A Senate panel has endorsed extending state and regional sales taxes to ride services such as Uber and Lyft in order to raise more than $21 million a year for mass transit systems across Virginia, replacing the use of state-backed bonds to pay for new buses and other capital needs.
The Senate Finance transportation subcommittee also voted separately Wednesday to impose a 2.1 percent motor fuels tax along a 325-mile swath of western Virginia to help pay for improvements to Interstate 81 from Bristol to the West Virginia panhandle.
The proposal to tax such ride services for mass transit is part of legislation proposed by Sens. Dick Saslaw and George Barker, both Democrats from Fairfax County, to raise $154 million a year for the ailing Washington-area Metro system, while providing a critical source of capital funding for smaller transit systems across the state.
The plan also includes a one-time bond payment of $50 million as Virginia’s share of a $150 million pledge with Maryland and Washington to collect an equal share of federal funding for Metro if Congress reauthorizes the expiring Passenger Rail Investment and Improvement Act, enacted in 2008.
The fuel tax increase for widening I-81 is part of a separate bill proposed by Senate Finance Co-Chairman Emmett Hanger, R-Augusta. The measure would create a Western Virginia Transportation Commission to provide regional funding for the high-priority project, similar to the regional transportation funding mechanisms created for Northern Virginia and Hampton Roads in a $6 billion transportation funding package adopted in 2013.
“We have a tremendous need in rural Virginia, specifically along the I-81 corridor,” Hanger said.
The two pieces of legislation, due before the full Senate Finance Committee meeting on Thursday afternoon, represent the most ambitious attempts to raise money for critical transportation projects since the 2013 law, which was sponsored by then-House Speaker Bill Howell of Stafford County and then-Gov. Bob McDonnell, both Republicans.
The subcommittee recommended approval of both bills on 4-2 votes, with Sens. Steve Newman, R-Lynchburg, and Siobhan Dunnavant, R-Henrico, voting no.
Newman said the mass transit funding proposal was a much better way to pay for transit capital needs than $550 million in bonds that would have eaten up 20 percent of state debt capacity over five years, but he added in an interview, “I don’t think taxes are the right way to do it.”
The proposed sales tax on ride services would raise $21.3 million a year, or about one-third of the $60 million a year that transit systems other than Metro were receiving through bond money that is projected to run out in 2020.
The sales tax varies by region in Virginia. In the Richmond area, it’s 5.3 percent, which is what the Uber or Lyft taxes would be.
Lisa Guthrie, executive director of the Virginia Transit Association, acknowledged that the state “will have to revisit the issue next year,” but she called the dedication of a new source of revenue for mass transit “a definite step in the right direction.”
Senate Finance staff members said the sales tax on the services “provides greater parity with traditional taxis” because nontraditional carriers such as Uber and Lyft don’t pay the same local taxes or fees as taxis.
Eight other states impose a statewide levy of some sort on such services and Washington imposes a 1 percent tax, according to a staff summary of the legislation.
The summary said the “statewide approach provides a new, dedicated source of revenue to local transit across the commonwealth and eliminates the need for continued debt issuance by the commonwealth in support of transit capital replacement.”
The new revenue would be deposited in a Mass Transit Fund that would be disbursed in a new prioritization process the state would be required to develop, similar to the Smart Scale process for ranking highway projects that would receive money from the Transportation Trust Fund.
“As these funds are made available, there will be a prioritization process around the state,” promised Secretary of Transportation Shannon Valentine, a former member of the Commonwealth Transportation Board from Lynchburg.
The action on the omnibus legislation, Senate Bill 856, was the second time in a week that the subcommittee approved a proposed package of regional tax increases in Northern Virginia and state money to pay the state’s share of an annual funding stream to the Washington Metropolitan Area Transportation Authority. WMATA needs the money to repair a Metro system considered critical to the economic health of Northern Virginia and the rest of the state.
However, the subcommittee pulled the bill back for reconsideration last week after realizing that it would authorize $550 million in long-term bonds to pay for short-term capital needs at transit companies while eating up one-fifth of Virginia’s debt capacity.
“The bonds were horrible,” said Newman, who credited state officials for a “fantastic job of finding the cash where there was no cash.”
The Washington-area Metro funding package includes:
- $30 million in redirected state money, including $20 million a year that will be freed up by the expiration of a 25-year-old bond package;
- $44.5 million a year from a 3 percent transient occupancy tax — for stays at places such as hotels — in Northern Virginia, including a 1 percentage point increase that generates an additional $14.8 million;
- $29.9 million from a 10-cent per $100 increase in the grantor’s tax in the six Northern Virginia jurisdictions in the Northern Virginia Transportation Commission;
- $31 million from local governments in the regional compact; and
- $18.6 million from imposing a floor on regional motor vehicle taxes, which the state included in the 2013 funding package for statewide wholesale fuel levies.
The WMATA funding is contingent on Maryland and Washington contributing their share of the $500 million annual capital contribution necessary for Metro over the next 10 years to fix the system.
The legislation also would require reforms of WMATA that include a smaller, more accountable board of directors; a cap on operating expenses that would limit growth to 3 percent a year; and annual reports on safety and finance to the governor and General Assembly.
“The whole idea behind this is we do not want to find ourselves in this position again,” Valentine said.