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Key transportation legislation updates

Signature legislation supported by Governor Ralph Northam to make major changes to the state’s transportation funding system survived conference committee and was approved by both the House and Senate. HB 1414 (Filler-Corn)/SB 890 (Saslaw) were filed by the Speaker of the House and Majority Leader of the Senate and would generate an estimated $700 million in additional transportation funding revenue over the biennium primarily raised through increases to fuel taxes.

As previously reported, the legislation seeks to address decreases or declines in revenues collected from the existing gas tax even as the overall vehicle miles traveled (VMT) on Virginia roadways increases. Analysis contracted by the Virginia Department of Transportation forecasts that unless changes are made, gas tax collections are expected to be reduced by 31% by 2030. These reductions are primarily to be caused by the increased proliferation of electric and fuel-efficient vehicles. When including higher regional gas taxes paid by Northern Virginia and Hampton Roads, Virginia currently ranks as the state with the ninth lowest gas tax. Gas and diesel taxes currently represent the third largest source of revenue into the Commonwealth Transportation Trust Fund after retail sales tax and motor vehicle sales tax.

The conference report legislation raises the Commonwealth’s gas tax 5 cents per gallon per year for two years beginning on July 1, 2020, and after July 1, 2022, adjusts the rate to the United States Average Consumer Price Index for all items, all urban consumers (CPI-U), which is a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services, published by the U.S. Bureau of Labor Statistics for the U.S. Department of Labor. The legislation similarly raises diesel fuel taxes to 27 cents per gallon by July 1, 2021, and pegs it to CPI-U. This represents a compromise as the House originally proposed raising fuel taxes 4 cents per gallon per year for three years, while the Senate only proposed doing the same increase for two years.

The legislation also imposes a 7.6 cent per gallon tax on gas distributors in any County or City that currently does not have a regional fuel tax such as the ones existing in Northern Virginia, Hampton Roads, and the I-81 corridor effective July 1, 2021, and also pegs it to CPI-U. This incorporates language from SB 452 (Edwards), which was left in the House Appropriations Committee.

The conference report legislation also creates a new highway use fee on fuel-efficient vehicles. This new fee would require fuel-efficient vehicles to pay 85 percent of the difference between the fuel tax paid by an average vehicle and what the fuel-efficient vehicle pays. The fee would be collected at the time of vehicle registration. The bills also would create a mileage-based user fee program to allow owners of fuel-efficient vehicles to voluntarily pay a mileage-based fee in lieu of the highway use fee. These fees are meant to provide equity in that fuel-efficient vehicles have the same impact on Virginia roadways as traditional vehicles but pay less into the maintenance of the system through reduced gasoline consumption.

VACo supports expedited action to address the causes for declining growth in transportation revenues and to develop recommendations to grow revenue over time to meet increasing demands for new construction and maintenance for existing transportation infrastructure.

The conference report legislation also reduces the state’s annual vehicle registration fee for motor vehicles by $10. This is compromise language which is $10 less than the proposal from the original House version and $10 more than the Senate’s proposal. Most importantly, the legislation maintains existing local authority to levy fees up to the current rate of $40.75 for vehicles weighing below 4,000 pounds. As previously written, this is a win for local governments.

The conference report legislation also raises the Transient Occupancy Tax (TOT) in Northern Virginia from 2 percent to 3 percent, effective July 1, 2020. This is expected to yield approximately $30 million funds for transportation projects in that region. The legislation also imposes a 10 cent Grantor’s tax in Northern Virginia directed to the Northern Virginia Transportation Authority for congestion relief, while also lowering the existing regional transportation improvement fee from the 15 cent Grantor’s tax to 10 cents.

The conference report legislation also maintains language creating a new entity known as the Virginia Passenger Rail Authority, whose purpose is to develop, maintain, and improve passenger rail facilities and increase passenger rail capacity in the Commonwealth, among other duties. This proposed Authority would be integral to the Governor Northam’s $3.7 billion proposal between the Commonwealth and CSX to build a new Long Bridge across the Potomac River to improve rail capacity at an existing freight and passenger choke point as well the acquisition of 350 miles of railroad right-of-way and 225 miles of track to expand rail service capacity across the state. The Board of Directors of the Authority was expanded to include 15 members. The Authority would be able to issue bonds and acquire rights-of-way, among other authorities.

The conference report legislation also streamlines the existing complicated transportation funding system by diverting all existing and proposed revenues into a single account known as the Commonwealth Transportation Fund. With exception of certain set asides, 51 percent of transportation revenues would be allocated to the Highway Maintenance and Operating Fund (HMOF) used for maintenance and 49 percent would be allocated to the Transportation Trust Fund (TTF) used for construction. Of the funds available annually to the TTF, 53 percent are to be used for construction, 23 percent for Mass Transit, 7.5 percent for Rail, 2.5 percent for Ports, 1.5 percent for Aviation, 1 percent for Space Flight, 10.5 percent for priority transportation projects, and 1 percent for the Department of Motor Vehicles.

Additional Legislation
Several bills addressed transportation safety concerns. HB 874 (Bourne) / SB 160 (Surovell) were signed by Governor Northam and prohibit the use of handheld personal communications devices while driving a motor vehicle with certain exceptions. HB 1439 (Jones) / SB 907 (Lucas) were companion language to HB 1414 /SB 890, and originally contained several safety provisions also contained in HB 1414.  Disagreements over the scope of the legislation sent it to a conference committee where it was amended to mandate that all passengers of a motor vehicle wear seatbelts, not just passengers in the front seat and allow local governing bodies to lower speed limits to 15 miles per hour on highways within business or residential districts within their jurisdiction, however the conference report was rejected by the Senate. Proposals to change the state vehicle inspection requirement did not progress.

HB 1541 (McQuinn) as previously reported, this legislation creates the Central Virginia Transportation Authority, composed of the Counties and Cities located in Planning District 15 (Goochland, Powhatan, Chesterfield/Colonial Heights, Henrico, Hanover, New Kent, Charles City, Richmond City). The authority will administer transportation funding generated through the imposition of an additional regional 0.7 percent sales and use tax and 7.6 cent per gallon gas tax and 7.7 cents per gallon diesel fuel tax pegged to CPI-U. This authority follows similar authorities created in Northern Virginia and Hampton Roads. VACo supports this bill, which passed the House and Senate and awaits action from Governor Northam.

VACo Contact: Jeremy R. Bennett

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