Governor McDonnell Proposes Eliminating Virginia’s Gas Tax

bVirginia is transferring  $364 million a year from our construction account to our maintenance account.   Money meant for building new roads is being used just to patch up old ones up.  That crossover amount is anticipated to grow to $500 million by 2019.   Virginia needs at least $500 million in new, ongoing transportation funding to eliminate this structural deficit and get us  back on sound financial footing when it comes to our transportation system.

According to McDonnell, the future of Virginia’s economy, and our quality of life is at stake.  His plan would provide over half a billion more dollars in highway construction funding each year and eliminates the structural deficit by 2019.  In fact, his  plan puts $3.1 billion more into transportation in Virginia in just the next five years.

In a nut shell the Governor is proposing eliminating Virginia’s gas tax of  17.5  cents per gallon saving Virginians $3.5 billion over the next five years.  “The gas tax is a declining revenue source. It is fixed  and does not fluctuate with inflation. Cars are getting better and better mileage. More Virginians are buying alternative fuel vehicles. Many have called for the gas tax to just be increased but  that’s not a long-term solution. All that would do is lead us back to the same revenue shortfall a few years down the road, and the same old debates. We need a complete change in how we fund transportation or else no new “solutions” will work. We can’t remain tied to an outdated model.”

McDonnell then proposes and increase in the sales tax from 5% to 5.8%,  still below every neighboring state and the District of Columbia, and putting that increase into transportation.   He says the  advantage of that change would be to ensure  that transportation receives the new funding it needs in the years ahead by tying it to a mechanism that moves in tandem with economic activity and inflation which would make transportation funding sustainable again.

The change will be generating $844 million in additional ongoing new revenue for transportation by 2019.

There will be some serious debate on this issue.  While eliminating the gasoline tax will help struggling families, increasing the sales tax rate we pay on everything we buy, use or service will not.

The Governor is also proposing:

  • Constitutional Lock Box on Transportation Funds: The governor supports legislation to send to the voters a constitutional amendment that will ensure that funds committed to the Commonwealth Transportation Fund are used solely for transportation purposes.
  • Streamlining VDOT Business Operations: Legislation to reduce bureaucratic hurdles and increase efficiency by giving the commissioner and VDOT greater authority over administrative issues, operational issues that principally involve the practice of engineering, and expanding stakeholder outreach and involvement.
  • Transit Funding Reform: If we are going to invest more funding in Virginia’s transit systems, we must ensure that our transit providers are operating as efficiently as possible. The current transit funding formula – in place since 1986 – is broken. The formula is based on one single factor: operating costs regardless of size, efficiency, or type of transit service provided. In other words, the more you spend, the more you get. Using two-year-old data, a transit providers’ funding is determined based on the proportion its costs bear to the total state transit operating costs. This system does not reward efficiency, and creates winners and losers by rewarding higher cost systems with more funding, while punishing those systems that achieve cost savings. The governor’s plan includes a new performance-based funding formula for transit. The formula will be based 50 percent on system size and 50 percent on performance factors.
  • Improving the Competitiveness of the Port of Virginia: Finally, the governor’s transportation plan will continue efforts to grow Virginia’s economy and create jobs by implementing further reforms at the Port of Virginia. These reforms will focus on eliminating bureaucratic hurdles to better enable the VPA to compete with private companies in a highly competitive global marketplace. They will also expand the VPA’s ability to act as a catalyst for economic development across the Commonwealth.


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