On the road

RICHMOND — Transportation is an issue that will dominate the days of the next governor, Democrat R. Creigh Deeds or Republican Bob McDonnell, even though it’s not dominating this fall’s campaign for governor.

It’s this simple: without new state money, Virginia could soon be virtually out of the business of building new roads or expanding existing ones.

McDonnell has offered a dozen proposals that either pull from existing money sources, rely on contested financial assumptions, have been shot down previously by the General Assembly or aren’t permitted under federal law.

Deeds won’t address whether he’ll ask the General Assembly for new transportation taxes, as Gov. Timothy M. Kaine has done, convening two fruitless special sessions on the issue since 2006. His position is essentially “trust me.”

The Problem

Virginia has cut nearly $3.5 billion from its six-year highway construction list the past 16 months. Scores of long-promised projects across the state have been canceled. Interstate rest stops sit boarded up and off-limits to travelers. Weeds and grass grow high on highway rights of way.

In 2005, a transportation study done under then-Gov. Mark R. Warner estimated the cost of backlogged, unfunded transportation needs would reach $100 billion by 2025. It reflected projected population and development growth over 20 years and the rising costs of easing the gridlock that traps commuters for hours each day and threatens to stall the state’s economic engine: northern Virginia.

The 17.5 cents-per-gallon gasoline tax, enacted 22 years ago, and taxes on car sales provide two-thirds of Virginia’s highway funding. As cars get more fuel-stingy, and telecommuting and the poor economy drive down vehicle use, the gas tax has withered as a source or revenue while steel, asphalt, concrete and labor costs have soared.

Left unchanged, things will worsen swiftly.

State law gives the safe upkeep of existing roads priority over new construction. So as available cash recedes and maintenance costs climb, fewer dollars are available for new projects. Transfers from construction to maintenance grew from $3.6 million in 2002 to $712 million this year.

To qualify for hundreds of millions of federal highway dollars, the state has to meet government minimums for road construction. For every $1 Virginia commits to road construction, Uncle Sam puts up $4. But now, growth in state and local maintenance funding must be slowed by one-fourth for the state to fully qualify for the federal match.

The Politics

The principal difference between Deeds and McDonnell involves how they would handle the state’s general fund that pays for core government services such as public safety, schools, social services and health care. Most of it comes from state income taxes and sales taxes.

Transportation money flows mostly from the non-general fund — revenues collected for a specific purpose. Two-thirds come from fuel and automobile sales.

McDonnell says transportation belongs among those priorities, and he would commit more than $1 billion from existing general revenues to it.

“The general fund, by definition, can be used for any purpose the legislature so deems,” McDonnell said in an interview.

Deeds calls that “stealing from public education.” But Deeds won’t specify where he would find the money.

McDonnell

McDonnell says his initiative would generate about $1.4 billion a year. Key provisions include:

n Rerouting nearly one-third of the sales taxes collected in northern Virginia, roughly $105 million a year, to highway projects exclusive to that region. The legislature — particularly the Senate — has rejected similar efforts.

n Privatizing Virginia’s state-owned liquor stores. McDonnell estimates the sale would gross about $500 million and annual alcohol taxes would add nearly $180 million a year.

That has failed in the legislature. McDonnell’s one-time windfall is also shaky: The Department of Alcoholic Beverage Control’s net assets for 2008 were only $2.8 million. The state leases virtually all of its stores. It owns a $15 million central warehouse and distribution center in Richmond. Also, its profits and tax receipts are general fund money, much of it spent on mental health and substance abuse programs.

n Using at least three-fourths of any budget surplus the state realizes.

By averaging unspent balances over the past 15 years, McDonnell’s plan assumes $115 million left over when the books close on each budget. The average, however, encompasses large year-end windfalls plus years like this one when billions of dollars get cut to avoid a deficit. Further, state law already dictates the pecking order for any unspent balance: the “rainy day” reserve fund, then the Water Quality Improvement Fund are at the front of the line

n Dedicating the first percentage of all state revenue growth over 3 percent to transportation, a yield McDonnell puts at $150 million. That also has failed to win legislative approval.

n Putting tolls on the northbound lanes of Interstates 85 and 95 at the North Carolina line.

Federal law bans tolling on an existing road except to pay for improvements to that road. McDonnell’s plan anticipates using the cash elsewhere.

n Dedicating royalties from companies drilling for oil and natural gas off the Virginia coast to transportation.

Federal law forbids drilling off the Atlantic coast. If Congress lifts that ban, it would take 10 years for production to begin.

n More use of public-private partnerships to build toll roads. These partnerships have broad bipartisan support, but few have been successful.

n Expanded high occupancy-toll lanes in congested metropolitan areas. This has support and the potential to help pay for itself while easing gridlock.

Deeds

Deeds prefers generalities and hints, referring often to his record of support for new fees and taxes for reviving the state’s road-building capacity. They’re embedded in his economic proposals.

He promises to enact a plan in his first year. He wants more freight and passengers moved by rail. He likes tax credits to encourage telecommuting, flextime scheduling that allows commuters to hit the road at off-peak hours and mass transit.

He has voted for increased taxes, fees or both for transportation. As governor, he has said, he would sign a tax increase into law provided it’s statewide, long-term and creative.

But press him for specifics he wants lawmakers to consider, and he bristles.

“I don’t think that I really gain much ground by throwing up lightning rods and making specific proposals about transportation funding today,” he said in an interview.