By Amanda Iacone
Virginia Statehouse News

RICHMOND — Virginia isn’t the only state struggling with paying for transportation maintenance and construction projects.

Yet Virginia has one of the lowest gasoline taxes in the country and is one of a few states to provide most local road maintenance.

The state faces a backlog worth billions of dollars for road, bridge, tunnel and transit projects. And the state has not seen a new infusion of revenue to pay for such projects since the Legislature raised the gas tax to its current 17.5 cents a gallon in 1986.

Virginia lawmakers floated a handful of bills this session to increase the gas tax as a way to provide more money for those projects. None of the measures passed.

Lawmakers overwhelmingly supported Gov. Bob McDonnell’s $4 billion transportation plan, which he touted as the first significant cash infusion into transportation in decades without raising taxes.

McDonnell opposes any increase in the gas tax and said that other innovative sources of funding can be found instead to provide sustainable revenue for road and infrastructure projects, his spokesman, Jeff Caldwell, said in an e-mail.

The plan relies on the state borrowing more money, more quickly than planned. A portion of those loans would be repaid using federal transportation dollars the state regularly receives.

The ability to borrow money cheaply and to take advantage of low construction costs prompted legislators to support the initiative. Still, many lawmakers said they worry that leveraging so much debt at one time will limit the state’s ability to borrow for years to come.

Democrats argue that the state needs to increase its gas tax to provide that revenue and filed a handful of bills this session that would have increased the tax or tied it to the rate of inflation among other proposals.

Republicans argued that now is not the time to raise a tax that hurts low- and middle-income Virginians. And they say increasing the tax would slow the economic recovery.

Gassing up

Virginia’s gas tax is the 37th lowest in the nation, according to the American Petroleum Institute. Neighboring states of North Carolina and West Virginia have higher gas taxes and similarly maintain most local roads. Maryland also has a higher tax than Virginia.

Many states also have additional taxes applied to gasoline sales. Virginia charges an extra 2.2 cents per gallon to pay for the inspection of tanks. Heavily populated states like New York, California and Illinois charge 12 to 39 cents per gallon in addition to the state gas tax, according to an API report.

Some states put the gas tax revenue into their general funds, where it could be used to pay for education or Medicaid, depending on the priorities of the legislature. New Jersey has one of the lowest taxes on gas in the nation, but the state generates so much revenue from its heavily traveled toll road it doesn’t need a higher rate, said Ray Dougher, a senior economist with the American Petroleum Institute.

North Carolina has a 32.5 cent tax, which is the third highest in the nation.

North Carolina uses its gas tax revenue to pay for state and county roads. A portion of the revenue also provides some funding to city-maintained roads. The state also uses vehicle registration and licensing fees plus a highway privilege tax to pay for transportation, said Burt Tasaico with the North Carolina Department of Transportation.

Every six months, the state’s Department of Revenue adjusts the tax based on the wholesale price of gas.

Maryland, however, relies on its legislature to make changes to the tax, like Virginia. And lawmakers are currently considering whether to increase its 23.5 cent tax for the first time since 1992, said Jack Cahalan, spokesman for the Maryland Department of Transportation.

A portion of Maryland’s highway revenue also is used to provide some funding for local road and streets, but in recent years lawmakers have drastically reduced that. A transportation fund study currently under way is looking at ways to restore that assistance, Cahalan said.

According to the Federal Highway Administration, Virginia and North Carolina own and maintain more than three-fourths of all roads in their states. In comparison, Maryland only directly maintains about 21 percent of all roads in the state.

Moving forward

The taxes collected per gallon don’t pay for as much as they once did. Asphalt, construction wages and the price of land have increased since 1986. And the miles Virginians travel also increased since then, said Sen. Roscoe Reynolds, D-Martinsville.

While there has been a need for more revenue for some time, lawmakers haven’t had the political will to approve an increase in the gas tax, Reynolds said.

Reynolds said he doesn’t believe that an increase would have much effect on the price drivers pay at the pump. Despite having a much higher gas tax, prices are not that much different across the border than they are in his district, a rural area that benefits from the cheapest gas in the state, Reynolds said.

North Carolina roads and drivers benefit from the revenue, but they don’t see it at the pump, he argued.

But Delegate Charles Poindexter, R-Glade Hill, said rural residents drive farther than urban drivers, and the majority of their gas tax dollars are sent to northern Virginia or the Tidewater areas, which have the greatest demand for construction and maintenance due to congestion. Any increase in the tax gas would disproportionately hurt his constituents and rural small businesses, Poindexter said.

“It’s an advantage to be on the low side on the gas tax,” he said.

The intersection of interstates 77 and 81 in far southwest Virginia is a hub of hotels, restaurants and gas stations that attract tourists and other motorist because of the cheaper gas available before they drive into neighboring states, he said.

Poindexter said Democrats erroneously focus on the gas tax because it won’t generate any revenue from electric cars, natural gas vehicles or other fuel sources such as hydrogen. Lawmakers should take a broader look at the services the state provides, including whether to continue paying for local roads, he said.

“Does Virginia want to keep operating the way we started operating in 1932, or do we want to look at a new paradigm?” Poindexter asked.

Localities should partner with the state to pay for road maintenance, he said.

Although developers typically pay to install the roads through new development, the state picks up the tab for patching potholes, repaving and snow removal. And localities benefit from the additional property tax and sales revenue those homes or businesses generate, Poindexter said.

The General Assembly has in the past discussed whether this is the best way to pay for maintenance. As counties grow in population, they add more and more roads to the state’s system, said Neal Menkes, director of fiscal policy for the Virginia Municipal League.

The Virginia Department of Transportation today pays to maintain local roads in every county but Arlington and Henrico. Cities and towns pay for their own maintenance, but the state reimburses them for some of those costs, said Joe Vagi, spokesman for the department.

Most gas tax revenue pays for highway maintenance, operations and administrations. A small portion goes into the transportation trust fund to pay for new construction and to support other modes of transportation such as airports, ports and mass transit, Vagi said.

Other funding for VDOT comes from the federal government, state gas tax, state motor vehicles sales tax, state motor vehicle license fees and 0.5 percent of the state general sales tax, Vagi said.