Giesen Perspective

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

The Virginia Transportation Reform Act of 2007 - HB 3202

A Collaborative Analysis—Installment # 5

A Brief History—How’d We Get Here;

How’d It Come to Happen

DATE: Saturday, March 24, 2007

HOW’D WE GET HERE?

The Code of Virginia

The Code spells out that the maintenance of our state highways—interstates, primaries and secondary roads—have first claim on funds allocated to VDOT. Our early legislators decided you should protect what you have built before you try to build more. Most people with whom one talks seem to agree with this philosophy.

The highway system followed this direction religiously, and until 1986, all revenues designated for our highway system went into a single fund, the Highway Maintenance and Operating Fund (HMOF). From this fund the highway department (later named The Virginia Department of Transportation–VDOT) budgeted first the funds needed for maintenance and then allocated construction funds to the various systems–primary, secondary and urban under a prescribed formula.

The Last Major “Fix” For Transportation

Then came the 1986 Special Session of the General Assembly (GA). Under legislation passed by this Special Session, called by then Governor Jerry Baliles, a new Transportation Trust Fund (TTF) was created The new and increased taxes and fees enacted by this Special Session of the GA (½% addition to the sales and use tax; a $3.00 increase in the motor vehicles license fee; a 1% increase in the vehicle titling tax; some increases on commercial vehicle license fees–depending on the weight of the vehicle; and a 2.5 cent per gal. increase in the gasoline tax) were directed to go into the TTF. From these funds 78.7% were directed to go for highway construction; 14.7% for mass transit; 4.2% for ports; and, 2.4% to airports.

The Interaction of the Two Funds

The revenues from the “old taxes and fees” designated for transportation–i.e. those enacted prior to 1986–were put into the HMOF. VDOT covered highway maintenance, its operation expenses, and some locally allocated construction costs from this fund. If there was any balance in the HMOF after these costs were met, the “extra” money was transferred to the TTF for the major construction purposes of the highway system. The highway official referred to this as their “crossover!” None of the transferred dollars were allocated to the other means of transportation as designated in the 1986 legislation. The Code also provides, however, if the maintenance costs exceed the budget and the revenue available in the HMOF, then the “crossover of funds” will flow in the opposite direction.

The Governor and the legislators in the 1986 Special Session envisioned the HMOF funding part of the highway construction expenditures for “at least the next twenty years!” This was the case for the first 16 years of the existence of the two funds in under VDOT. For instance, in FY91 over $50 million went from the HMOF to the TTF. This varied over the next ten years from a high of $127 million in FY96 to a low of $4 million in FY01.

The Inflation Factor

In late FY 02, things began to change. Costs of all types of material used in highway maintenance and construction “shot up” that year and have continued to increase ever since.

The prices for structural steel have doubled over the last five years. In fact, during his research on this, Pete was on the phone with friend who happens to be an executive of a structural steel fabricating firm. While they were discussing this “crazy steel market” the friend received a call on his other phone from one of his steel suppliers. The supplier wanted to give him a “heads up” that he should buy any heavy steel beams that he needed for fabrication in the next three months since the price for this type of structural steel was going to increase another 6.9% in the next few days.

Inquiries to paving contractors proved the same “inflation” has occurred with asphalt and concrete, “when you can get it.” Many steel fabricators and paving contractors are in fact on “allocation” from their material suppliers. These “independent checks’ have confirmed the information which VDOT and administrative officials have been telling the legislators.

Because of these two conditions--the maintenance of highways, streets, bridges, interstates, etc. having first claim on revenue flowing into transportation funds; and the rapid increase in highway maintenance and construction costs–by 2003 VDOT had to take money from the TTF and transfer it into the HMOF to keep up with its required first priority–the maintenance of our highways. In FY 03 this amounted to a drain on construction funds of $147 million. By FY 05 this figure had risen to $244.6 million and is forecasted to be $286 million this FY. The department’s six-year plan anticipates that some $473 million will need to be transferred from the construction part of the TTF into the HMOF for maintenance in FY 12.

To illustrate this condition in another way, consider the fact that from FY 91 until FY06, VDOT’s expenditures from state funds for highway systems’ maintenance have increased by 127.8% and the “local maintenance payments” (financial assistance to localities–cities, towns, and Arlington and Henrico, the two counties that construct and maintain their own highway systems) have increased 137.6%. In the same time frame, state highway systems construction expenditures from state funds decreased by 15.1%.

HB 3202 and Its Impact

The shortage of maintenance funds would be alleviated somewhat if HB 3202 becomes law. However, as one can see from earlier installments of the GP, only about $205 million new dollars are forecasted to be allocate to the HMOF in FY 12

The legislator authors of HB 3202 did not completely ignore the maintenance needs of the transportation system. They did put some funds into HMOF, as noted. There are a number of local officials from urban areas who are unhappy with this approach. They note the needs of mass transit systems, which, of course, do help alleviate vehicle traffic on some of our more congested roads. Remember, money going directly to the HMOF is not split with other transportation systems. These funds are used only by the highway system.

In addition and as noted under the analysis of the land reforms proposed under this bill, large counties with populations of over 90,000 in certain areas of the state will be required to maintain some of their own roads, those within the areas designated as Urban Transportation Service Districts. This is intended to relieve some of the maintenance costs for urban streets and roads from VDOT shifting it to the urban counties.

Many that have studied the total transportation problem have expressed their concern that HB 3202 does not meet the growing maintenance discrepancy between resources and needs.

A SOLUTION IN THE MAKING – HB3202

Back in the fall, most political prognosticators in Virginia were saying after the extended debate over transportation during the Regular and Special 2006 sessions of the General Assembly, there would not be any progress in election year 2007. The legislators gave the on-lookers plenty of indications that this would be the case. In the fall retreats of the House Appropriations and Senate Finance Committees, there were no staff briefings on transportation. This was in contrast to the 2005 retreats when the transportation crisis was the main topic of discussion.

In many of his speeches around the state Governor Kaine was “keeping the pressure on” with his emphasis on the need for a transportation fix. But there seemed to be little reaction from the Republican leadership or, for that matter, from the rank and file Republican members. However, there was action taking place -- away from the “glare of the cameras” as some would say. Many of the legislative leaders of the GOP from both houses were conscious of the mood of the voters of Virginia. They recognized the citizens wanted a solution to the transportation problems of the state, particularly in the congested northern and tidewater parts of the state. The question was, “How was the inaction of the past several sessions of the General Assembly playing politically with the populous?”

Some independent, professional polls revealed how the people felt. The citizens, and in particular the voters, wanted action. The public definitely gave most of the blame for the past deadlocks on a transportation fix to the legislature and not to the executive branch. In addition, the voters were clearly directing their blame toward the Republican legislators, after all, they were in charge. It is fascinating that sometimes politicians, like that stubborn mule my dad use to own, have to be hit between the eyes with a two-by-four before the public gets their attention. The main thing the Republican leadership learned from their study of the “peoples’ poll” was that “safe Republican seat” from both houses were no longer “safe” for the Republican incumbents. Majorities in both houses were in jeopardy. One of the major “facts” in politics came back to all of those in leadership roles -- you have to win elections before you can govern!

So some of the leadership took action. Leaders from both the House and the Senate met quietly and conducted some intense and eventually successful negotiations. It is reliably reported that the discussions were guided by the resolution of all to reach an agreement everyone in the group could support. Each side recognized that compromises would have to be made if such a plan was going to be developed. It has been suggested that some of the senators and delegates spent more than 200 hours debating various parts of the final bill, particularly how the statewide revenue was going to be raised. But by starting with the issues on which they could agree and working together to stay away from the “no way” issue (the House members would not agree to a statewide general tax increase), until they reached consensus on the major issues (everyone knew there had to be self-help components for the congested regions of the state), a comprehensive plan was reached. Considering the different positions with which these “negotiators” began, it is a real tribute to the mediation skills of those involved that an agreement was reached.

HB 3202 Emerges

When HB 3202 (and its senate counterparts) finally emerged most of those who were part of the negotiating group admitted it “wasn’t perfect,” but that it was a very fragile series of compromises. But they all felt it was a solution that could be adopted by the General Assembly and one that would have significant impact on the transportation problems of the state.

One interesting fact of HB 3202: the chief patron is the Speaker of the House. A fact not lost on the delegates and on the capital watchers- Speakers rarely patron legislation. They may be the power behind certain bills but their names are rarely on the first line of the bill. In this case, Speaker William Howell’s name was “front and center.”

Another interesting fact about the negotiating “team” who authored the bill was the absence in the core group of some of those who had been most prominent in the transportation debates of the past several years. Sometimes it is difficult for a person who is strongly wedded to a particular position to “compromise” that position no matter what the final results may be without a compromise. Thus the core group, while keeping their party colleagues informed of their deliberations, did not involve them in the rough and tumble of the actual discussions. The remarkable fact of these negotiations is there was no “leak” until the final product was ready for introduction.

The Legislative Journey of HB 3202

HB 3202 was not received with open arms by all the legislators. The Democrat members of the GA immediately began to attack the bill as “politically motivated legislation.” (Doesn’t most major legislation have some political motivation behind it?) They stressed the point that it provided for the state to borrow money for transportation and then pay it back with future dollars that should go into the general fund. (This has been a point emphasized by the Governor in his comments on a Transportation Solution. Yet he included some $500 million of GF for transportation projects in his introduced Budget Bill. We explored this in some detail in an earlier installment). There were also complaints that the minority party had been left out of the negotiations which crafted The Plan. (Isn’t that strange? Thinking back to 1986, I really don’t remember the minority party in the GA at that time being involved in the formation of the legislation introduced in that year’s Transportation Special Session.)

Some objections to the approaches taken by HB 3202 were also raised by some senior Republican Senators such as John Chichester and Charles Hawkins. Both of these long time serving Republicans had in the past spoken out strongly about the need for “new dedicated reliable sources of revenue for the transportation system.” They saw the use of bonds repaid by GF sources as bad policy. The drafters of the bill did give consideration to this concern by these important members of the Senate Finance Committee. HB 3202, as noted in earlier GPs, does specify that the recordation taxes to be used for this purpose are to be designated for this use and are to be transferred directly into the Commonwealth Transportation Capital Projects Fund upon collection.

The supporters of The Plan maneuvered the bill through its legislative journey with remarkable skill. For instance, when the bill passed the House and went to the Senate, the Majority Leader and the Majority Floor Leader, both of whom had been in the core group of negotiators who fashioned the bill, made certain HB 3202 went first to the more friendly Transportation Committee rather than the Senate Finance Committee (SFC.). Later a very slightly amended bill was re-referred to the SFC. Then SFC, by a 12-5 vote, adopted a substitute with a vehicle registration fee increase of $150 to raise the money for the repayment of the bonds. (The SFC had apparently recognized to get any transportation bill in this session the bond portion would have to remain.) This passed the Senate and was sent back to the House.

Naturally, as everyone expected, the House rejected the Senate substitute and requested a committee of conference. Now the original action of the Senate in sending the bill first to the Transportation Committee came into play. By the Rules of the Senate, the chairperson of the committee to which a bill is first referred appoints the members of a conference committee, if such is needed. Thus, Senator Marty Williams, instead of Senator John Chichester, appointed senators who had a great interest in making certain the Conference Committee reported a “compromise bill” which was very close to the original HB 3202. This occurred and the conference report came back to the full Senate. It was then debated on the Senate floor and in a surprise vote, four members of the SFC, who had voted differently during the first consideration of the bill by the committee, voted to support the conference report. Most emphasize they recognized the bill had a number of flaws but that it was the only transportation bill left and they were voting for the conference report so the Governor would have an opportunity to fix it.

The Governor heard their words and those of the local officials to whom he has been “listening” since the bill reached his desk. As you know from previous installments, the message from local officials has been – “Don’t veto the bill, fix it!”

As we all know, the big question now is how will he fix HB 3202 and will his amendments be accepted by the General Assembly.

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