Virginia lawmakers map out a major transportation initiative

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Democratic lawmakers in Virginia say it’s time for the state to implement a comprehensive transportation program funded with increased gas taxes, new fees on electric and fuel-efficient vehicles, and bond financing for major projects.

Gov. Ralph Northam along with Democratic House Speaker Eileen Filler-Corn and Senate Majority Leader Richard L. Saslaw on Monday outlined an initiative to “modernize funding for transit, rail, and roads.”

“This bold package will reduce congestion, transform transit and rail service, and support economic growth across Virginia,” Northam said. “I look forward to working with my colleagues in the General Assembly to pass it into law.”

The plan has a good chance of passing now that Virginia’s Democrats hold a trifecta in the executive and legislative branches after wresting control of the legislature from Republicans in November.

The House of Delegates picked up a 55-45 Democratic advantage in the election, while Senate Democrats gained a 21-19 lead over Republicans in that chamber. Northam began his four-year term in 2018.

Changes proposed in the state’s motor fuel tax program and increases in the gas tax rate over the next four years are expected to produce about $1 billion in new revenue to support road and bridge capital needs, as well as a “sustainable multimodal transportation system” over the next decade, lawmakers said.

Despite the fact that more Virginians are driving, revenues from motor fuel taxes have dropped the past two years, while in the years before that collections have been unpredictable, according to statistics from the Virginia Department of Transportation. State officials said KPMG has estimated that gas tax collections will drop by 33% by 2030 at the current rate.

House Bill 1414 and Senate Bill 890 would convert the gasoline and diesel fuel taxes to a cents-per-gallon tax from the current gas sales tax rate, which is based on a percentage of the wholesale price of gasoline and diesel fuel. The current gas tax rate is 5.1%, which was put in place in fiscal 2015.

Under the plan, the state’s gas rate will be 20.2 cents per gallon on July 1, rising to 24.2 cents per gallon in 2021 and 28.2 cents per gallon in 2022. The gas tax rate would be adjusted annually based on the Consumer Price Index starting July 1, 2023.

Motor vehicle registration fees would be cut in half, according to the proposal, and the Department of Motor Vehicles would implement a Highway Use Fee for alternative fuel and fuel efficient vehicles. People with vehicles subject to the new fee could opt instead to enroll in a mileage-based user fee program.

The legislation would also create the Virginia Passenger Rail Authority to promote and expand passenger and commuter rail service and authorize the Commonwealth Transportation Board to issue bonds for VPRA projects. Those projects include a $3.7 billion plan to build a new passenger rail bridge across the Potomac River and buy railroad right of way and improve tracks connecting Richmond and Washington, D.C., to provide faster, more frequent passenger train service.

Companion legislation, HB 1538, has been filed to authorize the issuance of $2 billion of revenue bonds and bond anticipation notes to accelerate transportation improvements in the Interstate 81 corridor.

“We know we can’t pave our way out of congestion,” said Saslaw, sponsor of SB 890. “This bill will ensure we are using taxpayer money efficiently, will save Virginians’ time, and will enhance infrastructure options for moving people and goods throughout the Commonwealth.

“In November, Virginians overwhelmingly demanded we take swift, decisive action that improves their lives,” Filler-Corn said. “I am excited to work with the governor and my colleagues in the General Assembly to pass this legislation.”

Since 2013, 30 states and Washington, D.C., have increased gas taxes, while 22 states and the District of Columbia have either indexed taxes or implemented variable-rate gas taxes, according to the National Conference of State Legislatures.

When asked to comment on Virginia’s proposal, spokesman Bill Cramer said the International Bridge, Tunnel and Turnpike Association has always supported the use of gas taxes as a funding source for transportation projects.

“More than 20 states have raised their gas tax in recent years,” he told The Bond Buyer. “The issue is that the federal government has not raised the federal gas tax since 1993.

“We also know that with more fuel efficient cars and electric cars coming online the gas is not a sustainable funding mechanism,” he said, adding, “Congress is now looking into alternative funding options such as vehicle miles travel and tolling.”

In addition to registration fees, Virginia already places a separate $64 annual fee on electric vehicles, according to the Department of Motor Vehicles.

Passenger cars weighing 4,000 pounds or less are charged an annual registration fee of $40.75. For cars weighing between 4,001 and 6,500 pounds the fee is $45.75. Pickup trucks weighing between 4,001 and 6,500 pounds are charged $45.75 and those weighing between 6,501 and 10,000 pounds are charged $51.75.

The transportation program announced Monday has the potential to move two, multibillion-dollar projects forward faster with new bond authorizations.

Last year, Northam signed Senate Bill 1716 and House Bill 2718 into law on April 3, creating the Interstate 81 Corridor Improvement Program to fund $2 billion in improvements along the 326-mile interstate.

The bills included a statewide increase in truck registration fees, a local 2.1% tax on the average wholesale price of regular fuel along the interstate corridor and a statewide increase to 2.03% in the diesel fuel tax, with much of the increase dedicated to the I-81 program.

Bond financing wasn’t included in last year’s legislation. Revenue collections over the first 10 years are expected to total $1.5 billion, according to a financial presentation given to the 15-member I-81 Advisory Committee in August.

I-81 is Virginia’s longest interstate, and it's a critical part of the East Coast’s freight network. The majority of the route is two lanes in each direction, but its capacity is constrained by rolling terrain, especially when accidents occur.

The corridor flows through 12 counties, and has 90 interchanges and major connections with I-66, I-64, I-77 and I-581. It experiences more than 2,000 vehicle crashes annually with 26% involving heavy trucks.

The state developed a capital improvement and funding plan for I-81 in December 2018 that included the use of tolls. Opposition to the plan was quelled when the state dropped tolling as an option.

The I-81 capital plan calls for widening the road in several districts, adding auxiliary and truck climbing lanes, extending acceleration and deceleration lanes, and shoulder widening.

The legislation unveiled Monday also addresses the $3.7 billion project that includes a new Virginia-owned Long Bridge across the Potomac River.

In December, Northam announced reaching an agreement with freight railroad owner CSX Transportation to build a new bridge with tracks dedicated to passenger and commuter rail, acquiring more than 350 miles of railroad right of way and 225 miles of track.

The current Long Bridge, built in 1904 and owned by CSX, carries all passenger, commuter and CSX freight trains that cross the Potomac River. With only two tracks, it is at 98% capacity during peak operating times.

Northam said the new bridge will relieve the bottleneck, and provide a separate track for passenger and commuter trains while freight trains will use the existing Long Bridge.

“The Commonwealth is bringing together federal, state, and regional partners to fund the proposal, with Amtrak playing a critical role,” Northam’s office said.

The Amtrak board of directors has approved a memorandum of understanding with Virginia that outlines its commitment to the program, but the state hasn’t released specific details about Amtrak’s contribution or funding to be provided by other contributors.

Other stakeholders in the project include the District of Columbia’s District Department of Transportation, which is working on an environmental impact statement as part of the National Environmental Policy Act; the Maryland Area Regional Commuter rail, which plans to expand service into the Long Bridge Corridor and northern Virginia; and freight railroad Norfolk Southern.

The new Long Bridge will allow Virginia Railway Express, the state’s commuter rail system that runs from the northern Virginia suburbs to downtown Washington, D.C., to increase its service, said Katie Cristol, chair of VRE’s operations board.

“Expansion of the Long Bridge will enable us to grow VRE service to include new riders, new hours, and new weekend service, in short to improve the quality of life and economic opportunities for tens of thousands more northern Virginians,” Cristol said in December. “That vision is truly within reach, with the Commonwealth now in a position to own and manage this major passenger rail asset.”

The Virginia General Assembly’s session started Jan. 8 and ends March 7. Committees are holding hearings on HB 1414 and SB 890. Hearings have yet to be scheduled on HB 1528, the Commonwealth Transportation Interstate 81 Corridor Bond Act of 2020.

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Transportation industry Revenue bonds Gasoline tax Public finance Ralph Northam State of Virginia Virginia Commonwealth Transportation Board Virginia