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Red
Light, Green Light
Will Virginia’s
political power brokers find a way to fund transportation
in 2005?
by
Garry Kranz
Virginia Business
January
2005
If
transportation isn’t the biggest issue for Virginia’s
business community, it certainly gets the most mileage.
Moving goods and people is the backbone of the state’s
economy. Despite having a solid network of interstate
highways, some businesspeople fret that Virginia’s
inability to pay for new roads and other transportation
assets could put the brakes on economic development.
“If the commonwealth is going to remain a desirable
place to do business, then we’ll have to address
our transportation [infrastructure] and transportation
patterns,” says Heywood Fralin, chief executive
officer of Medical Facilities of America Inc. in Roanoke.
The
question is how. During a contentious 2004 General Assembly,
Democratic Gov. Mark R. Warner capitalized on a divided
Republican majority to win a controversial package of
tax increases that gins up $1.4 billion in new annual
revenue. Yet nary one dime is earmarked for transportation.
Shaping up in the 2005 General Assembly is a battle
over how to use Virginia’s growing budget surplus,
projected to approach $1 billion by the end of next
year.
Reminiscent of last year’s session, Republicans
in the House of Delegates and the Virginia Senate appear
at odds on how to apply the newfound revenue. Only this
time the roles are reversed. Now it is House Republicans
itching to spend the surplus to complete long-stalled
road projects, while Senate leaders are preaching restraint.
The split is deep enough that some veteran lawmakers
say Warner should consider convening an emergency session
solely for transportation, just as then-Gov. Gerald
Baliles ordered in 1987-88. “Perhaps that’s
what it will take for us to solve this problem,”
says Sen. Charles Hawkins, a Republican from Chatham.
Meanwhile Warner has ambitious plans of his own during
his last legislative session. Rather than wait for the
fractious GOP to end its internecine bickering, the
charismatic millionaire is seeking to steer the ship
of state himself. Underscoring his boldness is an $824
million initiative to jumpstart funding for roads, rail
and transit projects, with roughly half the money coming
from the surplus. Another $147 million is a proposed
repayment from the General Fund, and other monies would
be allocated. For example, Warner wants to dedicate
the state’s automobile-rental tax — which
generates about $23 million annually — for investments
in rail transit. “We’ve got to stop talking
about the possibilities of rail and actually start putting
a funding source in place that can be relied on over
the long haul,” says Warner.
House Republicans are making a grab for the surplus,
too. A dozen conservative lawmakers from Northern Virginia
propose using the state’s tax on insurance premiums
to borrow $5 billion worth of money for transportation
projects. They want to use the surplus to plug the resulting
hole in the state’s general fund. Another potential
strategy would shift surplus dollars to complete projects
begun under Virginia’s Public-Private Transportation
Act of 1995, in which private-sector firms take over
design and construction of roads. Which projects would
get funded has not been spelled out.
Sanguine chirping about the surplus usually gets accompanied
by boasts about Virginia’s rebounding economy.
But amid the giddiness is a sobering reality, articulated
by Sen. John Chichester (R-Stafford County), the powerful
chairman of the Senate Finance Committee. “There
is no surplus,” he says cryptically. “All
we have are revenue projections that are exceeding expectations,
but the money isn’t in the treasury yet.”
Chichester worries that his colleagues are about to
repeat the spending patterns of the late 1990s, when
Virginia’s economy experienced a high-tech boom
and coffers overflowed with revenue. “There’s
no education in the second dog bite,” he says.
Instead, Chichester urges salting money away for anticipated
spending obligations, including funds for public education
and skyrocketing payments for Medicaid, the health plan
for low-income Virginians.
Construction contractors, trucking companies and real
estate developers want Chichester to reprise his package
for nearly $800 million in transportation funding through
increased taxes on gasoline, a move many legislators
would find hard to stomach during an election year.
Originally introduced last session, Chichester stripped
out the proposal during 11th-hour budget negotiations.
The motor fuels tax is especially critical, since it
generates more than $700 million per year, providing
much of the funding for the Virginia Department of Transportation
(VDOT). Virginia last adjusted its fuels tax, which
stands at 17.5 cents, in 1986. Since then, inflation
has eaten away about 40 percent of its value, with most
of the money going for required maintenance. Only $22
million is targeted for road construction in VDOT’s
plan through 2011.
That situation hurts Virginia’s ability to attract
federal highway funds. The federal government puts up
80 percent of transportation grants with states assuming
the remaining 20 percent. If current conditions persist,
VDOT forecasts that Virginia will run out of matching
funds as early as 2014. The problem goes deeper than
simply not having adequate roadways, says Richard Daugherty,
executive vice president of the Virginia Road and Transportation
Builders Association, a trade group in Richmond. “Our
industry is devastated. Just in the last month, I’ve
had two small [construction] companies tell me that
they’re going out of business because there isn’t
enough work. Very few [construction] jobs are being
let by the Virginia Department of Transportation, and
those that are bid out are much smaller jobs,”
he says.
Chichester won’t say if he plans to try again,
but getting wary election-year lawmakers to give a thumbs-up
for higher gas prices — especially as global oil
prices soar — appears to be a long shot, especially
in the House. Elections for House of Delegates occur
in 2005, with Senate elections scheduled for 2007. “[Warner]
poisoned the well last year with the tax increase. My
sense is this year is the absolute worst time for raising
gas taxes,” says Speaker William Howell (R-Stafford
County), a chief Warner nemesis.
The business community is ratcheting up the pressure.
The Hampton Roads Partnership wants members to lobby
legislators for an increase in the gasoline tax. This
is the same group, with many business members, that
supported a failed roads referendum for the area two
years ago. New to the scene is a political action committee
that’s targeting anti-tax conservatives. A bipartisan
coalition of business leaders formed Leadership for
Virginia to re-elect Republicans under fire for backing
Warner’s tax plan, and also to unseat its steadfast
opponents. “We believe that investing in the infrastructure
of Virginia is a good thing, and we are going to back
candidates who have the same philosophy, be they Republicans
or Democrats,” says James W. Hazel, a real estate
developer who serves as co-chair. The group has already
raised $1 million.
However they do it, business and transportation leaders
want elected officials to put aside their differences
and hammer out long-term solutions that keep Virginia
competitive. “The 2005 session has to be a transportation
session. The needs have been put off long enough,”
says Rick Taube, executive director of the Northern
Virginia Transportation Commission, one of the state’s
21 transportation districts. In other words, the time
for rubbernecking is over.
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