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Gov.’s Plan Would Fund Road Budget With Automobile-Related Taxes, Fees

Wed February 01, 2006 - Southeast Edition
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RICHMOND, VA (AP) The price of buying a car, titling and insuring it and the fines for driving it too fast would increase, yielding $3.7 billion and nearly doubling state outlays for roads and public transit the next four years under Gov. Timothy M. Kaine’s transportation plan.

The new Democratic governor made his bundle of reforms public Jan. 20 as Senate leaders announced their own $4 billion, four-year plan that would increase the taxes on fuel and even on car repair bills.

“I believe it meets the objective of being a long-term package that is not a short-term fix, that we can look people in the eye and say if we do this, if we have the courage to do this, we can fix the problems that have bedeviled us for a decade and we can fix them for a long time,” Kaine said.

In addition to his funding plan, Kaine will ask lawmakers for a “lock box” to prevent them from diverting Transportation Trust Fund money to non-transportation uses, allow localities to reject rezoning requests for development projects that would overwhelm their roads and streets and make greater use of public-private roadbuilding ventures and tolling to pay for new or enhanced roadways.

The idea, Kaine said, is to have those who use the roads most pay the greatest share of the costs.

“I’m trying to fund this out of user fees, which I think is fair. It’s fair to charge the users of the system, and there’s no service better than transportation where you can actually assess the costs against the users in an administratively easy way,” Kaine said.

The governor’s and the Senate’s packages are a blend of fee, fine and tax increases, and the tax boosts will face a hostile reception in the House of Delegates, where dominant Republicans still seethe over a $1.4-billion tax increase in 2004.

Kaine and the Senate propose raising the motor vehicle sales tax from 3 percent to 5 percent. It’s the largest single component of Kaine’s package and would generate $1.6 billion over four years and apply to the sale of all new and used vehicles, bringing it into line with the retail sales tax. That would add $600 to the sale of a $30,000 car.

“That’s going to be a very hard sell over here,” said House Appropriations Committee Chairman Vincent F. Callahan, R-Fairfax County and one of many GOP leaders who have ruled out another statewide tax increase.

Even Kaine’s fellow Democrats said general tax increases have little hope in the House.

“At this point, we’re employing user fees as opposed to general tax increases. That would be far more favorably received in the House,” said Del. Brian Moran, the Democratic caucus leader from Alexandria.

House Republicans, however, were pleased that Kaine borrowed some of their own ideas, including a bill Del. David Albo introduced last year to make abusive drivers pay steeper fines.

“As the governor said in his speech, it makes sense for people who abuse the roads to pay more to maintain the roads,” said Albo, R-Fairfax County.

The Senate proposes removing the sales tax exemption from gasoline, forcing motorists to pay 5 percent more phased in over four years. Based on today’s prices the increase would be approximately 3.5 cents per gal. the first year and approximately 9 cents the fourth year.

“We achieve this goal by applying tax rates uniformly rather than discounting or exempting certain transportation-related goods from taxation,” Senate Finance Chairman John H. Chichester said.

Without those and other revenues committed solely to transportation, Chichester said, Virginia would have to siphon off tax collections dedicated for public education, health care and public safety.

Other major elements of Kaine’s proposal and the revenue each would generate for transportation over four years:

• $1 billion from boosting the tax on auto insurance premiums by $15 to $18 annually per policy and dedicating a third of the total insurance premiums tax revenue to transportation;

• $296 million from an $8- to $13-per-year boost in the fee for registering and titling automobiles;

• $401 million from higher fines on traffic offenses;

• $339 million from the one-time use of general funds.

Increases in the Senate plan over four years amount to approximately $1.3 billion from higher sales tax on gasoline, approximately $1.2 billion from sales taxes on car sales, approximately $500 million from the car insurance premiums tax, $345 million from a $10 increase in the cost of registering cars ($20 for sport utility vehicles), $116 million from increasing the tax on automobile repairs and $72 million from raising the tax on diesel to match the gasoline tax.

Don Hall, president of the Virginia Automobile Dealers Association, said higher taxes on cars could devastate a sector of the economy already reeling from gasoline price increases. Any gains the new tax would bring the state would be at least partly offset by a decrease in sales.

“Most folks are cash poor and have limited money to put down,” Hall said. “This is a 66 percent tax increase —that’s the bottom line.”

Both packages, however, represent substantial down payments toward backlogged transportation needs that easily eclipse $100 billion and mark the first time taxes exclusively for road use have been increased since 1986.

“Virginia’s transportation system has moved from life-support to code red. It is, therefore, irresponsible to continue providing special tax breaks to transportation-related goods,” Chichester said in outlining the Senate plan.

The largest outlay from Kaine’s plan, approximately $1.5 billion over four years, would be used to pay off deficits from maintaining more than 57,000 mi. of roads — an obligation that grows by approximately $50 million annually and that must be funded before the state can fund new road construction.

By 2015, all the state’s available transportation money would be committed to maintenance with none left for new roads, Transportation Secretary Pierce Homer said.

Kaine’s plan doubles state support for local mass transit programs such as bus systems, the Metro rail system in the Washington, D.C., suburbs and the Virginia Railway Express commuter train system.

It also approximately doubles cost sharing with local governments.

Kaine said he’s willing to negotiate with the House and Senate and would support a legislative hybrid with different funding methods as long as it provides substantial resources for alleviating congestion, bolstering transit and has a sustainable, long-term revenue source.

He said the only part of his package he’s adamant about is having a constitutional lock box to shield transportation revenues by the time he leaves office in 2010.

And completing all of that need not require a protracted legislative battle, as the 2004 tax increase did.

“We don’t need any more studies, we don’t need an extended session, we don’t need a special session. Every legislator understands this problem. They’ve lived it, they’ve talked about it, they’ve heard about it from their constituents, and they’re here now for 60 days with every tool at their disposal,” Kaine said.

The regular session is scheduled to adjourn March 11.

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