Recordation Tax Distribution and Other Legislation Impacting Transportation Funding

February 15, 2022

As the General Assembly races towards crossover and the release of the House and Senate versions of the biennial budget, legislation seeking to roll back the 2020 reforms to the Commonwealth Transportation Fund is meeting mixed fates.

HB 978 (Durant) would reestablish the distribution of $20 million of state recordation tax revenue to counties and cities to be used for transportation or public education purposes. The bill was reported and referred to the House Appropriations Committee by the House Finance Committee, 12-9, on February 2. Legislation enacted by the 2020 General Assembly included changes to the distribution of state recordation tax revenues to cities and counties that effectively eliminated $20 million in existing recordation tax revenues distributed to cities and counties. These revenues were instead redirected to support Hampton Roads Regional Transit. This funding was distributed quarterly and could be used by counties and cities for either transportation or public education (K-12) purposes. Prior to the 2020 General Assembly session, a portion of recordation tax revenues had been distributed to localities since 1993 and localities had direct control over the transportation and education use of these funds. VACo supports a solution whereby these funds could be restored to localities while also holding Hampton Roads Transit harmless, as was the case with several member budget amendments during the 2021 session. Delegate Durant has introduced an accompanying budget amendment to achieve this end. In the Senate, SB 363 (Stuart) and SB 512 (Suetterlein) were passed by indefinitely by Senate Finance on a vote of 12-4.

HB 1144 (Webert) and SB 541 (Peake) as introduced, would lower the rate of tax on gasoline and diesel fuel on July 1, 2022 by five centers, from 26.2 cents per gallon to 21.2 cents per gallon on gasoline and from 27 cents per gallon to 20.2 cents per gallon on diesel fuel, the rates that were in effect before July 1, 2021. The bills provide that the rate of tax on gasoline and diesel fuel will return to 26.2 and 27 cents per gallon, respectively, on July 1, 2023, and will be indexed based on the change in the United States Average Consumer Price Index; thereafter, the rate will be indexed annually. If enacted, these bills would likely have an estimated impact of approximately $200 million in reduced revenues to the Commonwealth Transportation fund, as each penny of gas tax roughly equates to $40-$50 million in revenue. HB 1144 was reported by the House Appropriations Committee on a vote of 10-8 and awaits action by the full House. SB 541 was passed by indefinitely by the Senate Finance and Appropriations Committee on a vote of 12-4.

HB 297 (McNamara), would suspend the imposition of any regional fuels tax in the Commonwealth on and after July 1, 2022, but before July 1, 2023. This would likely have a multi-million-dollar impact on the Construction District Grant Program and would impact dedicated revenues for use by localities not located in the regional transportation districts of Northern Virginia, Hampton Roads, Central Virginia, and the I-81 corridor. The bill has been referred to the House Finance Committee, however as this committee is unlikely to meet before crossover, the bill will likely be left in committee, effectively ending its journey towards enactment.

HB 1059 (Cordoza) would suspend the imposition and collection of state and regional taxes on gasoline and diesel fuel until July 1, 2023. This bill would likewise have a multi-million-dollar impact on transportation revenues. The bill was unanimously laid on the table by the House Finance Committee on a vote of 20-0.

Lastly, as reported by VACo elsewhere, the two versions of grocery tax bills SB 451 (Boysko) and HB 90 (McNamara) do not replace the 0.5 percent portion of the tax that is dedicated to the Commonwealth Transportation Fund. This would lead to revenue loss of $186.5 million to $250 million over the next two years, depending on whether the tax is repealed on July 1, as in the House version, or January 1, 2023, in the Senate bill.

VACo Contact: Jeremy R. Bennett

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