RD54 - Transportation Funding Sustainability – December 2019

Executive Summary:

For the first time in Virginia’s history, vehicle miles traveled (VMT) increased and motor fuels tax collections declined in FY 2018. Data for the period between FY 2016 – FY 2018 reflects a 3.2% increase in VMT and a 0.4% decrease in motor fuels tax collections. In FY 2018, had motor fuels tax collections kept pace with the increased VMT, it is estimated that there would have been an additional $31 million per year collected in transportation revenue.

The decline in motor fuels taxes is a significant issue for Virginia as this revenue source generated $857 million for the Commonwealth Transportation Fund (CTF) in 2018. In recent years, gasoline taxes and vehicle registration fees, another important funding source, have not kept pace with inflation. During the past ten years, motor fuels taxes have grown approximately 0.2% while inflation over the same time period has averaged 1.8%.

As a result of these trends, the General Assembly enacted Item 433 K. of the Appropriations Act (Chapter 854), which requested the Secretary of Transportation (Secretary) and the Commonwealth Transportation Board (CTB) to direct the Virginia Department of Transportation (VDOT) to establish a working group to evaluate (i) the impact of increased fuel efficiency and increased use of electric vehicles (EV) on transportation revenues, and (ii) options to provide a sustainable funding stream for transportation infrastructure. The Appropriations Act further directed that the working group include, at a minimum, representatives of local government associations, the regional transportation authorities, the trucking industry, the motor dealer industry, and the motor fuels industries.

The Working Group was convened on August 15, 2019, October 2, 2019, and December 11, 2019, and engaged in communications throughout that period to provide input, review trends, and discuss options in response to the Item 433K requirements. The process utilized multiple sources of input, including information from VDOT, the Virginia Department of Motor Vehicles (DMV), the Virginia Department of Taxation, and external data compiled by groups including the U.S. Federal Highway Administration, U.S. Energy Information Agency, National Conference of State Legislatures, and the American Association of State Highway Transportation Officials (AASHTO). In addition, KPMG LLP (KPMG) was contracted to support the Working Group with specific research and analysis.