Wednesday, April 16, 2008
A way to break the transportation impasse
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Ray D. Pethtel
Pethtel was the chairman of the Commonwealth Transportation Board and commissioner of the Department of Transportation from 1986 to 1990.
The Republican-led House of Delegates and the Democratic-led Senate have been at odds for several years about raising new transportation revenue. The House adamantly refuses to raise the gas tax. The Senate wants statewide impact. The General Assembly passed House Bill 3202 as an apparent compromise.
This spring, part of the legislation was repealed (abusive driver fees) and another part was declared unconstitutional (local tax authority given to an unelected body). The opposing positions seem intractable. The gas tax impasse rests on at least three points:
1. The last tax increase in 1986 put the gas tax at 17.5 cents per gallon. Today, 22 years later, considering inflation, that amount has the purchasing power of just 8 cents. As costs increased over the years, the purchasing power to construct, maintain and operate transportation facilities decreased.
2. The Senate wants a statewide bill; the House is more focused on regional revenue for the urban areas of Northern Virginia, Richmond and Hampton Roads.
3. The House does not want to raise any taxes; the Senate is advocating a gas tax increase.
As luck would have it, there may be a way to address all three goals using existing law as the basis (or as the "vehicle" as legislators would put it) for compromise. Section 58.1-1720 of the Code of Virginia permits any jurisdiction or group of jurisdictions to create a transportation district.
If the district is adjacent to the Northern Virginia Transportation District, it can levy a 2 percent tax on the retail price of gas. To implement a statewide district, assuming local governments don't do it on their own, would likely require relatively simple legislative action by amending the existing law.
The General Assembly would need to create a statewide transportation district with optional or mandatory participation for localities. The statewide district would be governed by local elected officials. Each local government would be required to vote to become a member, satisfying the constitutional requirement.
The new statewide district would have authority to impose a 2 percent tax, again under existing law. In order to gain voluntary participation, legislation should allocate the funds to the regional entities of Northern Virginia, Richmond and Hampton Roads according to the amount collected in those areas. The district then could allocate the remaining funds through the statewide formulas to those jurisdictions that participate.
Since the tax is based on a percentage of the retail sales price of gas, the revenue would be sensitive to inflation. And there is an existing mechanism to collect retail taxes -- so administration would not be costly.
As long as the district has continuous statewide connections and is adjacent to the Northern Virginia District, even if it looks like Swiss cheese, it could impose the tax.
Virginia sells more than 11 billion gallons of gas each year. With a pump price at $3 a gallon, a 2 percent sales tax could raise more than $660 million. If the legislation allowed the district to set the tax up to 3 percent, it could easily reach the $1 billion mark.
Is this a solution the General Assembly can live with? As with the previous law, the General Assembly would continue to shift more of the transportation revenue responsibility to the local level. The transportation tax would keep pace with inflation, and it would have statewide impact with regional focus. Such legislation is straightforward and meets each of the conditions the General Assembly and the governor are looking for.
