“Terrible Traffic Tuesday” got underway on the sunny morning just after Labor Day. A band of supporters from the group Citizens for Better Transportation gathered at dawn in the massive Horner Road commuter lot just off Interstate 95 in Prince William County. As usual for a workday morning, this north-south artery was jammed with cars and trucks — especially on this day, notorious for its bad traffic. The boosters of the sales-tax hike brandished signs and welcomed Gov. Mark R. Warner, an ex-commuter from Alexandria who showed up to rally support.

That the referendum is happening at all is a victory of sorts for Northern Virginia and for Hampton Roads, which also is putting a regional tax increase to a vote. For years leaders in both regions have pleaded with little success for more state funding. Finally this spring, Warner helped break the logjam in the anti-tax General Assembly and won approval for the referendums, which go before voters on Nov. 5.
There is a lot of money on the table. If voters agree to the tax increases, the state’s two most prosperous regions will have a combined $11 billion over 20 years for new roads, bridges, interchanges and mass transit projects. Among the biggest boosters of the referendums are local business coalitions. “This is an opportunity for Northern Virginia and Hampton Roads to help themselves,” says Doug Gray, public policy director for the Virginia Association of Realtors. “Either they pass this, or they’re not going to have another chance for a long time.”

But even if approved, the referendums won’t fix everything. Virginia will still face a huge problem in finding the money to pay for its transportation network. A 1998 state study put its funding shortfall through 2017 at more than $40 billion. In June, the weakening economy forced a $2.8 billion cut from Virginia’s six-year construction plan, a 28 percent cut that eliminated 166 projects statewide. And this year Virginia had to take money from its road construction fund to pay for road maintenance. It has also started using future federal highway payments as collateral for loans. While the money might be drying up, the pressure on the state’s road network is not. “The demographics are still shooting up, and so the pressure on the transportation system is only going to increase,” says State Sen. Edd Houck, a legislator from fast-growing Spotsylvania County.

Why is money so short? The slumping economy forced state leaders to cut $3.8 billion out of the statewide budget this year, and they now face another shortfall of close to $2 billion. Others blame dawdling at the Virginia Department of Transportation. Another reason is Virginia’s stubborn resistance to raising taxes or borrowing money. Its last sales-tax increase for transportation was a half-cent hike in 1986.

But those reasons address only the supply of money, not the demand for new roads. And the state has little control over that demand. An example: In 1998 the city of Fredericksburg approved a 550-acre commercial project next to I-95 without knowing the cost of needed road improvements. Two years later, a consultant’s study put the price tag at a whopping $500 million. “We aren’t growing efficiently and it’s costing us billions of dollars,” says Gary Johnson, a professor of urban studies at Virginia Commonwealth University in Richmond. “We can’t afford to keep growing the way that we’re growing.”

County leaders, though, argue that they can’t afford not to grow. They desperately need the extra real estate tax revenues. So they have over-zoned the countryside in hopes of luring new development projects, which triggers leapfrogging development and consumes land at a rate faster than the population growth. For counties and cities, such projects seem a good way to pay for local services — especially public schooling, something the state underfunds anyway. But the localities don’t have to worry about how to pay for the roads that scattered development demands — that’s the state’s job. The referendums could help close the state’s transportation funding gap, but a new gap will eventually emerge unless new ways are found to control this growing appetite for newer and bigger roads. For a state that prides itself on being thrifty with a dollar, this is a major leak of red ink.

It’s also a tough issue for conservative Virginia. The state traditionally takes a hands-off approach to the private sector, and pro-development lobbies wield a lot of influence in state government. Dating back to the days of the Byrd machine, Richmond has kept a tight grip on power and money and shows little willingness to share it. Counties and cities aggressively guard their turf, too, weary of the powerful Dillon Rule — a 19th century legal concept that requires localities to seek state permission to implement new taxes and other changes. Plus, Virginia has a unique independent-city system that increases friction between localities. Cities have to provide the same services as counties, even though their revenues shrink as sprawling development encourages businesses and affluent residents to move to surrounding counties. Another quirk: It’s one of only four states with a state-only road system — a leftover of the Great Depression, when localities couldn’t afford to build and maintain their own roads.

What’s more, the politicking leading up to the Nov. 5 vote is making common ground hard to find. Still, something has to give. “The money issue alone dictates we have to go about our work in a different way,” says Houck. Why not find a way to divert more tax revenues to the localities? The money pressures on local governments promote sprawling development and fixing that problem could wind up saving the state transportation money in the long run. “That’s what this is all about,” says Del. Franklin P. Hall of Richmond, who co-chairs the Commission on Growth and Economic Development, which was created last year. “The critical issue here is, how do we finance local government? We’re still trying to finance it the way we did 50 years ago, primarily through the real estate tax. That financing vehicle has not kept up with the cost of providing all the services the public expects today.” According to a 2000 study, Virginia recorded big leaps in income-tax collections during the 1990s boom years while real estate tax revenues showed a far weaker return. That’s a bitter pill for cities and counties, since real estate taxes make up between 45 percent and 55 percent of their budgets.

There’s been some talk on the tax issue, but no action. In 2000 the General Assembly’s Commission on Virginia’s State and Local Tax Structure for the 21st Century recommended the state give at least 6 percent of individual income tax revenues back to localities to lower the dependence on real estate taxes. An 18-member General Assembly subcommittee formed last year is evaluating the state’s tax structure; its report is due in late November.

Another option would be to let localities in a region share some of their locally produced revenues. Minnesota, for example, has had a tax-sharing agreement since 1971 for the seven-county region around Minneapolis and St. Paul. Ohio, Michigan and Kentucky have revenue-sharing options as well.

Even Virginia law allows revenue-sharing agreements, but they are difficult to enact and only a few exist. The city of Charlottesville and surrounding Albemarle County created a tax-sharing system in 1982, with each contributing 37 cents per $100 of assessed value to a shared fund. Other city-county arrangements include Lexington and Rockbridge County, and Franklin and Southampton County.

Sharing revenues would be a recognition that a region’s economy actually supersedes political boundaries. It would also be a first step toward true regional planning, another remedy that Virginia has resisted despite recommendations from state-sponsored commissions dating back to the 1960s. The state does have 21 regional planning districts, each managed by boards comprised of elected officials from the counties and cities in the region. But these district commissions have little authority. “Our regional planning agencies are so dominated by local politics that they’re largely impotent” as regional planning bodies, says VCU’s Johnson. The federal government requires urban regions above 50,000 population to have metropolitan planning organizations (MPOs) to conduct regional transportation planning. Virginia has about 11 MPOs, but they are largely reactive to land-use plans the localities have already made.

Regional governing is a growing trend nationwide, says Jesse Richardson Jr., assistant professor of urban affairs at Virginia Tech. “Politically, [it] is a tough sell,” he says. “That is the answer, though. These are regional issues with a regional impact, so you need to deal with it in a regional way.”

Northern Virginia supporters of the referendum say the state is moving in the right direction on regional planning. John Milliken, a secretary of transportation under Gov. L. Douglas Wilder and chairman of the pro-referendum Citizens for Better Transportation, says the newly created Northern Virginia Transportation Authority will link land-use planning and transportation. “This referendum will tie those two much more closely together, because the decisions makers [on the authority] are the local land-use decision makers,” he says.

Maybe so, but the weak link is still the state law, which largely allows those decision makers to ignore the connection between transportation and land use. For example, all Virginia counties and cities have to write comprehensive plans outlining how they intend to grow. Incredibly, they don’t have to include anything about roads. “How in the world do you develop a comprehensive land-use plan without transportation being a key part of that?” asks Houck. Plus, the plans are toothless anyway — they can be ignored if they conflict with a developer’s proposal. “In order for the comprehensive plan to work there has to be a willingness to follow it,” says Glenn Larson, assistant director of the Chesterfield County Planning Department and a past president of the Virginia chapter of the American Planning Association.

In this year’s General Assembly session, Houck, a 19-year veteran of state government, proposed legislation to have the state Department of Transportation evaluate the traffic and land-use impacts of transportation projects of $100 million or more. Development interests opposed it, he says, and the bill was carried over. In August, Houck invited representatives from key industry groups such as the Virginia Builders Association and the Virginia Municipal League, along with VDOT, to discuss the issue. They talked a lot about whether changing state law on the comprehensive plans would help but came to no agreement. “The more we talked about it, the more complex we all began to realize this whole issue is,” says Lawrence Land, policy director for the Virginia Association of Counties.

Should Virginia develop a statewide planning policy? Nationwide, 15 states are pursuing their first major statewide planning reforms, according to a 2002 report from the APA. Local governments would likely resist it. Land says the state could play “a consulting role” with local governments to help them understand the impacts of land use on transportation. Virginia Tech’s Richardson, though, says there has to be some state-level leadership, or “we’re going to just continue doing what we’re doing. I know local governments don’t want land-use planning in Richmond, and I can certainly understand that. But the state has to step to the plate.”

The difficulty of merging state and local authority and land-use and transportation planning is why some argue that such a change isn’t feasible. “Meshing those responsibilities is very difficult,” says Gray of the Realtors association. “I don’t think land-use decisions are the big problems when we’re talking about funding. It’s just a lack of commitment to provide the resources necessary. Over the past 15 years we just haven’t invested enough.”

Or invested it very wisely, according to many. The Virginia Department of Transportation has a lousy reputation for managing funds and controlling costs. VDOT’s new commissioner, Philip Shucet, admits that the criticism was deserved. The department was poorly run and hyper-defensive to outsiders questioning its decisions, he says. Plus, “there was an absence of the most basic financial controls on how we administered our programs.” Since taking the job in mid-April, Shucet has revamped the agency’s financial practices and reorganized his senior staff. He also hired a new chief financial officer, and is pushing authority and responsibility out to the department’s nine construction districts.

VDOT has been getting slapped around for years. In the mid-1990s then Gov. George Allen pushed privatization as the cure. After a wave of VDOT employees took a buyout offer from Allen and left the agency, private consultants took over some tasks, but that strategy flopped: A 1999 report that that wasn’t made public until this spring concluded that VDOT wasted $23.5 million by hiring consultants for 50 jobs that could have been done by VDOT staff.

Even if Shucet succeeds in fixing VDOT’s cash-management problems, it won’t stop local land-use decisions from controlling the fate of the state’s transportation budget. “That’s kind of at the crux of the issue in a lot of ways,” he says. But it is outside of VDOT’s authority and mission. He did, however, pledge that VDOT would help localities do broader studies of the impacts their land-use decisions will have. “We want to be a good partner” with localities, he says. “But we’re only part of the equation.”

Alex Marshall, a former Norfolk journalist and author of “How Cities Work: Suburbs, Sprawl, and the Roads Not Taken,” says state leaders should drop their hands-off approach to urban design. “In a good state, the department of transportation would actually be an agency under a department of urban design. Then at a state level, you would plan out what kind of transportation system you want and then you’d direct various agencies of transportation to build that network. To have planners who don’t make transportation decisions is a recipe for ineffectiveness.”

Hunting for a long-term fix will have to wait, though. The coming General Assembly session will be dominated by fights over where to cut the state’s budget. Virginia’s government isn’t well-suited to unwieldy issues anyway, with its one-term governors and overwhelmed legislature plowing through thousands of bills. And while a yes vote on the referendums isn’t the whole answer, says Gray of the Realtors association, “It’s a step in the right direction. It solves political and policy needs that are desperate right now. After that, who knows.” Referendum opponents, however, counter that now is the worst time for a transportation tax hike and that the rest of Virginia should hope voters in Hampton Roads and Northern Virginia say no. Virginia is facing deep cuts to education, social services and a host of other state-funded programs, says Stewart Schwartz, director of the Coalition for Smarter Growth. “At the same time they’re allowing two of the wealthiest areas of the state to take a big chunk of their tax capacity and dedicate it totally to transportation. They’re getting the cart before the horse.”

What Smart Growth proponents like Schwartz fear is that the money will fuel more of the sprawling development of strip malls, subdivisions and big-box retail stores. Adding new roads won’t end congestion, they argue, it will simply spread it farther out in a car-dependent pattern that will make everyone drive everywhere to do anything. They’re not satisfied with the amount of money being devoted to transit systems, which could support higher-density development and take pressure off the road networks. “What we’ll end up with instead of this scenic green countryside is a black maze of asphalt,” says VCU’s Johnson.

Problem is, Virginia can’t afford to build a black maze even if it wants to. It has to find more money and build fewer roads. But pro-road groups in Northern Virginia are lobbying for new bypasses on the east and west sides of Washington and a new bridge across the Potomac River into Maryland, not to mention what the rest of the state wants. For years, the debate has been between Smart Growth types and laissez-faire developers. Now money is suddenly a big issue. Yet nothing will be resolved unless Virginia gets its planning and tax structures into the 21st century.

Return to Virginia Business - October 2002