Giesen Perspective

Editor's note: This is the third installment of the five part series. To view the first and second installments please click on the following link:

March 19, 2007

March 21, 2007

The Virginia Transportation Reform Act of 2007 - HB 3202

A Collaborative Analysis—Installment # 3

The Regional Packages

DATE: Thursday, March 22, 2007

THE REGIONAL PLANS

Since early in the Warner Administration years, both the executive branch and the legislature of the state have been trying to devise plans to allow the two most congested areas of the state to raise local money to help solve their particular transportation problems. You will recall the voters turned down regional propositions to accomplish “local effort plans” in 2002. These referendums, strongly supported by the popular Governor Warner and some members of the legislature, met even stronger opposition from strange coalitions of voters. The “no tax increase for anything” groups joined with some business groups who want fixes to the transportation problems but feared the tax dollars raised by those imposed in the referendums would sometime in the future be “snatched up by Richmond” to be used in other parts of the state. Even environmental groups were in opposition, suspecting that more money just meant “more” – not necessarily well planned transportation solutions.

Political, business and community leaders from both of these regions, Northern Virginia (NOVA) and the Tidewater/Peninsula area (Hampton Roads), have for years complained (with some justification) that they did not receive their fair share of the transportation taxes which they paid to the state. There were also many in these two areas of the state who felt very deeply that the transportation system was “a state system” and should be dealt with as a state system. These rather intense feelings were expressed at the ballot box.

Northern Virginians voted against the regional referendum (by 55%) that would have raised the sales tax in the area by 1/2 percent, and given their notorious highway transportation system an estimated $5 billion dollar boost over a ten-year period.

Voters in Hampton Roads disliked the prospect of increasing their sales tax by 1 percent even more than their fellow Virginian to the north. They turned down their referendum by a 62% “NO” vote.

So back to the drawing board went those determined to solve the growing transportation crisis in the state. The 2004, 2005, and 2006 General Assemblies tried and failed to come up with a transportation package that could be adopted by both houses. The idea of regional plans for NOVA and Hampton Roads kept being introduced and being turned down. One such bill surfaced late in the extended 2006 session, and seemed to get some traction. The patrons were known for their conservative credentials and had a number of co-patrons who sat on the House Finance Committee which was to consider the bill. After some words “from on high” (the sixth floor of the General Assembly Building – where the leadership offices are located) were circulated to the committee members, the bill died in the Committee on a 5-15 vote. Even some of the co-patrons of the bill voted “no” on the motion to report.

It was almost certain that if any transportation bill was going to be adopted in the 2007 session it would include regional packages for NOVA and Hampton Roads. The Plan, put together by a large segment of the Republican Leadership from both houses, naturally had such propositions. These parts of HB 3202 were modified some as the bill went through the legislative process, but the patrons of the bill never wavered on making certain the concept was viewed as an essential part of the Act.

The Northern Virginia Regional Package

The Northern Virginia Transportation Authority (NVTA) was created in 2002 in anticipation of the passage of the regional sales tax. When that didn’t happen, the Authority continued its existence to help coordinate transportation solution among the Planning District Eight localities (The Counties of Arlington, Fairfax, Loudoun, and Prince William, and Cities of Alexandria, Fairfax, Falls Church, Manassas, and Manassas Park). With this Authority in place, the framers of HB 3202 had an entity to which revenues generated by authorized local taxes could be sent.

With this in mind, the final drafters of the bill put forth five local taxes that could be adopted by the local governments to funnel money into the NVTA for transportation purposes in that region. To give each local government “incentive” to adopt these tax and fee increases authorized by the legislation, language was put into the bill to make certain any locality which did not impose, “…all of the taxes and fees authorized pursuant to (all of the subsections that allow the taxes and fees are listed) then, during such period of time, such county or city shall not be entitled to determine transportation projects and services to be funded with the revenue generated by such taxes and fees and shall not receive any allocation of such revenue.”

In addition to how the money will be raised, the bill spells out specific proposals on how the money will be spent. (See below for a list of both the taxes and fees authorized and the proposed uses.) In the spending of these revenues, the legislators put in a new wrinkle. Showing their concern for cooperation in the region, they put into the Code sections dealing with how NVTA’s funds were to be expended the phrase, “…in consultation with members of the governing bodies of the localities that are imposing such fees and taxes” and then they added, “…and members of the General Assembly representing any locality imposing all of the fees and taxes…”

Since the local governing bodies are the ones who will impose the fees and taxes on their citizens, having NVTA consult with them is reasonable. A number of local elected officials have asked, “Should the members of the General Assembly, who wouldn’t raise fees and taxes on a statewide basis to support the transportation needs of the state, have a say in the spending of locally raised fees and taxes?” The state legislators obviously think they do. One wonders, what does the Governor think?

In fact, the legislators aren’t too confident of the local elected officials. Forty percent of the funds raised by these new taxes will be distributed to the localities imposing all of the fees and taxes and 60% of these funds, “…shall be used solely for urban and secondary road construction and improvements or for public transportation purposes in consultation with members of the General Assembly representing any locality which receives such revenue.”

More about this new concept where the GA chooses to micro manage the transportation system in the fourth installment of our analysis of HB 3202.

In the NOVA Regional Plan—Where’s the Beef?

HB 3202 provides NOVA the beef IF the local government is willing to raise “fees and taxes” by the following methods:

1. Local rental car impact fees can be increased by 2%;

2. The commercial real estate assessments may be increased by 25 cents per $100 in valuation;

3. Initial driver’s license fees can go up $100 exclusive of teens;

4. A “congestion relief fee” of 40 cents per $100 on the value of a deed or other transference instrument (a grantors tax by any other name!); and,

5. A 2% transient occupancy tax (this in addition to any existing transient occupancy tax the locality may be collecting.

These five revenue sources are estimated to raise $ 215.0 million the first year (FY08), $409.6 the second year (FY09), and steadily increase to $425.4 million by FY13. The accuracy of some of these estimates has been questioned by the people watching the components that affect the NOVA region.

How the Fund Are To Be Spent.

The bill denotes how the funds will be used. Forty percent will first go the participating localities with the remaining 60% going directly to NVTA. The first priority from the later portion will be to pay the debt service of any bonds that the NVTA may issue. The legislation adds wording to the present law which allows “the authority to issue bonds” stating, “The Authority may issue bonds or other debt in such amounts as it deems appropriate. The bonds may be supported by any funds available including those from tolls imposed and collected as authorized under Section 15.2-4840.” Oh yes, HB 3202 permits NVTA to impose tolls on any new or reconstructed facility.

The legislation states that the next $50 million in revenue from NVTA’s share will go annually to the Washington Metro Area Transit Authority (WMATA). The Virginia Rail Express will receive the next $25 million then the remainder of the funds will be used for transportation projects authorized by NVTA in consultation with VDOT, in addition to the local governments and the members of the General Assembly.

How Do Local Officials Like This Plan?

In comments drafted for the Governor’s Northern Virginia listening session, NVTA expressed its appreciation to the GA for its efforts to provide statewide transportation revenues and the authority for NOVA jurisdictions to raise new transportation revenues. Then came the zinger, “…however, the bill (HB 3202) as passed is seriously flawed, and requires significant modifications if it is to be implemented.”

The comments then list nine major areas of the bill that NVTA would like to see modified. These include changing language making the planning and construction of the secondary road system the responsibility of a Northern Virginia county by virtue of the county adopting the new NOVA taxes and fees; modifying the provisions relating to the adopting of new standards for accepting secondary roads for maintenance to require NVTA’s concurrence with the new standards; putting all of the statewide transportation revenues including bonds into the Transportation Trust Fund (TTF) formula rather than depositing some into the Highway Maintenance and Operating Fund (see installment #2 and the explanation of the differences between the HMOF and the TTF); and, deleting the language requiring NVTA and local governments to “consult” with members of the GA in the selection of projects to be funded .

There are several other comments concerning the major portions of the bill, and the Authority gave a list of some twenty specific amendment recommendations to the Governor. These, according to NVTA would help make the bill more workable. The presenters of these comments and recommended amendments emphasized that without most of these changes, the Northern Virginia counties “will not support the bill.” Without the support and subsequent actions from the local governing bodies of the jurisdictions involved, a major part of HB 3202 would go by the boards.

The Hampton Roads Regional Package

The Hampton Roads area does not currently have an Authority like NVTA. So first, HB 3202 would enable the local governments to create the Hampton Roads Transportation Authority (HRTA). This authority would have one member of the local governing body of each of the three counties (Isle of Wright, James City and York) and the nine cities (Chesapeake, Hampton, Newport News, Norfolk, Poquoson, Portsmouth, Suffolk, Virginia Beach, and Williamsburg) in the Hampton Roads area as a voting member of the authority provided that locality imposes all of the fees and taxes allowed by the bill. Two members of the House of Delegates and one member of the State Senate would be voting members of the Authority, and there would be three ex-officio members without vote-- a Commonwealth Transportation Board member from the area, the Commonwealth’s Transportation Commssioner, and the Director of the Virginia Dept. of Rail and Public Transportation.

To avoid extra administrative costs, the legislators designated the Hampton Roads Planning District Commission (HRPDC) as the agency that would provide staff and other facilities to the Authority until “such time as the Authority is fully established and functioning.”

As in the NOVA regional plan, local governments would be required to impose all of the fees and taxes authorized by HB 3202. The difference is that if 7 of the 12 localities representing at least 50% of the population in Hampton Roads “opt in” (vote to create and join) the Authority, it will be formed. The implications of the bill are that if that happens then all 12 localities will have to become a member of the authority. This condition, however, is not clear in the bill.

The language which establishes the 7 of 12 requirement is in an enactment clause at the end of the bill. It does not state whether the action of seven localities can require the other five to “impose all of the fees and taxes authorized by the act.” The HRPDC, which issued an explanation of HB 3202 to all of the localities in its planning district, states there is the need for a technical amendment to clarify this provision of the bill. The Governor has, of course, been so advised.

The Proposed Sources of Revenue for the Hampton Roads Region

HB 3202 spells out eight different fees and taxes that the localities in the Hampton Roads area may enact to raise local funds to send to the Hampton Roads Transportation Authority (HRTA) once it is created. The legislation as it now stands supposes the HRTA will be created by Dec. 31, 2007 and the new fees and taxes will be levied by each of the localities starting on Jan. 1, 2008. Following are a list of the taxes and anticipated revenue in millions from FY09 to FY13:

1. A 2% increase in the local rental impact fee--$3.5 to $3.9;

2. A 10 cents per $100 value on commercial real estate assessments--$20.3 annually for the next six years;

3. A 1% initial vehicle registration fee (no exemption is stated for teens)--$41.2 to $43.6;

4. A congestion relief fee (it’s still a grantors tax in Hampton Roads just like it is in NOVA) of 40 cents per $100 value to be collected by the seller--$49.1 to $52.7;

5. An additional annual vehicle license fee of $10--$13.3 annually for the next six years;

6. An additional $10 annual motor vehicle inspection fee--$12.3 for the next six years;

7. The removal of the sales and use tax exemption from auto repairs (essentially this imposes a 5% sales and use tax on all auto repairs)--$21.7 for the next six years; and,

8. A regional 2% gas tax--$38.6 again this expectation is extended for the next six years.

With a straight-line extension of five of these eight revenue sources, it would appear the forecasted revenue is understated. The prognosticators may have figured there would be fewer vehicles and fewer miles driven with the higher prices these fees and taxes would impose on the driving public. Regardless, these are the figures being used resulting in a forecast of $88.1 million for the six months of collections in FY08 and $200.0 million plus for the next six years.

The Proposed Uses of the Funds

The developers of HB 3202 struggled to construct a bill that would be acceptable to a majority of legislators. That’s how the system works. So for the use of these regional funds HB 3202 mandates that, “The Authority shall only undertake those transportation projects that are currently included in the federally mandated 2030 Regional Transportation Plan approved by the Metropolitan Planning Organization…” The bill then divides the projects into two phases and lists the projects to be undertaken in each phase.

For those who drive in congested Hampton Roads or maybe live there, here’s a brief list of the projects. Phase 1 will include: Rt. 460 upgrade, I-64 Southside widening, Downtown Tunnel, Midtown Tunnel/NLK Extension, Southeastern Parkway/Dominion Blvd., I-664 widening in Newport News, Southside and Monitor Merrimac Tunnel. Then in Phase 2 the new Authority would have to tackle I-64 to the Intermodal Connector, I-564 to Monitor-Merrimac Tunnel and the Craney Island Connector.

There is every indication from previous estimates on the cost of these projects that to come anywhere close to completing them by 2030 additional streams of funding from some other sources will be necessary. Those kinds of speculations were not discussed during the debate on this bill, but concerns have been expressed in other meetings.

WHAT’S AROUND THE CORNER?

The Governor has listened to the local officials from NOVA and Hampton Roads as well as others around the Commonwealth. He has indicated he has already approved over 100 “technical amendments” to HB 3202 (as of 3/21 pm) and that he “has fixed the regional plans.” Of course, he has revealed no details. Those are not expected until Monday the 26^th. As one can see from the discussions of this rather complicated bill, his Excellency does have a formidable task in front of him.

As far as the next installments of these collaborative GPs, stay tuned! And good weekend reading before we all receive the anticipated and “very different” transportation bill from the Governor on Monday, probably late.

Arthur R. Giesen, Jr., fondly known as Pete, served in the Virginia House of Delegates for over 30 years. He represented the citizens of the Central Shenandoah Valley surviving four different district realignments. During his career he represented Augusta, Bath, Highland and part of Rockingham County and the Cities of Staunton and Waynesboro.

Following his career as an elected official, Pete assisted Lt. Governor John H. Hager as his Chief of Staff.

Pete now keeps an eye on Virginia government and assists many clients with his unique perspective on the workings of the Virginia General Assembly and its relationship with the other branches of state government.

THE GIESEN PERSPECTIVE