More Business-As-Usual Proposals to Raise Your Taxes

The man with a plan: Sen. John Watkins. Photo credit: Times-Dispatch

James A. Bacon

It looks like the 2013 session of the General Assembly will be consumed by one or more proposals to jack up taxes to pay for more transportation spending.

Sen. John Watkins, R-Powhatan, has advanced a complex package to raise an estimated $734 million for transportation, which he will unveil publicly at a meeting of the Mayors and Chairs of Virginia’s Urban Crescent today, the Times-Dispatch reports. But there are other proposals. The Richmond Planning District Commission voted last week to index the motor fuels tax. And the T-D quotes House Majority Leader M. Kirkland Cox, R-Colonial Heights, as saying that there will be a number of “competing proposals” in the upcoming legislative session.

The Watkins plan would (take a deep breath) impose a 5% tax on the wholesale price of gasoline…. anticipate the inevitable objection that the burden would fall disproportionately upon low-income Virginians by lowering the income tax rate on the lowest three income tax brackets…. and deal with the inevitable objection to that proposal, namely that lower income tax revenues would take money from schools, health care and other General Fund priorities, by eliminating transportation-related tax credits and sales-tax exemptions. Phew!

Oh, yeah, Watkins also would impose a $102 annual assessment on hybrid and electric vehicles to make sure they pay their fair share of building and maintaining roads.

The quest for more revenue is reaching a fever pitch as the time approaches when state funding for new construction projects runs out. Under state law, bond payments and road maintenance take priority over new construction. Borrowing and maintenance costs are rising while transportation tax revenues are mostly flat.

Bacon’s bottom line: So far, the transportation challenge in Virginia has been framed as one of insufficient tax revenue rather than (a) how the money is spent, or (b) the disconnect between transportation and land use planning. The discussion is all about protecting the status quo. Other than raising taxes, nothing would change. The underlying assumption is that there is nothing wrong with Virginia’s transportation policies that more money won’t fix.

I dispute that assumption. I maintain that transportation policy is fundamentally broken. And while, yes, we probably do need to spend more money on transportation to increase mobility and access, raising taxes without changing how that money is spent is a fool’s errand. No amount of tax increases will help Virginia build a transportation system for the 21st century if the money goes to the wrong projects.

The last time Virginia increased transportation taxes was in 1986. It was not a propitious time for Gov. Gerald Baliles to ask for a major tax hike, for the state was still reeling from bid-rigging scandals in which major road contractors had colluded to jack up construction bids. Understanding that Virginians would be reluctant to pay higher taxes without assurances that new tax revenues wouldn’t wind up lining the pockets of crooked contractors, Baliles shrewdly packaged the taxes with bid-rigging reforms.

Where is Jerry Baliles now that we need him? Is anyone talking about devolving responsibility for secondary roads to local governments that make the land use decisions that drive the need for those roads? No. Is anyone talking about utilizing “smart” technology to synchronize traffic lights and squeezing more capacity out of existing streets and roads? No. Is anyone talking about utilizing special tax districts and other value-capture techniques to ensure that landowners whose property values increase help pay for the transportation improvements that bring them a windfall? No, no, no!

The only ray of hope is a behind-the-scenes makeover of Virginia’s strategic planning process for transportation that would rate projects according to various metrics of need, such as congestion mitigation, economic vitality, environmental impact and coordination of transportation and land use. While these ratings may inform decision making, there are no assurances that merit will prevail over politics.

Watkins’ plan, like all the others made public so far, would perpetuate the system in which transportation projects are determined by rent-seeking, political log rolling and ideology, not demonstrated need. Indeed, by creating a new source of revenue and superficially “solving” the problem, the proposal would ensure that nothing changes.

36 Responses to More Business-As-Usual Proposals to Raise Your Taxes

  1. Here’s something related:


    Ninety-two percent of Virginian voters say it is “very important” or “somewhat important” to make [transportation] improvements, a new polls finds.”

    but wait, there’s MORE:

    ” But they oppose, 57 percent to 38 percent, putting tolls on parts of Interstate 95 ”

    but wait – there’s MORE:

    ” Virginians are even less keen on higher gas taxes. Given the choice between that and tolls, voters prefer tolls 56 percent to 32 percent.”

    http://goo.gl/KOmVC (WaPO/ Quinnipiac poll)

  2. ..hmmm.. WaPo did not post this part:

    ” except voters in the southeast part of the Commonwealth, where 46 percent prefer tolls and 42 percent prefer higher gas taxes. “

  3. Fairfax County did a poll on whether the County should raise revenue locally to spend on transportation and received 1725 responses. 85% said “yes.” When asked what types of revenues should be obtained, the number one choice (79%) was charge developers. We need more sources than that, but when we grant rezoning, we need to recover the costs for transportation facilities needed for such rezoning to a large, but not exclusive, extent from those benefiting from the rezoning – the developers, builders, and downstream purchasers and tenants.

  4. I will give you some credit, Bacon, for a decade of indecision and deterioration. We are just about out of the top tier of attractive states for new business and this indecision, and the resulting forest of toll booths and the buckets of toll quarters being sent to the foreign companies that own our infrastructure, is the reason. I’m tired of this argument, tired of fools who substitute polls for brains and investment smarts, tired of people who want somebody else to pay, tired of people who blame VDOT which is actually reasonably well managed. Doing nothing is easy and we’re damned good at it.

    Raise the freaking gas tax a dime, index it to the construction inflation gauge, stop stealing money from the TTF to pay for maintenance and move on. Over several years now, $3 billion in tax revenue from the TTF (established in 1986) has been spent instead on maintenance. Now we are spending federal construction dollars on maintenance.

    The Watkins proposal does seem needlessly complex.

  5. This sounds like a great idea for low-income residents of transit-rich Arlington County. Everyone else….not so much.

    The gas tax should cover maintenance of the current road/transit system. All new roadway expansion should be covered by real congestion management tolls. (I-495 Express Lanes)

    Note: The Dulles Greenway going from $4.75(off-peak) to $5.55(peak) is not congestion management.

  6. I go one step further.

    I think local roads including subdivision roads should be the responsibility of the locality – as it is in 46 other states.

    I’m not in favor of open-ended funding of transit.

    I’m more in favor of a cap on how much goes to transit and if there is a desire for more – then let the localities and regions fund it.

    We keep playing this Daddy Warbucks game with transportation funding – as if the money for transportation comes from a magic fault in Richmond instead of people who buy fuel for vehicles.

  7. Where are the service districts and proffers? Development must pay for the costs of the transportation facilities that they cause to be needed.

  8. re: service districts/proffers…

    if that question is to me….

    then once the locality become responsible for local roads – the proffers and service districts will become pro-forma – like they are in 46 other states.

    the biggest mistake that Virginia has made is that each locality believes they are owed far more money than they ever generate in taxes themselves

    AND/OR they think because they are economically robust – that the rest of the state – the poorer parts of the state OWE them THEIR pitiful gas tax revenues.

    Some counties in Va barely generate the gas tax money it takes to pay for maintenance and operations … snow removal… etc.

    the greedy NoVa types like DJ would grab what little money the poor counties have for road maintenance and divert it to build roads for NoVa subdivisions.

    and DJ calls Richmond the Clown show!

  9. Why is allowing the gas tax to track actual construction costs writing a blank check? That’s silly. The gas tax and a comparable fee for non-gasoline vehicles is the only logical way to pay for grass cutting, repaving, sign painting and all the other aspects of maintenance. We’ve deteriorated to the point that nobody can advocate using the gas tax for major construction projects (unless we raise it to a buck or something). But we’ve also gotten to the point where the state is providing zero dollars to localities, and very few dollars for the smaller projects on primary and interstate roads — intersections, lane additions, the routine smaller projects that we can’t sell the the Austrailians or the Red Chinese (so they can rent them back to us.)

    It is interesting. California is going over the edge on the left but I think Virginia may be the test case for going over the edge on the no tax, no way approach. In another ten years I’m not sure anybody will be flocking to live in either of them.

    • I have said many times that we need to find new revenue sources for transportation in Virginia. I don’t think anyone would dispute that. My concern is how the money will be spent. Our system is broken. Much of the money will be wasted on high-visibility, low ROI projects. My philosophy is akin to Reagan’s “starve the beast” — no more money until we’ve cleaned up the system to make sure the money isn’t wasted on projects like the Charlottesville Bypass.

  10. There you go again. Devolution will lead to two choices – higher real estate taxes or deterioration of the local roads. By VDOT’s own estimate, the current maintenance deficiency in the secondary system is millions, so just give the roads back to the counties and you can write off that cost? You say, “Well, the state should fix them, then turn them over.” OK, show me the money!
    Right now, if the state gives counties the money it currently spends on secondary roads, you might as well take a pick to the pavement in front of your home. James City County, Fairfax County, and Stafford County studied assuming the local road responsibility and they all reached the same conclusion – the money the state would give them [same amount the state spends on their roads now] is woefully inadequate and that without new revenue resources, local real estate taxes would have to be raised. As a historical note, the last time the General Assembly authorized a new, significant local revenue source was when Mills Godwin secured passage of the sale tax.
    Bad connect between local planning and roads? Well, according to VDOT’s own figures, secondary road maintenance takes up about 12% of their budget. And the new subdivision roads added to the system are in pristine condition. My home was built in 1984; it sits on a cut-thru street in my subdivision; it was repaved for the first time in 2001.
    The devolution question, like all public policy issues, is a gordian knot. It will require the state to spend money to remove the deficiencies in the current secondary road system. It will require the state to give counties sufficient funds to assume the responsibility, at least as much as it gives cities, and guarantee not to reduce those funds in the future like they have done over the past decades for other state responsibilities dumped on localities. It will require new, dedicated, and sustainable revenue sources for counties. It will require a change in the state constitution to allow counties to issue general obligation bonds without a referendum [and I am not talking about the urban counties where they have voted for road bonds, but all counties]. Once that occurs, then come to talk to me about devolution.
    Remember what H. L. Mencken said, “There is always a simple solution to every human problem. Neat, plausible and wrong.” Just saying devolution will bring in millions to help solve the transportation funding problem is fine, but it requires more than mouthing the words.
    My solution was found in a recent op-ed in the Pilot, start tolling as soon as you pull out of your driveway. Bosun

    • Bosun, I totally agree with your analysis of the pitfalls of devolution. It’s a non-starter unless the state can identify constitutionally protected revenue streams to help localities pay for the maintenance. Yeah, it will be hard to enact. But it’s got to be done. The disconnect between transportation and land use planning is too damaging.

    • Yet transportation needs have not yet reached the point where we decide to end the subsidy to the overweight trucks that damage roads and bridges. Better keep some dirt-bag lobbyist happy than do what makes economic sense.

  11. re: Gordian knots and “Constitutionally protected revenue streams”

    WTF?

    46 other states do NOT have either problem!

    the problem in Va is the localities EXPECT the state to put more transportation resources into their county than they themselves actually generate in fuel taxes.

    Mr. “this is not sustainable” Boomergeddon – can you explain to me how this is sustainable?

    the problem is a lack of local responsibility for land-use decisions that have damaging transportation consequences.

    VDOT, right now is on an aggressive access-management policy to try to claw-back transportation utility from the Primary Roads that localities have routinely used as commercial venues – for – decades.

    remember, devolution is NOT for PRIMARY roads – ONLY secondary roads and subdivision roads.

    this is a proper responsibility of the locality.

    as far as a “protected revenue stream” – what in heck do you call personal property taxes on cars and vehicles? Check your own bills. How much do you pay your locality for your vehicles?

    Localities have a lot of options for taxing already. Fairfax has the option of levying income taxes – provided they go to transportation and are approved in a referenda by their local citizens.

    Here’s a bonus question this morning.

    You tell me how much your county actually generates in fuel taxes in a year and then come back and tell me why your county deserves MORE than that in maintenance, operations and new roads.

  12. Here’s a “not business as usual” proposal.

    Instead of trying to increase the funding at the state level where most all of us agree it will become just more slush fund for developers and developer-friendly localities.

    let’s do this:

    1. – enable the localities to enact a percentage fuel tax – much like the VRE 2.1% tax.

    2. allow localities to set it at 1, 2, 3% with a max 4%,

    3. make them get local approval at referenda.

    4. anything they approve – the regional MPO gets some for
    regional projects.

    5. secondary/subdivision roads devolve if the local tax is chosen,.

    6. VDOT will match one for one whatever the locality chooses
    for it’s rate.

    7. Localities do not have to take the deal – they can keep the
    current deal if they want to.

    8. the local tax automatically sunsets after 2 years and the locality has to return to citizens for continuing authorization.

  13. Fairfax County has estimated it would take approximately $60 million annually to replicate VDOT’s maintenance of secondary roads. The County believes residents would expect better maintenance than VDOT provides, pushing the cost to between $80 and 100 million annually. A penny on the real estate tax is worth around $20 million. So if VDOT devolved secondary roads and did not send any money, we are talking reductions in other services (supported by 19.4% of the survey participants), tax increases in the range of 3 to 5 cents; or some combination thereof.
    There is strong support for putting much of the cost of new roads needed for development on the developers and their subsequent tenants/purchasers, both through proffers and special tax or service districts. And we have good precedents for this (Route 28 tax districts in Fairfax and Loudoun Counties and the soon-to-be Tysons Service District).

  14. Larry g,
    Yes, 46 other states don’t have the problem, but they did not remove counties from the responsibility in 1932 either.
    And over the past decade, the state has let the secondary system deteriorate to a point that even if every cent of gas tax and every cent of car tax generated in a county was poured into project to correct existing deficiencies, it still would not be enough. It would be like you going to a junk yard and picking out one of those smushed cars, giving it to a relative who is living on a fixed income and saying, “Here is your new car so don’t call me anymore for a ride.”
    Local option income tax? Yes, for five years only. Have you checked what interest rate Wall Street will give on five-year bonds? Super junk bond status, if that.
    You cannot build roads with the revenue stream from any type of additional tax if you have to keep going back to the voters for approval! You need to sell bonds. Have you priced the cost of a new interchange lately? How about one-mile of new road? Even with materials and labor at historic low costs, you are talking about millions. And remember, you got to keep the roads you have in repair at the same time.
    There are a majority of counties in the state who would love for VDOT to spend the equivalent of the gas tax revenue generated within the county on local roads. Have you seen what the state spends per lane mile on local roads? Also, remember you are talking about everything from a gravel road up to and including four-lane paved arterials.
    Most of the new local roads that have been built over the past decade have been done by developers through proffers, cash & non-cash. But you are seeing in many counties – Chesterfield, Spotsylvania, Isle of Wight, and Hanover – where developers are asking for proffers to be waived. Did you see where a committee in Hanover recommended doing away with proffers and replacing the revenue with a registration fee on all autos?
    What you are trying to do in solving equitably the devolution issue is equivalent to a 180 with an aircraft carrier; it don’t happen quickly, easily, or cheaply. I applaud the ideas expressed here, but in the end it all comes down to money. Bosun

  15. I grant the problem began a while ago but it was wrong from the start because when you separate land-use decisions from transportation consequences – accountability and responsibility – it’s a recipe for trouble.

    We have to change this. It won’t be easy but saying it is a long-standing problem is really crummy justification for keeping the status-quo.

    I gave a proposal. I said give the localities a positive path to transition and let them keep the status-quo also – AND have the local
    citizens have a strong say in it.

    Bosun – have you looked at the 6-yr construction “plans” recently?

    how much money did your county get for secondary road improvements?

    TMT is correct. If you look at the cities and towns in Virginia that ALREADY DO THIS – you’ll see that they have much more flexibility in what they do, when they do and now they do it. They are better able to accommodate development because they can work with development to map out what needs to be done – much, much better than VDOT’s top-down, “do it our way or else” approach.

    I’m IN FAVOR of VDOT retaining authority over Primary roads and to continue their heavy-duty access-management policies.

  16. Mr. Larry – I agree that separating the land use and transportation decisions is wrong and it really was not a problem until after WWII and accelerated in the 1970s.
    Devolution was never about primary roads; only secondary.
    Your transition proposal, with its referendum requirement, is a non-starter with respect to bonds. You cannot build new roads or improve existing roads without bonds. How can you sell a long-term bond if you have to go back to the public every two-five years? That is why Fairfax has not used the income tax authority; once approved, it only lasts for five years.
    Almost all counties would love to get the same amount cities and towns do! However, if you check, all cities and the large towns spend way more on their local roads than VDOT gives them. And the planning coordination experienced by municipalities is a plus that counties want.
    Yes, six-year plans can be over the top in some localities, but most have been scaled back in recent years because of the fiscal realities. Also, VDOT has input into the process, so if they are pie-in-the-sky, the state should speak up. And, some of the projects in a few of plans had advanced to the point where they were completed with stimulus dollars.
    Just want to be clear that if secondary road devolution comes about, VDOT will still impose a ton of mandates on the counties. Where the line is drawn between freedom and Big Brotherism remains to be negotiated. Bosun

  17. Bonsun – re bonds – you are correct.

    but it was a proposal for you to “improve”.

    :-)

    re: VDOT will impose… any more or less than they do right
    now with cities and towns or Henrico or Arlington?

    I’m all for VDOT imposing engineering and safety standards…by the way or let’s say that National Engineering standards – something to insure that arterials are built to minimum specs.

    subdivision roads – I’d let the county and it’s residents decide if they want that to be a county-taxpayer responsibility or an HOA responsibility or something in between – but get VDOT out of the subdivision road game and let the people who benefit from such amenities decide if they want to pay for them.

    but what’s your counter-proposal? Is it to accept what I proposed
    but without the sunset re-approval aspect?

    my view is not to IMPOSE devolution but to make it an appealing option that does address the money issue and at the same time
    allow local citizens to decide if they agree to be taxed.

    I would characterize it like the meals and by-the-drink taxes.

  18. actually the proposal is IMHO a whole lot better than a state-wide gas tax increase that pits NoVa vs RoVa vs Hampton.

    It instead, puts the question to local voters if they want local improvements and to pay for them.

  19. There is nothing wrong with VA transplrtation that will be solved without money.

    BTW. Drove part of the beltway today and saw exacfly zero cars inthe EZ pass lanes. Also saw zero signs for HOV use.

  20. Larry,
    I like your proposal, but it does not go far enough. I will repeat with some facts:
    State has to fix the deficiencies in the current secondary road system. According to VDOT and due to the decline in revenue, that will take $1.3 billion.
    Give counties what state gives cities for construction and maintenance and peg those funds to inflation. Right now the state AVERAGE for county road maintenance is $3,240 per lane mile. Cities receive $10,087/lm for collector & local streets.
    Give counties a new, dedicated, and sustainable revenue sources. That can be a share of the state income tax, additional sales tax on motor fuels, whatever. Require it to be statewide so that one county can’t become a tax haven with the state still maintaining their local roads. No referendum so there is not a patchwork of where state maintains and where counties maintain. If a county wants to spend more than state payment on the local roads, just like all cities, then they can.
    I will forgo a change in the GO debt constitutional requirement for counties as long as there is the additional dedicated local revenue to back voter approved road improvement bonds.
    Once these are in place, begin a transition period – three to five years for urban counties; eight to ten years for all others. In some instances, offer smaller counties the option of forming regional entities for secondary road maintenance and construction.
    Your proposal on subdivision streets is good in theory, but has some problems. HOAs have a record of amnesia and are quick to forget their responsibilities, quick to reduce dues or spend balances on other things, quick to threaten elected officials when their formerly private road needs to be upgraded after the HOA let it deteriorate, quick to point out that they pay taxes and deserve the service other taxpayers receive. Prime example is experience with HOA private roads in subdivisions so far. Most counties don’t permit anymore because the HOA does not live up to their responsibilities. Another problem is that post office will not deliver down private streets, locals cannot enforce traffic laws on private streets, school buses generally don’t go down private streets, and fire vehicles can have problems going down private streets because they are generally narrower and have less turn radius than VDOT requires.
    I agree that some VDOT rules have to remain in place to assure that one does not go from a paved road to gravel when transiting county boundaries. There may be other VDOT mandates that need to be repealed once the area of centralized responsibility for secondary roads is atomized.
    It will not be easy or done on the cheap. Bosun

  21. Well Bosun. I agree with your counter proposal but believe the conversation about who maintains subdivisions should be a local one.

    Let the counties and the taxpayers and HOAs fight it out but get VDOT out of the subdivision road business.

    but I’d agree with the reimbursement scheme but not with tying it to inflation unless the funding side has some mechanism to be able to generate additional inflation-adjusted funding.

    Otherwise – you’re just trying to get blood out of the proverbial stone.

  22. Re extra tax revenues. According to Sharon Bulova, the State gave Arlington the right to impose a meals tax without referendum as part of the package that made Arlington County responsible for its secondary streets. My recollection is that tax at 4% would produce $80 M annually for Fairfax County. Wouldn’t this work for the other counties in Virginia? Cities and towns already have this authority.

  23. TMT – I think it certainly should work but we are already charging a meals tax and already spending it!

    I am attracted to the local option gasoline tax for transportation because of it’s nexus.

    It brings the voters into the discussion and it gets the BOS thinking about land-use / transportation issues.

  24. re: ” Another problem is that post office will not deliver down private streets, locals cannot enforce traffic laws on private streets, school buses generally don’t go down private streets, and fire vehicles can have problems going down private streets because they are generally narrower and have less turn radius than VDOT requires.”

    they can be public streets – as long as they meet standards.

    I’m curious what 46 other states do about these “problems”.

  25. Larry – if the HOA is responsible for the streets, they are considered to be private roads, no matter what the standard. There may be some way to make them public which would solve the problem. Bosun

  26. Also, the reason the developer turns the streets over to a HOA is because the roads are not built to VDOT standards in order to save money on the front end. Bosun

    • Bosun is correct. I have a client in Loudoun County whose members live a a community with both public and private streets. The latter do NOT meet VDOT standards and, as such, are maintained by the HOA. Only streets that meet VDOT standards can be turned over to the Commonwealth.

  27. I live in a subdivision whose roads were built to VDOT standards and were accepted into the state system once VDOT inspect it.

    we need to separate different practices verses where or not VDOT could set a standard and the schools and post office would serve it if it were VDOT-certified. The HOA would pay to have the certification.

    The HOA would decide who to hire to maintain the ditches, re-paving, and snow plowing.

    In the end if someone were looking for a place to live – the question to ask would be if it is built to VDOT standards and certified for use by Post office and school buses, etc.

    this is just a different way to do business not a reason to not.

    VDOT already has a locally-administered projects capability where the locality manages the project and VDOT insures it is built to standards.

    Spotsylvania is adding lanes to a State Primary Road – on of those non-existent “Stimulus” projects. :-) Spotsy has hired a company to do the project but VDOT is calling the shots on design – and access management and has overruled Spotsy and the contractor multiple times.

    It would not be a big step to use a similar approach for maintenance.

    the big advantage to localities with devolution is phasing and determination of the end points of a given project.

    When a project is in the 6yr plan – VDOT decides logical termini as well as phasing – according to VDOT interests first then the localities interests second.

    For instance VDOT might identify a 2 mile segment while the locality would only want 1/2 mile now ..1/2 later, etc… or the locality may want to get proffers for 1.5 miles and do the other .5 themselves.

    VDOT is not in a position to deal with developers on issues like this while the county is – throughout the entire planning process for development.

    The locality has many other options also available when dealing with developers that VDOT does not.

    McDonnell though may not be headed this way. I understand that he has made statements recently that the gas tax is the only tax that does not increase when prices go up – all other taxes do.

  28. Sort of off the subject, but thought you might like to see this published in Friday’s NYT: Toll Unsettles Los Angeles Motorists Used to ‘Free’ in Freeways
    nyti.ms/106cMwZ . Bosun

  29. Did you see the recent Quinnipiac University Poll on Virginians polls and taxes:

    http://www.quinnipiac.edu/institutes-centers/polling-institute/virginia/release-detail?ReleaseID=1814

    they hate both but they prefer tolls over taxes.

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