Va. Gov. McDonnell outlines plan to fund transportation

By Anita Kumar and Rosalind S. Helderman
Washington Post Staff Writers
Thursday, December 9, 2010; 8:04 PM

RICHMOND - Gov. Robert F. McDonnell announced Thursday that he will ask state legislators to spend $400 million immediately on roads and bridges while borrowing an additional $2.9 billion over the next three years for transportation.

McDonnell wants to spend $150 million from last year's budget surplus and $250 million recouped from an audit of the Virginia Department of Transportation as well as issue two bonds totaling $2.9 billion.

"It's critically important we start today and start now," McDonnell said at a transportation conference in Roanoke. "This is the best opportunity in modern Virginia history to build roads."

For years, Virginia has struggled to find money for transportation, with Democrats and Republicans at odds over raising taxes or using other ways to raise money. The state's transportation budget shortfall, in the billions, has led to thousands of job cuts and hundreds of unfinished projects.

Transportation Secretary Sean T. Connaughton said Virginia will save millions of dollars by issuing the pair of bonds because interest and construction rates are so low. "We've never seen anything like this,'' he said.

Democrats, who control the state Senate, have long contended that Virginia's ailing road network requires raising additional revenue through a tax increase. They have indicated that they are hesitant to agree to taking on more debt for roads.

Already, Virginia has been leaning more and more on debt financing in recent years.

The Senate Finance Committee recently heard a staff presentation indicating that Virginia's tax-supported debt grew by $3.1 billion, or 54 percent, from 2005 to 2009. Debt service is now the state's sixth-largest annual expense; it is the only part of the state's budget besides Medicaid to have grown and not shrunk during the recession.

"It's the same process that we're decrying at the federal level,'' Sen. J. Chapman "Chap" Petersen (D-Fairfax) said. "You can't just borrow all this money and expect it to get paid back in the future. It's not a cost-free solution."

McDonnell, the state's first Republican governor in eight years, has ruled out raising taxes. But Thursday he pledged to find an additional $600 million for roads during the next three years - some through government efficiencies, including his controversial proposal to privatize the state's liquor stores. That proposal has failed to generate support from Democrats and some Republicans.

Connaughton said state officials will decide what the money will be spent on and prepare a list before the legislative session starts.

Virginia will issue two sets of bonds.

About $1.8 billion in bonds approved in 2007, but never issued, will be issued. Legislators already agreed to pay back the debt - about $135 million a year - using money raised from the state insurance premium tax.

About $1.1 million in bonds will be paid back with federal funds. Connaughton said about $80 million a year will be diverted to debt service from the $800 million a year the state receives in federal highway funds.

McDonnell said he will support a constitutional amendment to permanently protect transportation funding from transfers to the general fund, which pays for services such as education, public safety and mental health. He also wants to create a "transportation infrastructure bank" for grants and loans for transportation projects, with priority given to work that would relieve congestion.

McDonnell will present a complete package of his budget amendments to the General Assembly on Dec. 17. He said he will make additional transportation proposals before legislators return Jan. 12.

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