Virginia governor asks legislature to restore two tax increases to fund Metro
April 9, 2018
By The 2030 Group
By: Robert McCartney
Virginia Gov. Ralph Northam (D) asked the legislature Monday to restore two proposed tax increases on Northern Virginians to help pay for Metro’s historic funding agreement rather than use a significant amount of the money earmarked mainly for key road projects in the region.
Northam proposed amendments to the funding bill to increase a tax on real estate transactions in Northern Virginia by 5 cents per $100 of the sales price. He also proposed increasing the tax on hotel stays to 3 percent from 2 percent.
The increases in the grantor’s tax, usually paid by the seller, and the hotel tax would raise about $30 million total for Metro, Northam’s office said.
The governor’s action pleased the region’s top elected officials, because it would reduce by about 30 percent the amount of money to be diverted from highway improvements and other transportation projects in the traffic-plagued suburbs.
“The governor’s amendments ensure a funding stream for [Metro] while reducing by $30 million the annual negative impacts . . . for other transportation projects in Northern Virginia,” the statement from Northam’s office said.
But Republican legislators in the House have said they would try to kill the tax increases, which they blocked at the end of the regular legislative session after they were approved by the Senate. The outcome appeared uncertain, partly because Republicans hold only a two-seat majority in the House.
“I very much appreciate the governor’s amendments,” Fairfax County Board of Supervisors Chair Sharon Bulova (D) said. “Our work now is to persuade the General Assembly to support [them].”
The dispute in Richmond over how to pay for Metro does not threaten the overall regional plan in which Virginia, Maryland and the District combined would give the transit agency an additional $500 million a year. Metro will use the money for new equipment and upgrades that it says it needs to ensure safety and reliability.
Politicians in both parties support Virginia’s plan to contribute its share, which totals $154 million a year. The money would be given on the condition that governance requirements designed to improve Metro’s performance are met.
But most elected officials in Northern Virginia — as well as a coalition of business groups — were unhappy at how the funds were obtained under the legislation that emerged from the General Assembly.
The Metro funding package already relies on $30 million in state funds, and about $22 million from an increase in regional wholesale gasoline taxes. The remaining $102 million was to be diverted from funds used to widen roads, improve intersections and otherwise battle congestion.
Major projects that could be slowed as a result include widening Route 1 in Fairfax County, improving Route 28 in Prince William and Fairfax counties, and widening Route 15 and extending Northstar Boulevard in Loudoun County.
The top elected officials in Fairfax, Arlington and Loudoun, and the City of Alexandria — all Democrats — joined to ask Northam to amend the bill so it relied more on state money or on raising local taxes to pay for Metro.
If the two tax increases are approved, it was estimated that the total to be diverted from other transportation projects would drop to just over $70 million.
In Virginia, the governor has the power to propose amendments to a bill and send it back to the General Assembly. If the legislature accepts the amendments by a majority vote, then it becomes law. If lawmakers reject the amendments, the bill goes back to the governor to either sign or veto. (Exception: If the legislature rejects the amendments but then passes the bill by a two-thirds vote, then it becomes law.)
Some Democrats have predicted that Northam can make the tax increases stick. After big Democratic gains in November’s legislative elections, Northam would have to persuade only two Republican House members to vote in favor of the amended bill, assuming all the Democrats support it.
The tax increases previously had the support of Republican leadership in the Senate. Senate Majority Leader Thomas K. Norment Jr. (R-James City) is willing to back them because they fall only on Northern Virginians.
Supporters of the tax increases also note that they would have comparatively little impact on permanent residents. The real estate tax is paid primarily by home sellers, many of whom are moving away from the area. The tax on hotel stays is paid in large part by tourists or other visitors from out of state.
The Maryland General Assembly last week passed its bill providing $167 million a year to Metro, and Gov. Larry Hogan (R) has said he will sign it. The money will come from the state transportation trust fund, thus reducing the amount available for roads, bridges and other transportation projects.
D.C. Mayor Muriel E. Bowser (D) and other District elected officials have pledged to provide their share, $178 million. The mayor has proposed to pay for it partly by increases in the sales tax, commercial property levy and the tax on ride-hailing services such as Uber and Lyft.
The three jurisdictions provide different shares of the $500 million according to an existing Metro formula based on factors including population, ridership and number of Metro stations.
Northam’s office said the amendments to the Metro bill also include “a number of technical and clarifying amendments,” details of which were not immediately available. Northern Virginia officials asked the governor to propose several such amendments. One sought to expand an existing provision to reduce the role of alternate members on the Metro board by specifying that the change be included in the board’s bylaws.