Virginia legislators have reached agreement on implementing a 10-cent increase to the state’s gas tax over the next two years. The deal, which must be approved by both chambers, includes a separate measure restoring more than $150 million in Northern Virginia project funding that had been reallocated in 2018 to help cover budget shortfalls in the Washington, D.C., area’s Metro system.
The state last changed its gas tax formula in 2013, eliminating a per-gallon tax at the pump in favor of charging 3.5 percent of the statewide average wholesale price per gallon in January and July of each year. Coupled with the growth of fuel-efficient vehicle, Virginia’s gas tax revenue has steadily declined in recent years, limiting the state’s ability to keep pace with road and bridge maintenance needs.
Under the new plan, the increase will be added in 5-cent increments later this year and in 2021. Afterward, the fuel tax will be tied to the Consumer Price Index. However, the added revenue will be partially offset by a $10 reduction in the state’s vehicle registration fee. Increases to hotel and real estate taxes in Northern Virginia will help make up for the Metro transfers.
In addition, regional fuel taxes already in place to fund local transportation projects in Northern Virginia, Hampton Roads and the I-81 corridor will be expanded to adjacent areas. Virginia will also continue its requirement for annual vehicle safety inspections.
Although Gov. Ralph Northam (D) could alter the final legislation, he has supported a gas-tax increase as part of a broader plan that includes issuing bonds to upgrade the state’s rail infrastructure and fund improvements in the I-95 corridor.