 million in new funding for transportation by 2018, he said. By eliminating the need to transfer construction funding for maintenance and adding new revenue streams, McDonnell said the plan provides an additional $1.8 billion for highway construction over the next five years.
“We simply cannot continue to do what we have always done and expect this problem to go away,” McDonnell said in a Richmond press conference, where he was joined by legislators and transportation officials. “The gas tax is a stagnant revenue source, and no changes to it will provide a reliable growth mechanism for transportation in the state.”
