I’m always preaching the need to bolster the creditworthiness of the commonwealth — and with the fiscal calamities I see coming out of Washington, D.C., Virginia’s AAA rating just isn’t strong enough — so I feel obliged to take note of a statement issued by Moody’s Investor Services last week. The bond-rating agency has found the state’s transportation funding plan to be “credit positive.”
Stated the firm Friday:
Last Saturday, Virginia’s General Assembly passed a transportation funding package that eliminates the state’s gas tax and replaces it with a sales and use tax dedicated exclusively to funding transportation needs. Governor Bob McDonnell, who sponsored the original transportation package, is expected to sign the bill into law within the next month. The new law could generate as much as $3.5 billion of net additional revenue for roads, rail and transit in the state over the next five years, a credit positive.
The legislation makes The Commonwealth of Virginia (Aaa negative) the first state to address stagnant gas tax collections that have been increasingly insufficient to meet transportation funding needs, a problem faced by many states as they, consumers and automakers embrace higher fuel efficiency standards. These forces, combined with the fact that Virginia’s motor fuel tax rate did not adjust to inflation, have translated into flat revenues over the last ten years. … Set at a rate of 17.5 cents per gallon since 1985, over $3.3 billion of gas tax revenues have been used for required maintenance since 2002, reducing Virginia’s ability to fund transportation capacity expansion, congestion mitigation or major reconstruction and rehabilitation projects.
In a press release touting the Moody’s report, Governor Bob McDonnell gave an interesting response (my emphasis): “Today’s report from Moody’s is good news for Virginians. We are working to make Virginia a jobs-magnet and that can’t happen without a modern and well-funded transportation system.”
Bacon’s bottom line: As one who vociferously opposed the tax package, let me be quick to congratulate McDonnell on the positive review. It is a not-insignificant silver lining to an otherwise highly flawed approach to transportation policy. Unfortunately, Moody’s is interested only in the fiscal impact. The firm does not ask the question of interest to taxpayers, whether the money will be wisely spent.
On that topic, the governor’s statement should be a matter of concern. He promoted the tax increase primarily as a congestion-fighting initiative. Now he’s billing it as an economic-development initiative. Does this mean that we’ll be seeing more projects like the Charlottesville Bypass and the U.S. 460 Connector? Is he warming us up for other projects of dubious value or a highly speculative nature?