Conference Committee Reports Transportation Proposal

Yesterday, a Conference Committee of 8 Republicans and 2 Democrats announced a transportation proposal that we are told contained the following elements (we still have not been provided with text or official projections):

• Eliminates the $0.175 tax on gasoline and replaces it by a 3.5% tax on gas at the wholesale level and  a 6% tax on diesel gasoline.

This nets out to less money than the existing gas tax.  Therefore, it makes up for the lost revenue and increases revenue by the following:

• Imposes a $100 fee on hybrid vehicles;  
• Increases the tax on motor vehicle sales (new and used) from 3% to 4%;
• Diverts an increasing amount from the General Fund to transportation over five years ($200 million per year in final year). 

This allegedly nets out to approximately an additional $408 million year year in Year 1 and $880 million per year in year five.

Next, the legislation creates a Northern Virginia and Hampton Roads Transportation District funded local 1/2% sales tax options.  It also requires every locality in Northern Virginia to adopt a commercial and industrial real estate tax (Loudoun and Prince William did not do this in an attempt to attract commercial development from Fairfax, Arlington and Alexandria who did).

I'm still processing this, but I have serious reservations.

First, the overall number is still low.  VDOT has studied our lost term transportation needs and the revenue required is at least $100 billion over twenty years or at least $5 billion year year (see here and here).  This plan nets no more than $1.4 billion per year or about 30% of the total need.  It is a short-term measure masquerading as a long-term solution.

Second, our system has always been funded by user fees - if you use the roads or transportation networks, you pay.  Thirty-percent of gas taxes are paid by people who do not live in Virginia.  This starts to destroy the nexus that has funded our system and has functioned fine for nearly 100 years .

Third, heavy reliance on state and local sales taxes also are paid by people who are not using the road system at all including the elderly who do not drive as much or low income Virginians who depend on bicycles or mass transit for transportation. 

Fourth, Northern Virginia pays a larger percentage of General Fund monies which is largely funded by income taxes because of our higher incomes.  Using General Fund to now pay for roads means that Northern Virginia - which already pays more than its fair share for everything except roads - will now pay an increasing percentage for transportation around the entire state as well. 

This is compounded by the Northern Virginia tax district.  The creation of this minimizes the contribution to Northern Virginia's transportation projects by the rest of the Commonwealth - even though we over contribute to their regions.  From my point of view, it undermines the entire concept of a Commonwealth - that we are all in this together.

Fifth, the hybrid fee is just wrong.  My Honda Civic Hybrid gets 44 MPG.  The average U.S. vehicle gets 23.8 MPG.  That means I'm currently skipping out on about $43 of gas taxes per year and even less under this new plan.  Most hybrids don't even get 44 MPG.  Other non-hybrid cars get more than 44 MPG.  This punishes people for doing the right thing.  I don't get it.

Sixth, Northern Virginia will continue to be counted as 1/3rd a person on the Commonwealth Transportation Board (CTB) due to the use of transportation districts based on 1930 congressional district lines.  I've written about this here:

Weekly Column: Progress on Transportation (Feb. 2, 2012)

Reform of this was killed earlier this session after passing last year.  So now, Northern Virginia will send another $880 million per year, including $200 million of General Fund money, to a board where we have 11% of the votes even though the Northern Virginia Transportation District contains 27.8% of the state's population.

This is new money and it is real money.  There is no question about that, but it is a plan that continues to treat Northern Virginia like a cash machine, disincentivizes the wrong behavior (buying hyrids), and uses gimmicks to hide a tax increase instead of simply doing what everyone knows is needed - raising gas taxes, reforming the CTB, and reforming the way we distribute collected revenues.

Please send me your feedback at scottsurovell@gmail.com.