The Virginia General Assembly passed a landmark transportation package that replaces the per-gallon fuel tax with a wholesale tax, plus other revenue raisers, and addressed the controversial issue of adding tolls to I-95.

When it’s fully implemented in five years, the package will produce $880 million per year, a much-needed boost funding for the state’s beleaguered transportation program.

Gov. Bob McDonnell has 30 days to review and sign the measure, said spokesman Jeff Caldwell.

“We have passed, on a bipartisan basis, the first major new sustainable transportation funding and reform bill in Virginia in 27 years,” the governor said in a statement.

Passing a Compromise

The bill represents a compromise. McDonnell’s original plan was to eliminate the fuel tax and replace it with an increase in the sales tax, higher registration fees and a presumed revenue stream from a federal Internet tax that has not yet cleared Congress.

That would have made Virginia the only state in the nation without a gas tax.

The Virginia House passed that measure, but the Senate proposed a 5-cent increase in the gas tax, plus a wholesale tax on gas and allowing localities to raise their own transportation funds.

What emerged from the conference between the chambers was a blend.

The final bill replaces the current 17.5-cent gas and diesel tax with a 3.5% wholesale tax on gas and a 6% wholesale tax on diesel. The current 5% retail sales tax will go up to 5.3%, with a fixed portion going to transportation.

In addition, there will be a $100 annual fee on alternative fueled vehicles, including hybrids. The sales tax on vehicle purchases will go from 3% to 4%, and a larger portion of general fund revenues will go to transportation.

Virginia also wants to tap revenues from the Internet tax, should it pass. If it doesn’t pass, the state will add 1.6% to the wholesale gas tax.

In addition, the bill includes packages for Northern Virginia and Hampton Roads, two regions that have chronic, severe traffic congestion.

No Tolls on I-95

In bill also contains a provision that prohibits tolling of existing lanes on I-95 south of Fredericksburg, a move that was greeted with applause by trucking interests.

The state had been considering tolling as a way to raise highway revenues, but this provision makes it clear that the Assembly does not support that idea.

“By looking at, then rejecting tolls in favor of more efficient revenue sources, Virginia lawmakers have provided a solid example for states looking to finance needed transportation infrastructure,” said American Trucking Associations President and CEO Bill Graves said in a statement.

Lisa Mullings, president and CEO of the truck stop group NATSO, also supported the provision.

“Tolls would have unjustly burdened businesses located along Interstate 95, and encouraged tourists to bypass the state,” she said in a statement. “Today’s action will send a message that Virginia is open for business and tourism.”

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