WASHINGTON — Virginia Gov. Robert McDonnell touted his $4 billion transportation spending plan Wednesday during a state of the commonwealth speech in which the Republican reaffirmed his intention to privatize state liquor stores and proposed a state employee contribution plan to reduce the retirement pension liability.
McDonnell linked the state’s transportation needs to its future economic and job growth.
He said the plan would fund 900 road, rail, and transit projects, including a new Midtown Tunnel tube in Norfolk, extension of high-occupancy vehicle lanes on Interstate 95/395, and the widening of Interstate 66 in Northern Virginia.
For the plan to succeed, lawmakers must pass legislation accelerating Virginia’s $3 billion bond-financed transportation spending appropriation. The bond package was signed into law in 2007 by then-Gov. Timothy Kaine, a Democrat, but delayed three years by lawsuits and the financial crisis.
The state was finally able to sell the first portion of bonds last May in a $492 million deal. The law capped Virginia’s transportation bond issuance at $300 million a year. Now, McDonnell believes the state has the funds to support issuing up to $600 million a year in fiscal 2011 through fiscal 2013.
The transportation bonds are supported by a dedicated stream of revenue from the tax on automobile insurance proceeds. McDonnell’s administration now believes that debt service can support the debt-acceleration plan.
McDonnell said the financing urgency is in Virginia’s interest.
The state’s economic forecaster, IHS Global Insight, expects the triple-A municipal yield will increase by 2.5% over the next five years. By accelerating the debt issuance, he said Virginia can save $7.5 million a year.
McDonnell again declared that his transportation plan will not increase Virginia’s total authorized tax-supported debt and will not breach its 5% debt-to-general fund revenues cap. He said every $100 million spent on construction generates 3,000 new jobs.
The second leg of his plan calls for $1.1 billion of grant anticipation revenue vehicle bonds.
The bonds would be supported by a formula of toll revenues and funds from the Virginia Department of Transportation that were fleshed out in an audit of the agency conducted last year.
That part of the plan relies on continued federal transportation funding. Any cut in federal funds to states could challenge the amount of Garvee bonds that can be issued.
“If Congress cuts federal funding, it could have an adverse impact on Garvee issuance,” said Jeffrey Southard, executive vice president of the Virginia Transportation Construction Alliance and a former VDOT assistant commissioner.
The third leg of the financing plan calls for creation of a transportation infrastructure bank that initially will be capitalized with $150 million in surplus revenue and $250 million from the VDOT audit.
McDonnell reaffirmed his plan to privatize the state’s liquor stores. He said the plan could generate $300 million for transportation funding.
He also addressed the state’s pension fund, which is underfunded by $17.6 billion.
The governor said the Virginia Retirement System’s funding level could dwindle to 61% by 2014 if not addressed. He proposed a plan that would require state employees to contribute 5% of their pay to the fund.