Terry McAuliffe met in Washington this past Wednesday with Virginia’s congressional delegation — eight Republicans, five Democrats. It was a getting-to-know-you session. But the new governor had serious business to discuss: that congressional inertia threatens to undermine Virginia’s tax-fattened transportation fix. It was a high-water mark for McAuliffe’s Republican predecessor, Bob McDonnell.
Finance Secretary Ric Brown and Transportation Secretary Aubrey Layne, according to an administration spokesman, explained the potential impact of Washington’s inaction on the $1.6 billion plan. Unless Congress acts by January on an enforcement mechanism for applying sales taxes to Internet purchases, Virginia could lose $841 million by 2018. Near term, the revenue would be made up incrementally at the pump, by automatically increasing the percentage-based sales tax on gasoline.
Bit by bit, McDonnell’s transportation legacy — the cornerstone of which is his promise-breaking tax increase in 2013 — appears to be falling apart. It is a casualty of gridlock in D.C. and a reassessment in Richmond by Democrats and Republicans. Increasingly, their view is that the business-friendly McDonnell made some un-businesslike decisions.
This could have repercussions for a figurative multicar collision at the state Capitol: the fight over Virginia’s compliance with Obamacare.
Among the prospective voices in that argument is one frequently heard during the road-and-rail debate, that of Sean Connaughton. He was McDonnell’s transportation secretary. An unsubtle Northern Virginia lawyer, Connaughton clashed — occasionally bitterly — over transportation projects with legislators who will now decide whether to steer billions of dollars to a health insurance initiative favored by his new employer, the Virginia Hospital & Healthcare Association.
Let us stipulate that there is a partisan dimension to the revisionist view of the McDonnell transportation program. A newly installed Democratic governor is taking the lead, slowing this project, questioning that one, criticizing others. But McAuliffe’s words and deeds are an inducement to Republicans to pile on.
Most notable among them: Del. Chris Jones, R-Suffolk, chairman of the House Appropriations Committee. Before he was a skeptic on extending health coverage to the uninsured — putting him crosswise with McAuliffe — Jones thought it sweet to raise taxes for highways and, in 2004, for education, law enforcement and welfare.
In the latest twist, McAuliffe is attempting to set right a transportation jewel that a legislative watchdog panel suggests McDonnell put on the wrong course: the Port of Hampton Roads, the third-busiest on the East Coast. But McAuliffe says the agency that runs the port isn’t making the task any easier. He’s accused the Virginia Port Authority of failing to provide a complete and accurate snapshot of its operations.
That includes the McDonnell administration’s deal with a port management company, APM Terminals, under which the state is paying more than $70 million annually to use its Portsmouth terminal. McAuliffe depicts the lease as a fleece. Also, McAuliffe learned from an inquiry he ordered that the port’s debts are $34 million greater than he’d been told.
These are tiles in a larger mosaic: a port beset by turmoil. It was hastened by McDonnell’s attempt to, in effect, sell the giant natural harbor, perhaps to APM. To improve chances of such a deal — McAuliffe and Tidewater officials raged that it was akin to hocking the family silver — McDonnell purged the port’s governing board in 2011. At the time, he insisted the port needed new blood because it hadn’t sufficiently clawed back from the recession.
A second McDonnell-era project rubbing Republicans the wrong way: toll-financed improvements to the Elizabeth River tunnel linking Portsmouth and Norfolk.
This is another project initiated under an 18-year-old law that upends state purchasing procedures.
Instead of the traditional practice of hiring contractors to, in this case, build a second tunnel and upgrade the roads that feed it, Virginia — because it didn’t have the cash — is deferring to the private sector to do the deal at its expense. The state will buy the finished product with proceeds from bonds backed by those tolls.
The tolls, however, were steep, enraging commuters. They challenged the tolls as a de facto tax, winning in a local court, but losing in the Virginia Supreme Court. During the campaign, McAuliffe declared that he feels motorists’ pain. In January, the Commonwealth Transportation Board voted to cut car tolls to 75 cents from more than $1.50. The lower rate will continue through December.
What also annoyed commuters is they’re paying for work they’ve yet to see. In part, that’s because $200 million has to be socked away to guarantee the bonds.
And if Hampton Roads residents aren’t impressed with the tunnel project, neither is Wall Street. Bonds for the Elizabeth River crossings, issued through a state agency that typically bankrolls small business, are rated a click better than junk bonds. It’s a repeat of those sold for the new U.S. 460, the proposed alternate truck route into the Port of Hampton Roads.
McAuliffe has put that $1.5 billion project on hold, noting that more than $250 million has been spent with nary an inch of asphalt poured since it was announced in October 2012. Like the Elizabeth River tunnel, the new U.S. 460, between Suffolk and Petersburg, is a private enterprise that the state would pay for over decades with tolls.
McDonnell, with Connaughton as his cheerleader, depicted all of these projects as essential to keeping Virginia’s economy moving, evidence that the state is thinking anew on transportation finance and as examples of corporate principles applied to state government.
On closer examination, perhaps this is business as usual.
During the fuss over the possible privatization of the port, one of three contenders, APM, was represented by a lobbying powerhouse, McGuireWoods. It’s steered $527,000 in contributions to McDonnell since his run for governor in 2009.
The firm hasn’t been as generous with McAuliffe — yet. Over his two campaigns, McGuireWoods donated $21,000. It just threw at McAuliffe’s new PAC $25,000. There’s plenty more where that came from.