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Virginia negotiators reach transportation deal

Bob Lewis, AP Political Writer

RICHMOND, Va. (AP) -- Virginia's General Assembly will vote by Friday on major tax reforms a bipartisan panel of senior legislators presented that would fundamentally change the way the state finances its roads for the first time in a generation.

The five delegates and five senators signed off Wednesday on a compromise that would yield nearly $900 million annually, replacing Virginia's 17.5 cents-per-gallon gasoline tax with a 3.5 percent wholesale tax on gasoline. At current prices, that equals about 10 cents per gallon.

It would apply a 6 percent tax on diesel fuel, equal to about 22 cents per gallon at Wednesday's average statewide price of about $3.70 per gallon.

By tying the tax proportionally to cost, supporters argue, it becomes a more reliable source of revenue than the 27-year-old tax based on volume sold. As cars become more fuel-efficient and high gas prices discourage discretionary driving, per-gallon pricing has yielded less money in recent years while road construction and upkeep costs soared.

While it's quite different from the version Gov. Bob McDonnell proposed six weeks ago, it would become his most substantial policy triumph yet in the final year of his term if it passes. Altogether, it would generate an estimated $880 million annually after it's fully implemented within five years.

Gone, though, was his idea to increase automobile registration fees. Also, he had proposed eliminating gasoline taxes altogether and replace them with an increase in the general retail sales tax from 5 percent to 5.8 percent.

Wednesday's compromise would boost sales taxes from 5 percent to 5.3 percent, levy a $100 fee on hybrid cars and shift about $200 million a year in sales taxes to highway use in five years. It would also increase the share of existing sales taxes dedicated to transportation from 0.5 percent to 0.675 percent over four years.

The proposal also increases the titling tax paid on newly purchased cars from 3 percent to 4.3 percent.

Negotiators also agreed in principle to give as much as $350 million more for transportation in northern Virginia and $200 million for Hampton Roads, but details were still being worked out.

The same conference report heads to the House and Senate for a decisive vote as early as Thursday.

McDonnell, after studying the conference report with his senior policy advisers for nearly seven hours, offered guarded support for the accord in a 946-word statement issued by his office. In it, he noted its differences with the bill he dropped on lawmakers the day before the 2013 session began. But he also found solidarity with its overall objective of raising substantial money for maintaining and repairing Virginia's 10,000-mile web of aging roads and bridges.

"I also promised that ... there would have to be, by simple legislative necessity, components that not everyone would like," McDonnell said. "This bill certainly, depending on the philosophy of each individual legislator, does that. But the important thing is we now have the comprehensive transportation funding plan that has eluded Virginia for 27 years. Now it is time to vote."

Lawmakers broke from their closed-door huddle smiling at the bipartisan accord reached after four days of talks.

"Even when we disagreed, we weren't disagreeable," said Del. S. Chris Jones, R-Suffolk, who led the House negotiating team. "We worked very hard on an agreement, and I think we've got a good package."

Sen. Walter Stosch, R-Henrico and chairman of the Senate Finance Committee, said at a briefing for the full Senate that the compromise maintains a user-fee approach to funding transportation while also recognizing that "the current methodology is flawed because of the fact it is now a flat, non-growing source of revenue."

"We had the same kind of compromise in 1986, when the user fee was ratcheted up and we utilized general funds for the first time," Sen. John Watkins, R-Powhatan, said after the briefing.

But whether the measure can secure the necessary 51 votes in the 100-member House and 21 votes in the 40-seat Senate is a mystery that will await this week's final vote.

Conservatives attacked the proposal as a tax increase.

"Get ready to pay up unless you speak up now," Del. Robert G. Marshall, R-Prince William, said in a blast email to supporters. "Call your delegate and senator right away and urge them to vote against any bill that raises any tax."

Senate Democrats and some Republicans agree higher gas taxes and sales taxes are needed to solve the state's transportation problems. Others propose both statewide and local or regional increases in sales or income taxes in Northern Virginia and Tidewater.


AP Writer Larry O'Dell in Richmond contributed to this report.