RICHMOND — Virginia’s transportation plan is getting high marks from Moody’s.
The bond-rating firm reports in its U.S. Public Finance Weekly Credit Outlook that the funding plan — expected to generate as much as $3.5 billion in additional revenue for transportation over the next five years — makes Virginia “the first state to address stagnant gas tax collections that have been increasingly insufficient to meet transportation funding needs, a problem faced by many states as they, consumers and automakers embrace higher fuel efficiency standards.” The firm also praised lawmakers for passing the proposal “at a time when Virginia’s economy is highly exposed to downsizing,” noting the possible effects of defense cuts that are part of the federal sequester that began March 1.
Moody’s called the plan a “credit positive” for the commonwealth.
The General Assembly approved a compromise version of a package originally proposed by the governor in the final days of the legislative session, which ended Feb. 23. The deal hammered out by lawmakers eliminates the 17.5-cent-per-gallon tax on gasoline and replaces it with a new 3.5 percent wholesale gas tax that will keep pace with economic growth and inflation.
Other major parts of the deal include boosting the state sales tax on nonfood merchandise from 5 percent to 5.3 percent and devoting more existing revenue to transportation instead of school, public safety and other services. A regional funding mechanism would boost the sales tax to 6 percent in Northern Virginia and Hampton Roads, and those monies could only be spent on transportation projects in those areas.
Supporters celebrated the plan as a long-term solution to address the region’s gridlock, while critics have derided the legislation as a burden on Virginia taxpayers.
Gov. Robert F. McDonnell (R) responded to Moody’s findings, saying: “This is yet another demonstration of why it was so critical that we finally, after 27 years of inaction, come together in Richmond to get a long-term transportation funding plan passed . . . The failure to properly fund transportation was hurting Virginia’s economic competitiveness, it was hurting our citizens’ ability to find good paying jobs, and it was imperiling Virginia’s critically important credit rating.”