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Would West Virginia’s Amendment 1 raise taxes?

Verbatim: Ballotpedia’s Fact-checking Desk

West Virginia Governor, Jim Justice

September 28, 2017
By Taylor Kempema

West Virginians will vote on October 7 whether to authorize sales of up to $1.6 billion in general obligation bonds to fund highway, road, and bridge construction and improvements.[1] An August 22 press release from the office of Gov. Jim Justice, who proposed the highway bond plan, states, “All West Virginians — The Road Bond Referendum is not going to raise your taxes at all­ — ZERO.”[2]

Is Justice correct?

No. If voters authorize the bond sale, the funds necessary to repay them will be generated from a variety of newly imposed tax and fee increases dedicated for that purpose. Moreover, the legislature would be required by law to levy additional new taxes and/or fees if the State Road Fund balance is insufficient to repay the principal and interest on the bonds.[1][3]

Background

Earlier this year, TRIP, a national transportation research organization, reported that 29 percent of West Virginia’s major roads were in “poor condition”, 55 percent were in “mediocre or fair condition”, and 17 percent were in “good condition” in 2015.[4] The American Society of Civil Engineers, in its 2017 report, said that 19 percent of West Virginia’s roads were in “poor” condition, and rated 17.3 percent of West Virginia’s bridges as “structurally deficient.”[5] Moody’s, the credit rating firm, reported that the state has a $4 billion backlog of road surface and bridge maintenance.[6]

During his 2016 campaign for governor, Jim Justice pledged to push for legislative approval of an infrastructure plan.[7]

In his February State of the State Address, Gov. Justice proposed raising the state gas tax and fees charged by the Division of Motor Vehicles (DMV) to pay for highway construction, maintenance, and repair. Such revenues are deposited into the State Road Fund, from which bond payments are also made.[8][9]

Prior to passage of the tax and fee increases, the governor’s FY 2018 budget proposal noted that projected revenues for the State Road Fund are “inadequate to permit the Division of Highways to satisfactorily achieve its mission of maintaining a safe and efficient highway system.”[10]

The State Road Fund ended FY 2017 with a balance of $12.9 million, and with outstanding bond debt of $326.3 million, according to the state treasurer’s office. The legislature appropriated $1.3 billion for the fund for FY 2018.[11][12]

Between 2018 and 2025, an average of $23.2 million annually will be expended on existing debt repayments without Amendment 1 bond sales, officials said.[13]

Amendment 1

West Virginia Amendment 1, the Roads to Prosperity Amendment of 2017, is on the ballot as a legislatively referred constitutional amendment. In West Virginia, a constitutional amendment must be approved by two-thirds of each chamber of the legislature during one legislative session and approved by a majority of voters.[1]

The Senate unanimously approved the measure on April 8, 2017. The same day, the House adopted the measure by a vote of 84 to 11. (All 11 opponents were Republicans.)[14][15][16][17]

Amendment 1 would, if adopted, authorize the sale of up to $1.6 billion in bonds during a four-year period (July 1, 2017, to July 1, 2020). Proceeds from the bond sales could be used only to improve and construct highways, secondary roads, and bridges. (Generating the funds would also qualify the state for additional federal highway funding.)[1]

Under Amendment 1, the legislature is required to “provide for the collection of an annual state tax which shall be in a sufficient amount to pay the interest on such bonds and the principal thereof as such may accrue within and not exceeding twenty-five years. Such taxes shall be levied in any year only to the extent that the moneys in the state road fund irrevocably set aside and appropriated for and applied to the payment of the interest on and the principal of said bonds becoming due and payable in such year are insufficient therefor.”[1][18]

New tax and fee increases to generate revenue to repay the new road bonds took effect on July 1, 2017. According to the state Tax and Revenue Department and Division of Motor Vehicles, the new taxes and fees will increase revenue to the State Road Fund by $137.7 million in fiscal year 2018, $143.1 million in fiscal year 2019, and $143.5 million for each year thereafter. Assuming these estimates, the increases would generate approximately $4 billion in additional revenue over the 25-year lifetime of the bonds.[19][20][21]

Opposition to Amendment 1

The tax and fee increases necessary to repay the bonds prompted the executive committee of the West Virginia Republican Party on August 19 to vote 99 to 1 on a resolution to oppose Amendment 1. The resolution reads, in part:[22]

“Whereas​ ​there​ ​is​ ​no​ ​limit​ ​in​ ​the​ ​Road​ ​Bond​ ​Amendment​ ​on​ ​future​ ​tax​ ​increases, gasoline​ ​excise​ ​tax​ ​increases,​ ​toll​ ​increases​ ​or​ ​increases​ ​in​ ​DMV​ ​fees​ ​to​ ​pay​ ​interest​ ​or principal​ ​on​ ​these​ ​billions​ ​of​ ​borrowed​ ​dollars;​ ​now​ ​therefore​ ​be​ ​it

Resolved,​ ​that​ ​the​ ​State​ ​Executive​ ​Committee​ ​of​ ​the​ ​West​ ​Virginia​ ​Republican​ ​Party opposes​ ​the​ ​passage​ ​of​ ​the​ ​Road​ ​Bond​ ​Amendment​ ​on​ ​October​ ​7th,​ ​and​ ​the​ ​taxes, fees,​ ​borrowing​ ​and​ ​interest​ ​within.”[23]

Tax and fee increases

The legislature on June 16 approved a variety of transportation-related tax and fee increases to generate revenue for the State Road Fund, in general, and new bonding, in particular. The measure, SB 1006, was signed by Gov. Justice on June 22, and took effect on July 1.[3][24][25][26]

By law, revenues deposited in the State Road Fund are dedicated to maintenance, construction, and improvement of state roads and to pay the principal and interest due on state bonds issued for the fund.[27][28]

To generate additional road fund revenue, SB 1006 increased the following taxes and fees:[3][29][30][31][32]

  • Raising the tax on gasoline and other fuel by an average of 3.5 cents per gallon, from 32.2 cents per gallon to 35.7 cents.[33]
  • Raising the consumer sales tax on motor vehicles purchased by West Virginians from 5 percent to 6 percent.
  • Higher fees charged by the state Department of Motor Vehicles for vehicle titles and registration; vehicle safety inspection stickers; driving records; and salvage titles. Fee increases range between 50 cents and $171.50.

Conclusion

West Virginians will vote on October 7 whether to authorize a sale of up to $1.6 billion in bonds to fund highway, road, and bridge construction and improvements.[1] An August 22 press release from the office of Gov. Jim Justice, who proposed the highway bond plan, asserted that “The Road Bond Referendum is not going to raise your taxes at all­ — ZERO.”[2]

No. If voters authorize the bond sale, the funds required to repay them will be generated from a variety of newly imposed tax and fee increases dedicated for that purpose. Moreover, the legislature would be required by law to levy additional taxes and/or fees if the State Road Fund balance is insufficient to repay the principal and interest on the bonds.[1][3]

See also

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Sources and Notes

  1. 1.01.11.21.31.41.51.6 West Virginia Legislature, “Senate Joint Resolution 6,” April 17, 2017
  2. 2.02.1 Office of the West Virginia Governor, “Governor Justice Issues Statement on Road Bond Referendum,” August 22, 2017
  3. 3.03.13.23.3 West Virginia Legislature, “Enrolled — Senate Bill 1006 by Senators Carmichael (Mr. President) and Prezioso (by request of the executive),” June 16, 2017
  4. TRIP, “West Virginia Transportation by the Numbers: Meeting the State’s Need for Safe, Smooth and Efficient Mobility,” February 2017
  5. American Society of Civil Engineers, “West Virginia Infrastructure Overview,” accessed September 28, 2017
  6. Moody’s Investors Service, “Moody’s: Burden of infrastructure spending increasingly falling on US states,” January 19, 2017
  7. The Exponent Telegram, “Tired of being 50th? Jim Justice says new leadership needed to lift state to rightful spot among nation’s best,” August 7, 2016
  8. West Virginia Governor’s Office, “Full Transcript of 2017 State of the State Address,” February 8, 2017
  9. West Virginia Governor’s Office, “Gov. Jim Justice — Roads Plan,” February 27, 2017
  10. West Virginia State Budget Office, “State of West Virginia, Executive Budget: Volume 1 Budget Report — Fiscal Year 2018,” February 8, 2017
  11. West Virginia State Legislature, “Enrolled — Senate Bill 1013 by Senators Carmichael (Mr. President) and Prezioso (by request of the executive),” June 16, 2017
  12. West Virginia State Budget Office, “State of West Virginia, Executive Budget Brief — Fiscal Year 2018,” January 11, 2017
  13. West Virginia Treasury, “June 2017 Debt Position Report,” June 30, 2017
  14. West Virginia Legislature, “SJR 6 House Vote,” April 8, 2017
  15. West Virginia Legislature, “SJR 6 Senate Vote,” April 8, 2017
  16. West Virginia MetroNews, “Justice schedules road bond election, signs Parkways bill into law,” June 27, 2017
  17. The measure also required the governor to set a special election date in 2017 for a public vote on the amendment. On June 27, 2017, Gov. Jim Justice set the election date for October 7, 2017.
  18. The following amounts would be authorized in bonds each year: $800 million in 2017, $400 million in 2018, $200 million in 2019, and $200 million in 2020.
  19. West Virginia State Legislature, “Fiscal Note Summary of SB1006 from the WV Division of Motor Vehicles,” May 16, 2017
  20. West Virginia State Legislature, “Fiscal Note Summary of SB1006 from the WV Tax and Revenue Department,” May 16, 2017
  21. Under Amendment 1, the final bond would be issued on July 1, 2020. Any bonds not issued between 2017 and 2019 may be carried forward and issued in any subsequent year before July 1, 2021.
  22. Charleston Gazette-Mail, “Resolution on the October 7, 2017 Road Bond Election,” August 23, 2017
  23. Note: This text is quoted verbatim from the original source. Any inconsistencies are attributed to the original source.
  24. Road fund revenue includes taxes on gasoline, motor carriers, and automobile purchases; fees on motor vehicle registrations and licenses; federal funds, and miscellaneous revenues.
  25. West Virginia House of Delegates, “83rd Legislature — First Extraordinary Session 2017 — SB 1006: Increasing funding for State Road Fund,” June 16, 2017
  26. West Virginia Senate, “West Virginia Senate Roll Call — SB 1006: Increasing funding for State Road Fund,” June 16, 2017
  27. West Virginia Legislature, “West Virginia Code: Chapter 17. Roads and Highways. Article 3. State Road Fund,” accessed September 11, 2017
  28. West Virginia Legislature, “Constitution of West Virginia, Article 6–52,” accessed September 18, 2017
  29. The Herald-Dispatch, “Justice signs bill to increase gas tax, DMV fees,” June 23, 2017
  30. Tax Foundation, “State Tax Changes Taking Effect July 1, 2017,” June 2017
  31. West Virginia Department of Transportation, “Senate Bill 1006 Changes DMV Fees Effective July 1, 2017,” June 27, 2017
  32. Fees also were increased for some services from which the revenue is not deposited into the road fund, including driver’s license tests; instruction permits; DMV hearing requests; and motorcycle licenses.
  33. SB 1006 raised the minimum average wholesale price of fuel for tax collection purposes from $2.34 per gallon (a rate of 11.7 cents) to $3.04 (a rate of 15.2 cents).




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