By Bob Chase
For Virginia Business
Transportation in Virginia has been a state responsibility since 1932. But state government hasn’t addressed transportation funding since 1986. The neglect shows.
Virginia’s 58,000 mile road network is aging; 2,000 of 12,000 bridges, for example, are structurally deficient. State law disguises the true magnitude of the problem in rural areas by allowing highway construction dollars to be diverted from the Transportation Trust Fund to cover maintenance shortfalls.
Since 2002, lack of maintenance resources has necessitated more than $1 billion in state construction funds being spent on maintenance. Failure to fix maintenance this year means another $3 billion in construction funds will be required to address the maintenance shortfall in the next six years.
Changing state law to stipulate that maintenance can be funded only with maintenance dollars would quickly bring calls from rural legislators, “Richmond, we have a transportation problem.”
During the past two decades, governors and legislators have pursued various strategies in dealing with transportation, such as studying the problem, denying that it exists, passing responsibility on to the public and attempting political fixes.
All have failed. Rising fuel and construction costs make the problem worse than ever.
The General Assembly faces a special session in June because the Virginia Supreme Court struck down key provisions in last year’s transportation law. It’s time to fix transportation funding right by addressing statewide needs coupled with regional solutions for Hampton Roads and Northern Virginia. Regional solutions are not more important than statewide solutions. Both are needed now.
Fixing it right means using funding mechanisms that are broad-based, sustainable and substantial.
Broad-based taxes and fees are best
A popular current mantra is, “Transportation costs must be paid by users.” While user fees such as gasoline taxes are a logical part of any comprehensive solution, virtually no other core area of government is funded solely by user fees. Most Virginia households have no students in public schools, yet every household pays taxes to support schools. Relatively few Virginians receive direct help from the fire department or police. Not all utilize libraries and parks, yet all pay to support them
Better transportation benefits everyone, and everyone should help pay for it. Broad-based statewide and regional options to help stabilize the state maintenance fund include:
• Gasoline tax: Virginia has the nation’s ninth lowest gas tax. A 10-cent per gallon tax generates $530 million, and a 3 percent tax at the wholesale level produces $440 million.
• Sales and use tax: Virginia’s sales tax is the nation’s fifth lowest. Revenue expands with the economy, and a 1 percentage point increase statewide would generate $1 billion annually.
• Motor vehicle sales tax: Virginia’s titling tax is the nation’s third lowest. Raising it 2 percentage points to the 5 percent retail sales tax level would provide $400 million a year statewide.
• Income tax: Income taxes support virtually every basic government service except transportation. Why not transportation? A 1 percentage point increase would produce $2.5 billion per year in fiscal year 2011. A 0.25 percentage point increase would generate $600 million annually. Excluding the first $30,000 of taxable income still would produce $1.5 billion and $380 million, respectively.
• Transient occupancy tax: Aimed at out-of-staters, a 2 percent tax equals about $25 million per year in Northern Virginia.
• Car rental tax: Regionally a 2 percent tax would generate $3.5 million per year in Hampton Roads and $9 million in Northern Virginia.
• Grantor’s tax: A 40-cents per $100 assessed value tax would produce about $40 million a year in Hampton Roads and $170 million in Northern Virginia.
• One-time vehicle registration fee: An initial vehicle registration fee of 1 percent of a vehicle’s value would provide $41 million in Hampton Roads and $64 million in Northern Virginia each year.
Substantial investment required
Many combinations can produce substantial regional and statewide packages, but at the end of the day the result must represent substantial new investment. After 20 years of neglect, half-way measures are not enough.
At a minimum, Northern Virginia needs $300 million in new funds annually; Hampton Roads, $200 million. At the state level, $500 million per year is required to put maintenance on a strong footing; another $500 million per year should be invested in a Strategic Transportation Fund to finance major projects of statewide significance.
Maintaining Virginia’s reputation as a low-tax state is important. However, perpetuating its reputation of lacking the political will to invest in the transportation infrastructure it needs is a prescription for economic disaster.
We will be measured by the world we leave our children. As things stand now, our transportation legacy is a sorry one. The governor and General Assembly can change that by working together to enact statewide and regional funding solutions that are broad-based, sustainable and significant.Tweet