Return to Virginia Business - January 2002

by Peter Galuszka
Executive Editor
and Garry Kranz

It takes a little creativity for business executives to endure the traffic congestion in Northern Virginia. For example there's Dave Guernsey, whose company, Guernsey Office Products, ships office products to customers throughout the greater Washington, D.C., area. His firm opened a new storage facility in Beltsville, Md., about 25 miles from the company's main office in Chantilly. But to avoid bumper-to-bumper traffic that can start as early as 6 a.m., Guernsey's drivers hit the Beltway much earlier to make their deliveries. It's inconvenient, but it works. "In the course of doing that, we gain about a 20 percent increase in productivity and save about $1,400 of gas a month," says Guernsey.

Related story: Capsule view of the good and bad of Northern Virginia transport projects

Yet, indications are that Guernsey's business, among many others in the region, won't see much relief from road congestion that is among some of the worst in the U.S. Guernsey has battled the traffic problem fromanother perspective as well. As former president of the Fairfax Chamber of Commerce, he was often on the front lines pushing for transportation improvements to help the region remain economically competitive.

A seemingly simple and much-touted solution would be for Northern Virginia to pursue a referendum to raise regional sales taxes 1 percent to support $2 billion or more in bonds for roads and schools. The referendum was one of the crucial issues in the 2001 gubernatorial campaign. Republican nominee Mark L. Earley declared that he would veto any regional referendum, while Mark Warner, a Democrat and Northern Virginia resident, said that he would not stand in the way of the referendum.

By tossing down the anti-tax gauntlet, Earley alienated thousands of voters in Northern Virginia's affluent core of Fairfax, Arlington and Alexandria, which swamped any support he may have picked up in more conservative areas outlying Prince William and Loudoun counties. Northern Virginia's business leaders flocked to Warner's side, resentful that Earley and his mentor, out-going Gov. Jim Gilmore, pandered to downstate anti-tax sentiment by restricting Northern Virginia's right to choose its own destiny. "I'm pissed off at the whole concept," says Bob deLorenzi, founder of PatriotNet, a Fairfax-based Internet Service Provider. "We are the funding mechanism for the whole commonwealth and if we want to fix our roads, we have to get additional capital…We only get 32 cents back on every dollar we send to Richmond."

But since Warner's victory, the referendum issue has slipped into oblivion. Why? The reasons are many, ranging from a budget crisis that demands attention to a lack of cohesion among Northern Virginia business and civic leaders. Meanwhile, some believe that traffic conditions are already so bad that the plan may not accomplish much at all. The anticipated funds are puny compared to the real needs. Indeed, the tax-and-pave strategy may distract attention from badly needed land use reforms.

Political pros caution against expecting any action on the referendum from the upcoming General Assembly session, which opens this month. Legislators will face a more immediate problem: a surprise $1.3 billion shortfall in the budget. Recent analysis showed the state's finances to be in such turmoil that outgoing Gov. Gilmore reversed his controversial plan to abolish the car tax on schedule. Incoming governor Warner is too busy assembling his team and devising creative ways to goose revenues (see stories page GA29 and GA33) to devote much attention to a Northern Virginia referendum.
There are other factors, to be sure, that stymie a referendum this year. Although Northern Virginians are united in their frustration with Richmond, they have reached no consensus about how a referendum should proceed or which projects it should fund. Opinions vary widely on what type of authority the General Assembly needs to give Northern Virginia to administer the revenues from an oft-mentioned 1 percent regional sales tax. The estimated $250 million in annual revenues from the tax could comfortably support about $2 billion in bonds; revenues in excess of the amount needed for debt service could supplement normal transportation funds.

Yet there are serious questions about whether those funds come close to anticipated needs. Just the top six transportation projects total nearly $7 billion, and that sum doesn't include a penny for schools, a top priority for many Northern Virginia legislators. Still unresolved is how to structure the bonds: Who should carry the liabilities on their books - the state, the localities, or the regional authority? With limited state bonding capacity and competing demands for state-backed bonds, downstate legislators will be sure to keep Northern Virginia's bonds off the commonwealth's balance sheet.

For their part, Northern Virginia leaders have yet to speak with a common voice on the referendum. Their badly coordinated attempts to push the referendum through the General Assembly last year floundered because there was no coordinating authority established to collect the tax money, sell the bonds and set funding priorities.

A House bill introduced last year sought to give Northern Virginia localities authority to increase sales and use taxes by 0.5 percent. The authority would have encompassed the counties of Fairfax, Loudoun, Prince William and Arlington, and the towns and cities of Alexandria, Fairfax, Falls Church, Manassas, Manassas Park, Dumfries, Leesburg, Vienna and Herndon. Voters would decide whether they wanted to pay for transportation improvements themselves, with the money earmarked for different priorities such as transportation and education. The bill outlined plans for the state to initially collect the revenue and then remit it to a regional authority, which then would decide how to distribute it to localities. It also provided for $2.38 billion in bonds to be issued for about 15 transportation projects, including the extension of rail service to Dulles International Airport and improvements to Interstates 66 and 95.

As the short session went on, the bill morphed several times. Legislators wrangled over competing priorities in transportation and education. Ultimately, the bill failed to win enough votes to pass.

Last year's failure disappointed legislators elsewhere in the state, particularly in Hampton Roads, also suffering from worsening traffic congestion. Sen. Martin Williams, R-Newport News, says he was tracking the issue because 61 percent of voters in Hampton Roads say they'd be receptive to a regional sales tax to unclog their region's roads and tunnels. He was dismayed to see the Northern Virginia delegation self-destruct. "I thought we could wait and learn from Northern Virginia's experience how to do it. Instead, we learned how not to do it," he says.

Even the referendum's backers acknowledge that it is no panacea for Northern Virginia's transportation woes. Leading a short list of high-priority highway projects are plans to double the size of the Woodrow Wilson bridge on Interstate 95 between Maryland and Virginia, expand the "Mixing Bowl" where I-495, 395 and 95 meet to 24 lanes and extend commuter rail service to Dulles Inter-national Airport. These three projects alone total more than $4 billion.

Over the next six years, according to Virginia Department of Transportation estimates, Northern Virginia is slated to receive only $150 million in annual transportation funding, compared to $500 million a year in needs. Raising $250 million a year, a 1 percent sales tax would generate only half of what's needed.

What's more, critics contend that adding more lanes will do little to relieve congestion over the long run. Ed Risse, a principal of Synergy Planning in Fairfax and a consultant for the Piedmont Environmental Council, notes that simply widening superhighways only attracts more cars and congestion. He proposes a wholesale rethinking of Northern Virginia's approach to urban planning. A favorite Risse concept: placing denser retail, residential and commercial projects along Metro rail lines closer to Washington.

Risse's proposals face resistance from powerful county planners, deep-pocketed real estate developers who make easier money building on vacant land, and fearful homeowners who say denser development will clog the roads they use most. But with the state facing a budget crisis and the sales-tax referendum up in the air, his recommendations may end up part of the solution.

With transportation funding needs growing exponentially, something needs to happen. Getting the region to work together to address the order of transportation priorities presents perhaps the biggest challenge of all. As Guernsey notes: "Very few roads go through only one county or one city. … So we basically inherit the paralysis we have today."

Some activists believe that once momentum for a referendum starts rolling, many of the uncertainties will clear up. "I don't have any doubt we could come up with a very creditable list relatively quickly, certainly in time to put it on a ballot a year from now," says Bob Chase, executive director of the Northern Virginia Transportation Alliance, an influential grass roots lobbying group. "We've studied this stuff for so many damn years that there aren't any mysteries. The problem (to overcome) is the political horse-trading."

For instance, a joint subcommittee of state legislators and local elected officials chaired by Sen. Warren Barry is completing work on how a proposed Northern Virginia Transportation Authority would be structured. But the new body may be too similar to other regional ones. Its voting structure leaves some cold. Under the Barry Commission proposal, Fairfax County would gain greater voting power because it comprises 53 percent of Northern Virginia's population. Critics contend that makes the new body very similar to existing ones, like the National Capital Region Transportation Planning Board or the Northern Virginia Regional Transportation Coordinating Council. "What the Barry Commission is recommending right now is a regional authority that's essentially the same structure we have now: every local government and five members of the assembly. It's a new uniform but the same players. That's not exactly regional," Chase sniffs.

There is another danger to passing a sales tax. Federal funds are needed to complete virtually every transportation improvement, and proceeds from a sales tax wouldn't be enough to complete most projects. That could lead to disenchanted voters. "If people vote for a package thinking that by doing so they're completing these projects, when in fact the federal dollars that are needed aren't in the pipe stream, you run the risk of years and years going by and nothing happening. People will start wondering why they're paying additional sales tax and not seeing any results," says Chase.

Adding rail along the Dulles Corridor, for example, is often cited as a key transportation priority in the region. The NVTA lists it as one of the region's most pressing needs. Yet even Chase, the NVTA president, advises caution, noting the project carries a price tag of about $4 billion. It would be built gradually, with a combined bus-light rail system moving passengers along a line that would run from west Falls Church to Tysons Corner and Dulles Airport, extending as far as Loudoun County. A second phase would extend rail to Centreville from Vienna. Thus far, about $600,000 in dedicated state funding has been identified - a fraction of the $3 billion to $4 billion needed.

Adding rail transit along the Dulles Corridor does offer the promise of faster commutes. Yet the size, scope and cost of the project make planning cumbersome; it would take years, perhaps generations, to complete. "It's still a priority, but is it cost effective? That's a question I can't answer," says Steve Suder, a transportation project manager with the Northern Virginia regional office of the Virginia Department of Transportation. Suder acknowledges the Dulles Rail project could consume every last dollar of federal dollars allotted for transit development in the region - and that's before factoring in cost overruns and other cost-inflating delays.

Rather than sinking limited state funding into mega-projects, the NVTA wants smaller, more circumscribed projects to get top priority. Identifying 10 or 15 projects that could be substantially improved during the next few years would bolster voters' confidence and probably position the region to compete for additional federal money.

Studies on the feasibility of rail along the Dulles corridor have implications for another pressing need: improvements to Interstate 66. Plans call for rebuilding the interchange where I-66 meets the Capital Beltway. The project would add lanes, reconfigure HOV lanes and include a rail extension with at least four stations. VDOT engineers say that making a multi-modal corridor could alleviate bottlenecks and gives commuters more transportation options. Don't expect anything to happen too soon. Engineers plan further studies before breaking any ground on a project whose cost is certain to rise above the $1.3 billion estimate three years ago.

VDOT also wants to plan enhancements to I-66 inside the beltway. Construction of a third lane for I-66 is one of Northern Virginia's most pressing needs, yet no plans are currently on any drawing board. "Adding one lane each way inside the Capital Beltway would unclog several bottlenecks and make a major difference" on alleviating traffic congestion, says Chase.

A referendum may not even be necessary, if existing legislative mechanisms for funding are used. The state legislature passed the Public-Private Transportation Act of 1995 to help private entities get involved in the road-improvement business by working with localities to acquire land and build transportation facilities. The Route 28 project bisecting Fairfax and Loudoun counties offers hope. Plans call for widening Route 28 from six to 10 lanes, stretching from I-66 in Fairfax County north to State Route 7 in Loudoun County. It would include 10 interchanges, although only three are included in Northern Virginia's long-range plan. The ambitious proposal, estimated to cost as much as $380 million, aims to convert the 14-mile highway into a limited access freeway. VDOT is providing about $85 million in funding, with landowners along the route footing the balance of the debt. Bonds will be sold to generate proceeds and will be repaid with tax money collected from landowners, who approved a special tax district to fund the improvements.

Any referendum that involves floating general obligation bonds is muddied by uncertainty over the state's debt capacity and how bonds would be structured. During the George Allen administration, Virginia's bonded indebtedness declined from the levels of the 1980s and early 1990s. Nervous bond experts refuse to speculate on how any new bonds would affect Virginia's debt service. Would new debt be applied to the Commonwealth or localities? Privately, some bond experts can't say how new bonds might affect Virginia's AAA bond rating. Says one analyst: "The problem with debt capacity is there's no real definition for it. How different localities describe it may vary."

Guernsey and others are weary of all the debate and excuse making. Northern Virginia hasn't erected a new bridge since 1968, back when the population was considerably smaller. Although money is certainly an issue, Guernsey says a regional leadership needs to emerge to steer the course of debate. There is more than business at stake. "I think we always have to be sensitive to doing the right thing for the citizens of Northern Virginia, and the right thing is not just exclusive to commuters. We've got neighborhoods and environments to be sensitive to. We have needs that have to be balanced." But unless Northern Virginia's leaders get off the dime, little will happen.

Return to Virginia Business - January 2002