VIRGINIA GOVERNOR MCDONNELL'S ROAD FUNDING PROPOSAL

 

Here is an op-ed that was published today in The Virginia Gazette, a Tribune Paper. I should note that Gov. McDonnell is a good governor and gets national attention for being so. I've known  him for 20+ years, but I cannot simply support policy reflexively. I want to support his initiatives, but I have been on the opposing side of the issues mentioned up front in this op-ed and now on the new tax plan.

JAMES CITY COUNTY VIRGINIA:

Gov. Bob McDonnell's proposal to fund roads with increased sales tax while canceling the gas tax is as incomprehensible as previous proposals.

The first proposal — to sell the ABC operations for a fraction of their value for incremental road funding, while losing $47 million annually from the general fund — was canceled when the true economics were revealed. The second proposal — to sell our crown jewel ports to such as Goldman-Sachs — was dropped, partly because of arguments that the ports would end up in foreign hands as Goldman-Sachs sold them to get its targeted ROI. Still being “negotiated” is the leasing of ports, again for what is inadequate compensation compounded by national security worries. Leasing the ports was to be a “done deal” in August 2012, but is still pending after critical discussions, some from here. It seems the result may be a restructuring of Virginia International Terminals, a company formed by Virginia to operate ports. That’s a necessary change, but it won't fund roads. And ports shouldn't.

Before critiquing the governor's taxing proposal it is necessary and fair to acknowledge that he operates with a handicap. The transportation funding formula is a province of the legislators. It is woefully out of date, yet they refuse to modernize it. The formula does not give priority to funding roads in areas of critical need. It is used to keep certain legislators in power. So it is that we have beautiful roads to The Homestead, a 4-lane to thinly populated Lawrenceville and lightly traveled 895 south of Richmond. It's why perfectly good Route156 along Jordan's Point golf course to Route 10 was recently totally milled and repaved. Route 5 was recently repaved from Midlothian to Williamsburg, with stretches of rough, noisy slurry replacing smooth surfaces. It reminds me of rural Mexico where the ruling Institutional Revolutionary Party (PRI) stayed in power for 70 years, in part by paving for votes. But, that's Mexico.

The governor's proposal to drop the gas tax is inexplicable. It abrogates the tenet that “users pay.” Reports I've seen suggest that revenue from the 0.8% increased sales tax and a $15 vehicle registration will fall short of making up the loss in gas tax receipts, a net loss of annual revenue. It's reported that the governor depends on a $1 billion windfall from Internet taxes. But, federal law does not yet allow it. Multiple billions of dollars ($8B-12B) are needed to bring roads up to standard. How does this plan provide it?

Thousands of out-of-state vehicles travel Virginia's roads daily, especially I-95, I-81 and I-85. I know from experience that drivers wait to buy fuel in Virginia. Gasoline prices in North Carolina average 22-cents per gallon more than in Virginia. The Washington/Maryland area is similar. These travelers don't shop in Virginia to pay sales tax. They will use our roads free! And don't bank on lower gas prices.

How will the sales tax be apportioned? Why would legislators modify the funding formula for the sales tax but not for gas taxes? How will the sales tax be allocated for roads from the general fund when they aren't now? Who remembers that the Mark Warner's tax increase was supposed to be spent in large part “to ease gridlock” but was used to expand general spending from $23.5 billion in 2002 to $39 billion in 2011. In spite of that, Gov. Kaine proposed a sales tax increase, ostensibly for transportation. McDonnell opposed that.

Even if one accepts a sales tax increase to fund roads, canceling the gas tax is not easily understood. Perhaps McDonnell should oppose his own plan. And hire new advisers.