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May 13, 2008

Kaine calls for special transportation session: sets wheel in motion with plan to raise $1.1 billion by FY14

Gov. Tim Kaine on May 12 called for a June 23 special session on transportation, and proposed a series of tax increases to pay for statewide road and bridge maintenance, major road and transit projects in Northern Virginia and Hampton Roads, and boosts in state support for transit, rail, and public-private partnerships.

 Maintenance of State Roads and Bridges

 The state’s maintenance budget for roads and bridges is in dire straits.  Governor Kaine proposes to beef up the highway maintenance budget; thereby eliminating the current need to transfer money from new construction to pay for maintenance.  If approved, the governor’s plan would halt the transfers for a period of five years. 

Kaine Plan Fully Funds Maintenance Budget until FY14 (in millions)
	FY09	FY10	FY11	FY12	FY13	FY14
Gov’s Plan	445.3	471.4	477.0	492.8	513.9	512.6
Projected Deficit	(388.1)	(387.0)	(432.3)	(471.1)	(504.9)	(575.7)
Surplus/(Shortfall)	57.2	84.4	44.7	21.7	9.0	(63.1)

To pay for the maintenance plan, the governor wants to increase the motor vehicle sales and use tax from 3.0 percent to 4.0 percent and raise the annual vehicle registration fee from $39.00 to $49.00.  He also proposes to dedicate to highway maintenance 1.0 percent of the current motor vehicle sales and use tax as well as the existing $35.00 minimum tax levied on the sale of any motor vehicle.  These taxes now go to new construction, transit, aviation, and ports. 

The average age of the state’s bridges is 47 years, and about 8.0 percent are in need of replacement today.  The state maintains 57,867 miles of roads, and provides funding to cities and towns to maintain an additional 10,561 miles and to Henrico and Arlington Counties for maintenance of 1,638 more miles.  Virginia is one of only a handful of states to assume such a major management and financial responsibility for transportation infrastructure. 

Since FY02 the revenues dedicated for VDOT’s maintenance budget have failed to keep up with costs, particularly as prices have increased for asphalt, steel and cement.  Under state law maintenance is the first funding priority, and VDOT has been transferring money from the new construction budget to cover the maintenance budget deficit.  Over $265.5 million have been taken so far in FY08 from new construction for maintenance activities.

 Regional Plans

In February, the Virginia Supreme Court struck down as unconstitutional the provisions dealing with the taxing powers of the Northern Virginia and Hampton Roads Transportation Authorities included in HB 3202, the transportation bill adopted in the 2007 session.  Moreover, the Court hinted that HB 3202 might also violate the state’s constitutional prohibition on special legislation.  Kaine did not submit any legislation at his news conference, but his office stated that the bills to be submitted for the June 23 session will be more “generic” in nature to allow areas outside of Northern Virginia and Hampton Roads to form transportation regions under yet-to-be-defined criteria. 

To fund regional projects, Kaine champions a state-imposed 1.0 percent retail sales and use tax in those two regions.  The money would fund the projects below, which largely mirrors those in HB 3202.  The sole addition is the Hampton Roads Bridge Tunnel expansion.

 Northern Virginia

• Locality-determined secondary/urban/transit projects (40.0 percent of funds)
• Washington Metropolitan Area Transit Authority ($50.0 million per year)
• Virginia Railway Express ($25.0 million per year)
• Northern Virginia Transportation Authority projects (all remaining funds) 

Hampton Roads

• I-64 Widening on Peninsula and South Hampton Roads
• Midtown/Downtown Tunnel
• Southeastern Parkway/Dominion Boulevard
• I-664 Widening on Peninsula and South Hampton Roads
• Third Crossing
• Hampton Roads Bridge Tunnel
• Route 460

 The 1.0 percent retail sales and use tax increase would raise these amounts. 

Over Half of the Revenues in Kaine Plan Go to Regional Projects (in millions)
	FY09	FY10	FY11	FY12	FY13	FY14
NVA	306.3	351.1	368.3	384.2	400.3	414.3
HR	167.9	192.5	201.9	210.6	219.4	227.1
TOTAL	483.2	553.6	581.2	606.8	632.7	655.4

Transportation Change Fund

 The Kaine Plan recognizes that highway construction alone will not solve Virginia’s transportation problems.  The plan apparently creates a new fund called the Transportation Change Fund, to be financed by a 25-cent per $100 value increase in the state grantor’s tax.  The action would raise $142.0 million in FY09, increasing up to $155.0 million by FY14.

 This proposal would increase spending for rail and transit by more than 30.0 percent over present levels.  Kaine also proposes greater state financial involvement to encourage teleworking.  And, lastly, he wants to re-capitalize the Transportation Partnership Opportunity Fund to encourage the development of transportation projects through design-build and to provide funds to address the transportation aspects of economic development opportunities such as the Rolls Royce and Canon projects, Route 28 interchanges, and the Coalfields Expressway and Route 58.

 The Change Fund would be allocated as follows: 65.0 percent for transit capital and operations, 10.0 percent for rail capital and operations, 13.5 percent for the Transportation Partnership Opportunity Fund, 7.5 percent for ports, and 4.0 percent for aviation.

Beginning in FY09 through FY14, the Kaine Plan would raise, in total, $859.0 million, $963.0 million, $989.9 million, $1,022.4 million, $1,057.8 million, and $1,081.5 million.

 Local Impacts

 Governor Kaine proposes that all of the tax increases be enacted by the General Assembly.  None would be imposed by localities.

 If the General Assembly approves the funding plan, the 44.0 percent reduction to primary, secondary and urban highway construction allocations proposed under the 6-Year Improvement Program now under consideration could be largely reversed.  The Commonwealth Transportation Board would have to amend the program during the summer, giving localities another opportunity to advocate for un-funded projects.

 Based on current formulae, most of the new transit dollars in the Transportation Change Fund would go to Northern Virginia and Hampton Roads.  The additional rail funds would not be so regionally slanted.

 The governor also promised that his June legislative package would include language to eliminate statutory authority (§58.1-540) permitting localities in Northern Virginia and Hampton Roads to levy a local income tax.  Moreover, he promised to abolish the Hampton Roads Transportation Authority.

 Outlook

 Within 24 hours of introduction, the Kaine Plan drew fire for a variety of reasons from statewide elected officials, legislators, and bloggers.  Governor Kaine will hold town hall meetings across Virginia to seek support.  The governor recognizes that his plan is the starting point in the effort to solve a difficult long-standing problem. 

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