Written by former Delegate Barnie Day, Notes from the Sausage Factory is a must read book for anyone who wants to understand Virginia politics and how what should have been a simple piece of legislation to generate new transportation revenue ended up being over 100 pages long. And yet, after 27 years of inaction that put Virginia's economy and quality of life at risk, and the hard reality that Virginia would run out of money for new construction by 2017, it came down to deciding whether to vote for an imperfect fix or hold out for a better plan that might never materialize.
After eight years of running to do something about congestion, potholes, and overgrown medians, I voted "yes" on the comprehensive transportation package that passed the 2013 General Assembly. No doubt, there are parts of the plan that I dislike. Because the compromise was in the form of a conference committee report, this was a "take-it-or-leave-it" proposition and couldn't be amended. But, the bottom line is that the legislation generates real revenue - about $880 million annually state-wide and an additional $300 to $350 million annually to be used here in Northern Virginia.
Here is what the plan includes and my take on the pros and cons:
The Gas Tax. The Governor originally proposed completely eliminating the gas tax. The compromise plan eliminates the 17.5¢ on the gallon tax and replaces it with a percentage tax on the wholesale price of gasoline - that is, when it is purchased by the station. The new gas tax is 3.5% for regular gasoline and 6% for diesel. In terms of actual dollars, 3.5% represents a slight decrease in the amount a consumer will pay while 6% represents a slight increase. The 6% on diesel acknowledges the higher wear-and-tear that diesel trucks have on our roads. Diesel powered passenger vehicles are eligible to receive a rebate equivalent to the difference between the tax on gasoline versus diesel. Overall, the conversion to a percentage is a huge step toward making this a sustainable source of revenue that grows with inflation. Since the gas tax was last raised in 1986 it has lost more than 50% of its purchasing power.
The Sales Tax. The sales tax will increase by 0.3% state wide. This revenue "diversification" is meant to acknowledge that reliance on gasoline will decrease over time as cars become more efficient. The increase does not apply to food. In addition, the amount of the existing sales tax going to transportation will gradually increase from 0.5% to 0.675%. This will result in a diversion of about $200 million from the general fund, which is something that makes me very uncomfortable given the challenges ahead to adequately fund public education and other services. However, it is far less than what was originally proposed and will be dedicated to mass transit and rail - something that disproportionately benefits Northern Virginia and other urban areas.
Marketplace Equity Act. The Marketplace Equity Act (MEA) is federal legislation that proposes to set up a system for collecting sales tax from internet sales. If enacted, it would result in significant new revenue for Virginia. In his initial proposal, Governor McDonnell proposed that this new revenue would be dedicated solely to transportation. Alas, depending on who you talk to, the MEA is a real possibility or simply a pipe-dream. In the compromise, the federal government has until 2015 to act. If the MEA does not pass, the gasoline tax will increase by an additional 1.6%. If it does pass, the new revenue will be split between transportation and education. The approach takes advantage of new funding if it becomes available, but is pragmatic enough to recognize that funding for our roads can't rely on federal action.
Hybrid Tax. Last year, the General Assembly imposed a $50 annual license tax on electric vehicles. This legislation increases that to $100 and also applies it to hybrid vehicles. While hybrids take up space on our roads just like any other vehicle, there are lots of problems with this approach. This includes, but not limited to, the fact that it serves as a disincentive for people to invest in technology that reduces air pollution. I've already sent a letter asking the Governor to amend or reject this portion of the transportation bill.
The Regional Component. Residents of Northern Virginia are already subject to a congestion tax - that is, the billions of dollars wasted on lost productivity by sitting in traffic and the untold hours we could be spending with friends and family. Under the regional component of the plan, the revenue raised here stays here. For a region that is typically a donor area, the idea of keeping 100% of what is brought in is about as good a deal as we will ever get. The $300 to $350 million that will be raised each year will go directly to fixing bottlenecks, adding turn lanes, better timing lights, and other local projects. Do I like the idea that the rest of the state isn't willing to do more? Nah. Do I think that the rest of the state will ever give us what we need to continue to be the economic engine of Virginia? Nope. Do I think that this approach is a good deal for our region? Yes. The regional package includes three major components: (1) an extra 0.7% on the sales tax that brings it up to a flat 6% -- much easier to calculate than the 5.3% that the rest of the state will have to deal with; (2) increases the grantors tax by 25¢ per $100 (this is the tax paid when one sells a home); and, (3) imposes an additional 3% tax on hotels and motels (therefore capturing a lot of out-of-state money).
Your comments and feedback played a critical role in how I voted on the transportation plan - voting no on the original Governor's plan and then yes on the compromise plan. While it isn't everything that I wanted, it will result in real projects that will help get our region moving.
Although transportation and Medicaid expansion dominated the end of the session, other significant issues were also debated. Click here for a great publication by our Legislative Services that provides a summary of session highlights.
Thank you for the opportunity to serve! Please contact me if I can be of service to you.
P.S. Join me this Sunday, March 3rd for a Welcome Home Reception at Casa Italia in the City of Fairfax. Only through your generosity am I able to send out newsletters and constituent surveys. Enjoy great Italian food and hear stories from Richmond. Click here for more information.