Government Affairs

General Assembly Update

January 23, 2012

TRANSPORTATION FUNDING BILLS INTRODUCED

Last Friday was the final day for introducing bills in the 2012 session of the General Assembly. While we are still reviewing the last minute bills, several key transportation funding bills have been introduced. We will distribute a final list of bills we are engaged with in a few days. But, these funding bills deserve note and following. We expect a few more funding bills are in the hopper.

HB 23 (Delegate Cole) Transportation Trust Fund; increases amount of sales and use tax revenue dedicated to Fund. Increases the amount of sales and use tax revenue dedicated to the Transportation Trust Fund from an amount generated by a 0.5 percent tax rate under current law to an amount generated by a one percent tax rate, phased in by a 0.1 percent increase each year for five years, or over a longer period of time if there is a lack of growth in general fund revenues. HB 23

HB 422 (Delegate Watts) Transportation; additional funding by imposing and increasing certain taxes. Provides additional funding for transportation by (i) imposing a motor fuels sales tax rate of four percent, phased in over four years, for highway maintenance; (ii) increasing the state sales tax in Northern Virginia by 0.5 percent for transportation projects in Northern Virginia; and (iii) adding an additional recordation tax in Northern Virginia at a rate of $0.40 per $100 valuation. The motor fuels tax is not effective until the unemployment rate in the Commonwealth decreases for four consecutive quarters after July 1, 2011. The bill also reduces the sales and use tax rate on food for human consumption from 1.5 percent to one percent, and repeals the authority for certain localities to impose a local income tax. In addition, the bill removes the sunset date from the 2009 Act of Assembly that reduced the special real property tax rate on commercial property in the localities embraced by the Northern Virginia Transportation Authority from $0.25 per $100 of assessed value to $0.125 per $100 of assessed value. Finally, the bill increases the special real property tax rate on commercial property in localities in Hampton Roads from $0.10 per $100 of assessed value to $0.125 per $100 of assessed value. HB 422

HB 575 (Delegate Marshall) Salem Highway Construction District Transportation Fund. Provides for transportation funding in the Salem Highway Construction District by allocating revenue attributable to a portion of economic growth due to or facilitated by the Inland Port in Montgomery County. HB 575

HB 802 (Delegate May) Virginia Pump Toll. Imposes the Virginia Pump Toll (“FareShare”), in the amount of (i) $0.50 on each use of a retail motor fuels pump and an additional $0.50 when purchasing 35 or more gallons; (ii) $1.00 on each 12-gallon sale of gasoline (other than for resale) from a transport truck or tank wagon and on each 60-gallon sale of diesel fuel (other than for resale) from a transport truck or tank wagon; (iii) an amount to be determined by the Commissioner of the Department of Motor Vehicles on the bulk purchase of clean fuel other than electricity at a rate equivalent to $1.00 times the volume of clean fuel required to fill the average size fuel tank to three quarters full; and (iv) $0.50 on each sale of clean fuel at an electric vehicle charging service facility. Revenue from the FareShare shall be used for highway maintenance and operation in the highway construction district in which the motor fuel is sold. The amount of the FareShare increases by 10 percent every five years. The bill has a delayed effective date of January 1, 2013. HB 802

HB 892 (Delegate Alexander) Highway Construction Projects Trust Fund. Makes the retail sale of gasoline, diesel fuel, and other fuels subject to the general five percent retail sales and use tax and reduces the fuels tax on such fuels by $0.05 per gallon from $0.175 per gallon to $0.125 per gallon. Under current law, the sale of fuels is exempt from the general retail sales and use tax, but fuels are subject to a fuels tax imposed at the rate of $0.175 per gallon. Of the net additional revenues generated each year under the bill, $250 million would be deposited into the Highway Maintenance and Operating Fund and the remainder would be deposited into the Highway Construction Projects Trust Fund created under the bill.

Moneys deposited into the Highway Construction Projects Trust Fund would be used to finance or fund the construction, acquisition, reconstruction, or replacement of or improvements or additions to highway projects determined necessary by the Commonwealth Transportation Board. The bill also authorizes the issuance of up to $5 billion in bonds for such highway projects with the bonds and the interest thereon to be repaid from the net additional revenues generated by the bill and deposited into the Fund.

The Commonwealth Transportation Board is charged with ensuring that of the net additional revenues over the long term approximately 38 percent of such revenues would be used for projects in the Northern Virginia construction district, 31 percent for projects in the Hampton Roads construction district, and 31 percent for projects in all other construction districts in the Commonwealth. HB 892

HB 898 (Delegate Albo) Highway Maintenance and Operating Fund for transportation funding. Dedicates to the Highway Maintenance and Operating Fund (i) one-third of the total revenue from the insurance license tax and (ii) the amount of current state sales and use tax revenue attributable to a 0.25 percent sales and use tax rate. HB 898

HB 1239 (Delegate Putney) Retail sales and use tax increase. Increases the state retail sales and use tax from four percent to five percent beginning January 1, 2013, subject to a statewide referendum on the same. The increase in the state retail sales and use tax would result in a combined state and local retail sales and use tax of six percent. One-half of the revenues generated would be deposited into a new special fund, the Supplemental Highway Construction and Maintenance Fund, and one-half of the revenues generated would be used in accordance with the general appropriation act for the provision of mental health services, public K through 12 education, and public higher education.

Of the sales and use tax revenues deposited into the Supplemental Highway Construction and Maintenance Fund, $200 million each fiscal year would be used for the construction of secondary system roads. The remaining sales and use tax revenues deposited into the Fund would be distributed to the Highway Maintenance and Operating Fund to be used (i) to repair bridges that are structurally deficient or functionally obsolete and (ii) for maintenance of the Commonwealth’s highways. HB 1239

HB 1248 (Delegate Linghamfelter) Transportation construction, operation and maintenance, and funding. (Governor’s Omnibus transportation bill) Provides for the construction, maintenance, and funding of transportation by (i) creating transportation construction districts and the Transportation Improvement District Fund to identify, construct, and fund certain transportation projects, including the authority to issue revenue bonds; (ii) creating the Virginia Toll Road Authority to fund transportation projects through tolls and other charges, (iii) increasing the dedicated transportation allocation of the sales and use tax from 0.5 percent to 0.75 percent, phased in over eight years, with the additional revenue dedicated for highway maintenance and operation, (iv) increasing transportation’s share of year-end surpluses to 75 percent, (v) dedicating a portion of revenue growth each year to transportation, and (vi) requiring localities to create transportation plans as part of comprehensive planning.

The bill also authorizes the Commonwealth Transportation Board (CTB) to name highways, bridges, interchanges, and other transportation facilities for private entities if an annual naming rights fee is paid, with the revenue dedicated to highway maintenance and operation. The bill also charges the CTB with greater responsibilities involving integration of land use and transportation planning and authorizes the CTB to withhold federal and state funds for certain local or regional capital improvement projects if those projects are inconsistent with the Statewide Transportation Plan or the Six-Year Improvement Program. Provision is made for use of “revenue-sharing” funds for secondary highway system maintenance projects carried out by local governments. The bill also provides for special allocations by the CTB for bridge reconstruction, high priority highway projects, and reconstruction of highways with particularly deteriorated pavements. It also provides for the performance of maintenance projects directly by VDOT when it can be demonstrated to the Commissioner or the CTB that VDOT can do it at lesser cost than an outside contractor. HB 1248

SB 162 (Senator Peterson)Fuels taxes; indexing of tax rates. Increases or decreases each year the rates of Virginia’s fuels taxes using a fuel efficiency index. The bill would define the fuel efficiency index as the quotient that is obtained when using as the numerator the total annual vehicle miles traveled in the Commonwealth for the relevant year and using as the denominator the total gallons of motor fuel consumed for highway use in the Commonwealth for the relevant year. The numerator and denominator would be the corresponding amounts as published by the Federal Highway Administration of the United States Department of Transportation.

The bill would establish 2007 as the base year for the fuel efficiency index. Thus, the percentage change in the fuel efficiency index between the current year and 2007, the base year, would determine the annual percentage increase or decrease in the rates of Virginia’s fuels taxes. Each December the Commissioner of the Department of Motor Vehicles would compute the adjusted rates of fuels taxes.

Currently, Virginia’s fuels taxes are fixed at the rate of $0.175 per gallon for each gallon of gasoline, gasohol, and diesel fuel. SB 162

SB 631 (Senator Watkins) Motor fuels tax indexed. Requires that the motor fuels tax rate be indexed each year to the percentage change in the U.S. Department of Labor’s Producer Price Index for Other Nonresidential Construction from January 1 through December 31 of the year immediately preceding the affected year. SB 631