Greater Greater Washington

Posts by Trip Pollard

Trip Pollard directs the Southern Environmental Law Center's Land and Community Program, which works in Virginia and 5 other states to promote smarter growth and more sustainable transportation choices. 

Virginia conferees reach flawed transportation deal

As the clock winds down on the 2013 Virginia General Assembly session, a conference committee has reached a deal to eliminate the gas tax, but impose a wholesale tax on gas, divert more general fund revenue to transportation, and charge a $100 per year fee on alternative fuel vehicles. Some of the new funding will go to transit and rail, but the lion's share will go to highway construction.


Photo by ervega on Flickr.

The conference committee deal would generate an estimated $3.5 billion in additional transportation funds over the next 5 years, roughly $900 million a year after that, and even more in future years. It includes some positive provisions to address our transportation challenges, but is a flawed deal, with a number of provisions that are cause for serious concern.

If approved, the deal will affect for decades how Virginians travel, how much we pay in fees and taxes, and how our tax dollars are spent.

Since Governor McDonnell unveiled his plan the day before session began, there have been plenty of twists and turns to the effort to pass the most significant transportation funding boost in the Commonwealth since 1986. Reflecting the deep disagreement over various proposals, the House and Senate each narrowly adopted a major package, with sharp differences between the two versions.

A conference committee met this week and hammered out the proposed deal that now must pass each chamber. The House and Senate could vote on it as early as today.

Where will the money come from?

The primary disagreement between the House and Senate has been over whether to raise revenues through the gas tax and other user fees or to take money from the general fund.

Gas tax: The governor's proposal and the House version of the transportation bill would have eliminated the current 17.5¢ per gallon state gasoline tax, which the Senate voted to raise it and index it for inflation. The conference committee version would eliminate the gas tax, and fill the resulting budget hole (over $4.5 billion in the next five years) by imposing a wholesale tax on gasoline and diesel and increasing the sales tax on vehicle purchases.

Eliminating the gas tax weakens the logical tie between transportation use and funding, and Virginians who use roads less will subsidize those who use the roads more. The compromise does retain elements of a user-pays approach through the wholesale fuels tax and sales tax on vehicle purchases, although it sends a weaker price signal.

A better alternative would have been to increase and/or index the gas tax, or apply the sales tax to gasoline purchases, as the Senate version did. These measures would properly tie fees and taxes to use of public infrastructure and allow revenues to grow with the price of gas. The governor is correct that the gas tax is a declining revenue source, but the main reason it is declining is that it doesn't rise with inflation and hasn't been increased since 1986.

General fund: If much of the proposed funding deal only brings us back to where we are today, where do the additional funds come from? The deal would divert a portion of the existing sales tax, increase the sales tax, and devote possible future online sales tax revenue to transportation.

Sales tax revenues typically go to the general fund. Although transportation is a core function of government, there are few or no other state dedicated revenue sources for education, health care, public safety, and conservation. The deal would divert an estimated $3 billion over the next 5 years that could have gone to other core services, at a time when Virginia ranks 35th in state investment in higher education, 38th in public K-12, and 46th in Medicaid spending.

Clean vehicle fees: The compromise also would impose a $100 fee on alternative fuel vehicles, as the governor had proposed. This "hybrid car tax" is particularly hard to justify when gas taxes are being cut, and it would create a disincentive for purchasing vehicles that help achieve critical goals such as reducing pollution and conserving energy.

Regional funding: The proposed deal also includes regional funding packages of approximately $300-350 million annually for Northern Virginia and $175-200 million annually for Hampton Roads. Funding is likely to come through local sales tax revenues but many details remain unclear.

Where will the money go?

Amid all the debate, a central issue has largely been ignored: how will the state spend these additional funds?

Highway construction: The General Assembly authorized almost $4 billion in additional transportation funds just 2 years ago. The administration has earmarked almost all of these funds for roads, and has spent much of the money on destructive projects that do not address pressing transportation needs.

In the proposed deal, although there is some good news for rail and transit, most of the funding again will go to road-buildingat least $2.6 billion over the next 5 years alone. The ultimate impact of this deal depends on how wisely this money is spent.

Passenger rail funding: Passenger rail is a transportation success story, with record ridership last year. Without dedicated, sustainable funding, however, Virginia could lose its intercity services due to federal funding changes. A bright spot of the proposed deal is that it would provide roughly $50 million annually to preserve and expand passenger rail.

Transit funding and Dulles Rail: The deal would provide additional funding to transit as well. In addition, $300 million would go to Phase 2 of the Dulles Metrorail (Silver Line) project, which would help address the relatively small contribution Virginia has made to a project that could significantly enhance multimodal transportation in one of the nation's leading economic and employment corridors.

However, going forward, it appears transit will only receive about 1/6 of the funding devoted to roads, despite transit's benefits in reducing congestion, energy consumption, and pollution while providing better services for elderly, disabled, and low-income citizens.

The compromise before the General Assembly offers some meaningful benefits, but it has numerous shortcomings and does nothing to advance overdue policy reforms to help ensure that our transportation dollars are used wisely.

Virginia needs a more balanced, efficient, and cleaner transportation system. Time will tell how far this deal gets us.

Time to overhaul Virginia's Public-Private Transportation Act

Virginia's Public-Private Transportation Act (PPTA) lacks adequate safeguards to protect the public interest as the state spends billions of taxpayer dollars and imposes decades of substantial tolls imposed, according to a new analysis.


Photo by VaDOT on Flickr.

The PPTA can be an innovative tool, allowing private entities to partner with the state or localities on transportation projects, and Virginia has been a national leader in pursuing public-private partnerships. Yet the report details how the PPTA has centralized decision-making, limited information given to the public, and often resulted in deals that allow private entities to earn high returns with little risks.

The report was prepared for the Southern Environmental Law Center by Jim Regimbal, a consultant with Fiscal Analytics, Ltd. and a former staff member to Virginia's Senate Finance Committee who has over 30 years of experience in state policy analysis.

It examines the PPTA's history and process, and highlights two recent projects for in-depth analysis: the I-495 Express Lanes in Northern Virginia and the Downtown Tunnel/Midtown Tunnel/MLK Extension in Hampton Roads. The study also analyzes the substantial policy issues the Act raises and offers recommendations for reform.

The PPTA authorizes private entities to build, maintain and/or operate "qualifying transportation facilities" under an agreement with state or local entities such as the Virginia Department of Transportation (VDOT). The intent was to reduce the up-front costs to government by attracting private sources of funding and to tap into private sector creativity and efficiency through competitive bidding to speed and improve building projects.

Since it was enacted in 1995, only four PPTA projects have been completed (Route 288 and Route 895/Pocahontas Parkway around Richmond, Route 199 around Williamsburg, and the new Beltway express lanes). Another 17 projects are partially completed or currently under construction, under contract, or under consideration.

The PPTA has expanded far beyond the General Assembly's original intent to supplement the traditional transportation improvements process. It is now the major method for constructing large new projects, and it concentrates decision-making in the Governor's office with little effective oversight.

Moreover, as the report notes, it "has evolved into a process in which large private-sector construction consortiums propose design/build/operate projects funded using as much state/federal funding and taxpayer-subsidized debt as can be negotiated with the state, coupled with toll revenues that are as secure and protected as possible."

There are significant differences between the PPTA agreements made between the Commonwealth and private entities. The I-495 Express Lanes project, for example, increases transportation capacity while still leaving existing toll-free transportation choices in place for the public. This agreement does not contain any "non-compete" clauses that limit future transportation improvements, although it does have a troubling provision that could increase taxpayer liability or dissuade high occupancy vehicle (HOV) use. The private partner is taking on true demand risk in return for its investment.

In contrast, the Downtown Tunnel/Midtown Tunnel/MLK project expands an existing free facility already once paid for and currently maintained by the state, but with no viable travel alternative for the public. There is little rationale for the amount of state subsidy provided and the contract allows for automatic toll escalation and penalties for creating competing transportation alternatives.

In another project, the proposed $1.4 billion new Route 460 between Petersburg and Suffolk, the state plans to provide $1.1 billion public in direct subsidies (tolls will cover the rest) to build a destructive highway that will parallel an existing, relatively uncongested route. This project is a much lower transportation priority than many others throughout the state, yet it is slated to receive the highest subsidy.

The report recommends a number of reforms to the PPTA, including:

  • Providing more information to the public (including the cost-benefit analysis), and requiring a public hearing at least 30 days prior to signing a comprehensive agreement;
  • Increasing the role of the Commonwealth Transportation Board, and other oversight boards, by requiring it to evaluate and approve a proposed comprehensive agreement before it can be approved, and giving the Board greater independence by limiting the ability of the Governor to remove members without cause;
  • Creating a greater role for the legislature in the process, such as requiring the findings of the cost-benefit analysis to be provided to the General Assembly prior to initiating a PPTA procurement process to ensure that the assumptions contained in the analysis can stand up to public scrutiny, and by requiring the Assembly to approve subsidy levels (particularly debt) and the use of toll facilities;
  • Ensuring greater competition by requiring more bidders; and
  • Adding conditions for prioritizing state PPTA subsidies.
These solutions will help ensure that the PPTA process is good at producing public benefits for as low a price as possible.

Recent PPTA deals show why the current debate over transportation funding needs to focus on ensuring that taxpayer funds are spent wiselyand not just on raising more revenues for transportation. The legislature needs to improve the PPTA before the state signs additional agreements or authorizes any additional funds for public-private transportation projects if we are to promote smarter transportation investments and adequately protect our communities and environment.

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