Virginia Senate and House negotiators agreed on a deal today to resolve their differences over transportation funding.

When fully phased in, the agreement in its current form would raise roughly $880 million by doing the following:

-- Replace the current 17.5 cents per gallon tax on gasoline with a 3.5 percent wholesale tax paid by distributors and a 6 percent wholesale tax on diesel fuel;

-- Increase the 5 percent retail sales and use tax paid on most purchases to 5.3 percent;

-- Apply a $100 annual fee on alternative fuel vehicles, including hybrids;

-- Increase the current 3 percent sales tax paid on the purchase of motor vehicles to 4 percent;

-- Increase the amount of general fund money diverted to fund transportation from .50 percent to .675 percent, raising roughly $200 million when fully phased in;

-- Use a substantial portion of any future sales tax proceeds generated from Internet purchases if Congress passes the Marketplace Equity Act, or, if the act fails, replace the revenue it would generate for transportation, education and localities through an additional 1.6 percent tax applied to the wholesale gas tax.

Not all of the .3 percent increase in sales tax goes to transportation. Part of the overall revenue generated by the increased tax will go toward an increase in education funding and other general fund priorities.

The House had been working from Gov. Bob McDonnell’s plan, which replaced the gasoline tax with an increase in the sales tax, and diverted more sales tax revenue to transportation. The plan also increases vehicle registration fees and presumes an anticipated tax windfall from the ability to collect sales tax on Internet purchases.

The Senate had proposed a 5-cent increase in the per-gallon tax, a wholesale tax increase on fuel and to let localities raise funds for transportation. The wholesale fuel tax would increase an additional 1 percent if the Internet sales tax revenue does not materialize.

"We have arrived at a meaningful solution, we feel, for our transportation, both statewide and regional," said Del. Chris Jones, R-Suffolk, the lead negotiator from the House team.

"There's a lot of what the governor liked, what the House liked, what the Senate liked -- that's what the conference is all about."

There were 10 negotiators on the transportation conference committee -- five from each chamber of the General Assembly, and only two Democrats.  It took them four days to reach agreement.

Now the challenge is selling the plan to a majority of House and Senate members before the General Assembly adjourns Feb. 23. The House needs 51 votes for approval; the Senate requires support from 21 of its 40 members.

"I feel very confident that we will have a conference report that is accepted by the House," said Jones, who said negotiators had been communicating with Gov. Bob McDonnell since the talks began.

"The governor wants to get something done," he said.

"I'm very happy about the progress we've made on transportation for Virginia," said Sen. Thomas K. Norment, Jr., R-James City.

The plan is likely to face opposition from a number of Republicans in the GOP-dominated House, to whom the prospect of any tax increase is anathema, especially in an election year. The entire 100-member House is up for election this November, and a number of delegates fear primary challenges from anti-tax Tea Party candidates.

Full GOP support in the Republican-controlled Senate is also unlikely, with a block of conservative senators similarly opposed to tax increases. Sen. Majority Leader Richard L. Saslaw, D-Fairfax, has also bristled at the prospect of any plan that eliminates the per gallon tax on gas.

"We have to see the fine print," said Saslaw.

The plan also would prohibit placing tolls on highways that don't have them now and provide funding for mass transit and rail projects.

Still under consideration are additional regional increases to generate funds for transportation needs in Hampton Roads and Northern Virginia. The working plan would call for raising revenue in Hampton Roads between $175 and $200 million, and $300 to $350 million in Northern Virginia.

Senators and House members are being briefed today on the agreement, which could be put on the calendar as early as tomorrow.

Some Richmond area senators expressed concern that there was no regional component to fund needs in the Richmond area, while lawmaekrs in Hampton Roads said there should  be a plan to mitigate tolls that are scheduled to be implemented on bridge and tunnel crossings.

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