Thirteen northern Virginia Republican lawmakers have proposed a revolving trust fund to leverage tax revenues to provide more than $5 billion over the next 20 years for road and transit construction.
Under the Virginia Transportation Act of 2000, one-third of the revenues from the state’s insurance premium tax are designated for the Priority Transportation Fund. However, for several years, legislators have diverted that money to balance the budget, which is now in surplus. Many business and community leaders have called for policymakers to address the diversion of funds.
Borrowing Against State Surplus
Backers propose using the current surplus in the state’s general fund–estimated at about $700 million–to borrow against future revenue generated by taxes on insurance premiums. This would jump-start critical transportation improvement projects throughout the Commonwealth and provide a designated stream of funding for future projects.
“For too long, a top taxpayer priority–transportation–has been neglected in Richmond,” stated Delegate Jeff Frederick (R-Woodbridge). “The revolving trust fund would finally address this problem. We have a real opportunity to find a solution in 2005–using creative solutions without raising taxes.”
Joining lawmakers in support of the proposal were representatives from northern Virginia business groups, including the Fairfax County Chamber of Commerce, Greater Washington Board of Trade, Northern Virginia Transportation Alliance, Northern Virginia Technology Council, and Dulles Area Transportation Alliance.
“I think it has merit because it’s building upon a previously identified revenue source,” William Lecos, president and chief executive of the Fairfax County Chamber of Commerce, told the Washington Post.
Opponents Warn of Precedent Opponents argue the plan will create fiscal difficulties for the Commonwealth by creating a borrow-now, pay-later mentality. It is also unclear whether overall state tax revenue will continue to grow sufficiently to fund the plan. If revenue were to lag, the debt for the transportation fund would have to be paid before other programs such as education and health care.
The 2005 budget for the Virginia Department of Transportation is $2.9 billion.
“Only 17 percent of the budget is left for road projects. The rest is for maintenance,” said Bob Grow, director of government affairs at the Greater Washington Board of Trade. “We are very interested in listening to any proposal regarding new transportation funds. We have a $13.2 billion shortage of funding for projects in our region. In Northern Virginia it’s $4 billion.”
Grow said his organization views the proposal as a useful first step.
“We’ve not embraced the entire proposal, and they’ve not thought out all details either. We would prefer to see a dedicated source of funds that comes in every year without having to go out on a limb. But we applaud the creative thinking on this.”
He said Virginia has some of the nation’s worst traffic congestion and needs road construction to alleviate the problems.
He does have concerns, though, about Virginia’s AAA bond rating.
“Our bonding power is stretched,” Grow said. “That’s something to be mindful of.”
Christi Bearden ([email protected]) is a legislative aide for Virginia Delegate Jeff Frederick.