In the first meaningful infusion of funding into the Commonwealth’s critical transportation infrastructure in nearly 30 years, the Virginia General Assembly passed a sweeping transportation funding plan. The statewide plan would generate approximately $454 million in new money next year, and $870 million per year when fully implemented beginning in 2018
Of perhaps the greatest significance to AOBA members in this deal is the freezing of the commercial and industrial tax rate cap at 12.5 cents in perpetuity. AOBA secured a reduction of the maximum rate to this level in previous Sessions. However, that cap was scheduled to sunset in 2015, after which time it would rise to 25 cents per $100 assessed value.
Moreover, AOBA successfully urged rejection of a provision in the original draft conference committee report which would have compelled all Northern Virginia jurisdictions to adopt the commercial real estate tax surcharge as a condition of receiving regional funding. Currently, only Arlington and Fairfax Counties have adopted the levy - Arlington at 12.5 cents and Fairfax at 11 cents. The original conference committee language would have meant that AOBA members with properties in every other Northern Virginia jurisdiction would see a property tax increase of 12.5 cents per $100 assessed value on all commercial buildings. AOBA lobbied conferees to support an alternative approach recommended by Alexandria Delegate Rob Krupicka that, instead of forcing the commercial property surtax on local governments, would only require that local governments put forward an "equivalent local effort," i.e., localities could provide matching funds from other revenue sources of their choice (e.g. other taxes, bonding/other investments in infrastructure improvement).
This legislation represents a significant victory for AOBA members on this and several other fronts.
Cobbled together from numerous funding sources in an effort to secure the necessary number of votes in each Chamber, the legislation consists of the following basic components:
• Eliminates the states current 17.5 cents per gallon gas tax and replaces it with a 3.5% tax on gas “at the rack” (at the wholesale level) and a 6% tax on diesel fuel.
• Raises the statewide sales tax from 5% to 5.3%
• Raises the titling tax on vehicles from 3% to 4.3%
• Charges a $100 registration fee on electric vehicles
• Dedicates a portion of any future proceeds from internet sales taxes (pending action by Congress) to transportation. (A trigger mechanism is also included in case Congress fails to act, which would replace such funds with an additional 1.6% on the gas tax.)
• Increases the portion of sales taxes statewide currently dedicated to transportation from 0.5% to 0.67%.
• Adopts an additional 0.7% regional sales tax in Northern Virginia to be dedicated to new transportation construction.
• Increases the existing grantor’s tax in Northern Virginia by 25 cents per $100 assessed value.
• Adds an additional 3% transient occupancy tax to hotel stays in Northern Virginia only.
This legislation more than closes the existing maintenance funding gap, whereby construction funds are currently being depleted at a rate of roughly $400-500 million per year to support maintenance needs in other areas of the state. Regional funds generated by way of the additional sales, grantor’s and transient occupancy tax levies would stay in Northern Virginia, with 70% going towards regional projects to be administered by the Northern Virginia Transportation Authority and 30% to be granted to local governments that meet established thresholds for infrastructure investment. The regional funding sources in Northern Virginia total approximately $350 million per year.
1.) Gradually increasing the percentage of sales tax revenues dedicated to transportation from 0.5% to 0.75%
2.) Increasing fees (automobile registration/other transportation related sources)
3.) Eliminating the existing 17.5 cent/gallon gas tax
4.) Raising the existing sales tax to approximately 5.8% and dedicating the new revenues to transportation
5.) Designating a percentage of the proposed internet sales tax to local governments for transportation purposes (requires federal action)
In addition to funding critically needed new infrastructure, new revenues would reduce pressure on localities to exercise the existing authority to levy a commercial real estate tax surcharge for transportation.
The office of Attorney General Ken Cuccinelli recently released a report confirming what AOBA members already know – that utility customers have paid more under Virginia’s monopolistic egulatory scheme adopted in 2007. Drawing on five years of data dating back to the adoption of the 2007 legislation, the Attorney General found that:
The adders have contributed to increases in customer bills and reduce the chance
the customers will be entitled to future rate decreases
The adders are particularly costly to consumers as they may be applied not just to
investments in renewable energy, but to the utility’s entire rate base
The Attorney General is expected to press for legislation during the 2013 session to eliminate or significantly reform the adder provisions. In a presentation to the Commission on Electric Utility Regulation, the Attorney General’s office recommended the following legislative changes:
Eliminate the 50 basis points return on equity adder prospectively for meeting the
state’s voluntary renewable portfolio standards goals.
Eliminate the new generation return on equity adders prospectively for any new
Eliminate the provisions which preclude a utility’s return on equity from being adjusted
downward for poor performance or customer service if it has not met renewable
portfolio standard goals, and return the range for possible adjustment to +/-
50 basis points
The Commission instructed the Attorney General’s office to work with the incumbent utilities (Dominion Virginia Power and Appalachian Power Company) to reach consensus on legislation for the 2013
session. The Commission will meet again Jan. 16 to hear a report from the stakeholders and consider legislative changes.
The Fairfax County Board of Supervisors has advertised a public hearing for Dec. 4 to solicit public input on the creation of a new service tax district to fund transportation infrastructure improvements to facilitate the redevelopment and urbanization of the Tysons urban center. The Board recently endorsed a proposed funding plan, which included the establishment of the new service tax district. Early estimates suggest an initial tax rate of seven to nine cents per $100 assessed value. All properties, residential and commercial, would be subject to the new levy. AOBA will testify at the Dec. 4th hearing; members are encouraged to contact Brian Gordon at email@example.com to provide input.
The Fairfax County Board of Supervisors voted this week to endorse and advance a proposed infrastructure financing plan for Tysons. The Board’s action is designed to fund approximately $3.2 billion in transportation improvements over the next 40 years in order to achieve the vision for the redevelopment of Tysons as a high-density, mixed-use, urban downtown. AOBA succeeded in convincing the Board pursue an alternate approach, dividing the implementation of project delivery and financing into more manageable phases, thus eliminating uncertainty associated with projecting over a 40-year term and providing for some measure of consistency in the rate. By identifying a defined list of projects to be constructed over a shorter term, the costs of construction can be much more easily identified and the number of unknown variables substantially reduced, cutting down on potential for overruns. At its Oct. 16 meeting, the Board directed staff at AOBA’s request to segment the project list into phases and develop a corresponding cash-flow analysis to include tax projected levy rates. AOBA further succeeded in defeating a proposed exemption from the service district tax for owner-occupied residential properties. Had such a provision been included, apartments would have been subjected to a tax from which single-family home and condominium owners would have been spared.