The influential bond rating firm Moody's Investors Services has found that the historic transportation funding plan passed with bipartisan support in Virginia's General Assembly last Saturday is "credit positive" for the Commonwealth, a major recognition that greatly enhances Virginia's fiscal standing during a very uncertain period nationally.
Moody's US Public Finance Weekly Credit Outlook reports:
"Last Saturday, Virginia's General Assembly passed a transportation funding package that eliminates the state's gas tax and replaces it with a sales and use tax dedicated exclusively to funding transportation needs. Governor Bob McDonnell, who sponsored the original transportation package, is expected to sign the bill into law within the next month. The new law could generate as much as $3.5 billion of net additional revenue for roads, rail and transit in the state over the next five years, a credit positive.
The legislation makes The Commonwealth of Virginia (Aaa negative) 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. These forces, combined with the fact that Virginia's motor fuel tax rate did not adjust to inflation, have translated into flat revenues over the last ten years (see Exhibit). Set at a rate of 17.5 cents per gallon since 1985, over $3.3 billion of gas tax revenues have been used for required maintenance since 2002, reducing Virginia's ability to fund transportation capacity expansion, congestion mitigation or major reconstruction and
The report further notes the Commonwealth's good timing in passing the legislation as the sequester takes effect and promises to potentially negatively impact Virginia's ability to fund roads absent this legislation:
"The dedicated transportation funds come at a time when Virginia's economy is highly exposed to federal downsizing. Defense cuts included in sequestration in particular would have an adverse impact on the commonwealth and its ability to address its transportation needs."
Speaking about Moody's finding the Governor remarked, "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. Transportation is crucial to job creation, and it is crucial to the quality of life of our citizens. 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. Today's report from Moody's is good news for Virginians. We are working to make Virginia a jobs-magnet and that can't happen without a modern and well-funded transportation system. I thank all those who have worked so hard to get this legislation passed, it was long overdue, and it is having a positive impact on our Commonwealth already."