Panel Orders Localities to Stop Collecting Taxes, Fees

By Tim Craig
Washington Post Staff Writer
Tuesday, March 4, 2008

RICHMOND, March 3 -- The Northern Virginia Transportation Authority ordered the state and local governments Monday night to stop collecting taxes and fees that the Virginia Supreme Court ruled are unconstitutional.

The authority, which had been administering the taxes and fees since Jan. 1 on such things as auto repairs and car rentals, issued the order after a day of confusion over whether local governments should stop collecting them.

On Friday, the court said that regional taxing authorities created by the General Assembly last year violated the state constitution because voters do not elect the panel members. But until Monday afternoon, some local governments were still collecting the fees because they had not received official word about the court's decision.

"The Northern Virginia Transportation Authority is developing a refund plan for the special taxes and fees that have been paid to date," the panel said in a statement ordering the cessation of fees. "This is very complex, involving state and local authorities as well as various business entities."

The authority said "potential applicants for refund should retain evidence of payment as it may be required as proof of payment."

The authority's order came too late for an Arlington resident.

"The Supreme Court ruling said what they are doing is illegal -- 'Don't take my money,' " said Stephen Schwartz, 29, who paid a $1,600 grantors tax Monday on the sale of his South Arlington house. "I am a young guy. This is real money we are talking about."

Earlier Monday, Gov. Timothy M. Kaine (D) said he wanted to salvage the regional taxing authorities to pay for new roads and secure several hundred million dollars in statewide revenue for highway maintenance.

Lawmakers have until Saturday's planned adjournment to attempt to find a solution, or they will return this spring for a special session.

A year ago, lawmakers believed they had tackled Virginia's transportation problems by devising a plan to raise $1.1 billion a year for road and transit projects, the largest such infusion in 21 years. But now, in addition to dropping abusive-driver fees and coping with a court decision nullifying the legislation, the Virginia Department of Transportation is telling local governments they will lose millions of dollars for highway construction next year because of the slowdown in the economy.

The budget cuts, including a 47 percent reduction for primary and secondary road construction, are on top of the $300 million a year for Northern Virginia projects that are threatened by the Supreme Court decision.

"If commuters think things are bad now, they are only going to get worse," said Kala Quintana, spokeswoman for the Northern Virginia Transportation Authority.

Kaine administration officials and legislative leaders plan to meet this week to try to come up with a solution. House Republicans and Kaine and Senate Democrats appear to be offering different answers, meaning the chances of reaching a deal before Saturday appear grim.

House Republicans are floating a proposal to require local governments to vote on which taxes and fees to impose -- an idea opposed by local governments last year.

Kaine and Senate Majority Leader Richard L. Saslaw (D-Fairfax) said Monday that they want legislators to impose the taxes. Democrats accuse Republicans of wanting to push the state's responsibilities onto local officials.

"We are going to do it from here [Richmond], or it ain't going to happen," Saslaw said. "It's a nonstarter. Any taxes that get imposed are going to be voted on by the General Assembly of Virginia. Period."

House Majority Whip M. Kirkland Cox (R-Colonial Heights) responded that House Republicans probably won't agree to raise taxes this year.

"To say anything is a nonstarter is a mistake. We have tried not to draw lines in the sand," Cox said. "We need to fix the regional plans, but I don't think there is much appetite from us to impose a new tax increase."

But Kaine said, "We've got to take our responsibility seriously. The court said, 'General Assembly, if you want to do this, you have to do it yourself.' "

House Majority Leader H. Morgan Griffith (R-Salem) said Kaine's remarks "make negotiations almost impossible" because the governor signaled to him Sunday that the GOP approach might work. "I feel like I have been punched in the gut," Griffith said.

Kaine also plans to use the Supreme Court decision to push for more money statewide to address a projected $400 million shortfall in the part of the state budget used to repair and maintain roads. Kaine doesn't have a specific proposal, but he noted that he pushed for an increase in the sales tax on cars during the first two years of his term.

The loss of statewide revenue, including a decline in sales and fuel tax revenue and the proposed elimination of the abusive-driving fees, is already having an effect.

Until recently, the state was expecting to spend $447 million next year on local and regional highway projects.

But Secretary of Transportation Pierce Homer sent a letter to local leaders Friday saying that they would now be getting $238 million. Transit funding will be reduced by 10 percent, which Homer said could result in a $15 million cut in public transportation projects in Northern Virginia next year.

But the Supreme Court ruling is what caused the most confusion.

Kaine said he wants the General Assembly to come up with a plan for offering refunds to the people who have already paid the taxes and fees.

Staff writer Anita Kumar contributed to this report.