Metro Sales Tax: Bad for Virginia, Worse for Loudoun

by Dave LaRock

The Washington, D.C., Metro system serves three jurisdictions: Maryland, Washington DC and Virginia. The Virginia jurisdiction includes Alexandria, Arlington, Fairfax City, Falls Church, and, starting in 2020, Loudoun County. For several years, D.C.-based interest groups have been pushing for a 1% sales tax increase across the region served by Metro to fill a funding gap currently estimated at $7.5 billion over ten years.

While this may sound like a reasonable proposition to some, when you drill down it becomes clear this is very unbalanced against Virginia and even less equitable for Loudoun County.

Right now there is a funding ratio in place whereby Metro funding needs are divided between the three jurisdictions. This funding ratio is based on track miles, number of stations, ridership, etc. Virginia is assessed 28%, WDC 37% and Maryland 35%. The proposed 1% sales tax would have Virginia paying over half of the money needed to fill the $7.5 billion funding gap. In 2019, Virginia’s share will increase as Loudoun will also start paying a share for the maintenance and operations of the overall system.

But for Loudoun it is far worse. Much of the $7.5 billion funding gap is needed to make repairs that are decades overdue and rightfully should have been completed years before Loudoun joined the partnership. Just to put this in perspective, if Loudoun was a paying member in 2016, the proposed 1% sales tax would have cost Loudoun $74,949,695, and that number is increasing rapidly. In the last 2 years, Loudoun’s sales tax revenue increased 23%; that’s more than the other affected Northern Virginia jurisdictions increased in the last 10 years! If the proposed tax is levied with permission from the General Assembly, Loudoun County would pay at least $80 million per year going forward.

That is a pretty hefty share considering the Metro will only come 1.7 miles to one station past MWAA/Dulles Airport land into Loudoun; MWAA will have 4.9 miles of track and two stations on Dulles Airport land. The total system at that point will be 129 miles with 97 stations. Also realize that Loudoun will not be using Metro’s bus service, and that Loudoun and Fairfax folks are already contributing billions of dollars in tolls and taxes to fund 100% of the Silver line, as well as over one quarter of the 7000 series “New Cars” that will be in service throughout the Metro system by the end of this year.

It is outrageous to ask all Loudoun County residents to pay money into a Metro system every time they purchase a taxable item; most residents use the Metro rarely, if ever.

To a large degree, the high cost of bringing the Metro system to a reasonable state of repair is due to decades of mismanagement. Safety and reliability have plummeted, and so have ridership and revenues. Most of the $7.5 billion total “funding gap” can be attributed to capital projects: WMATA needs new cars and major track refurbishment.

It is essential that as we work to fix Metro, we do not lose sight of the importance of being fiscally responsible and the need to limit taxation. These are basic principles of sound government: Excessive taxation has a negative effect on economic activity and family budgets.

Simply handing more revenues to WMATA without fixing its foundational issues is not a responsible solution. There are significant reforms to Operations and Management that must be made as well. Metro’s new General Manager, Paul Wiedefeld is doing a great job at getting the ball rolling in the right direction, but that’s not enough. Metro has problems that go much deeper than lacking cash. Operating expenses (mostly labor) are growing at nearly twice the rate of revenues and this requires significant changes in the business model. The WMATA Compact binds the three main jurisdictions and governs the management of the system. The Compact is outdated and needs to be revised. In fact, Virginia has already passed multiple revisions which, if accepted by Maryland and WDC, would substantially improve the Compact. Last, but not least, the WMATA Board is too large and is staffed with too many people who do not have the expertise needed to whip the Metro into good shape and keep it that way.

In 2012, Loudoun County supervisors voted 5 to 4 to extend Metro to Loudoun; while doing so, the payment proposition was to cover construction costs by taxing the property around the new rail stations. Fairfax County has a similar arrangement around the Silver Line stations. That is a funding alternative that holds promise. Those who benefit from Metro – riders and station-area developers – and the Federal government should pay to keep the system running.

In closing, the proposed 1% sales tax is bad for Virginia and worse for Loudoun County. Throwing more money at Metro without fixing the WMATA Board and the WMATA Compact ignores Einstein’s observation that doing the same thing over and over again and expecting a different result is insanity.

Dave LaRock is a Republican member of the House of Delegates, serving the 33rd District in Loudoun, Clarke and Frederick Counties.

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17 responses to “Metro Sales Tax: Bad for Virginia, Worse for Loudoun

  1. This is the proverbial – “We won’t fund VDOT until they fix their congestion problem” … “thinking”.

    If you underfund an organization – they ARE going to do badly.

    So some folks are actually talking about dealing with that issue while the naysayers like Mr. LaRock want to continue to distract the reality that has tobe addressed and apparently is more than willing to let Metro just continue to twist in the wind..

    you either want to fix the problem or you just want to stand aside and make noise.

  2. The next time Virginia raises the sales tax it will be for Medicaid, a prediction I made as far back as 2004 and of course was proven wrong by the 2013 roads tax bill….but a tax increase to fund Medicaid is inevitable, especially as Congress proves incapable of slowing its growth. Virginia still has a relatively low sales tax and I suspect the long-lead thinkers won’t want to use it for transportation again.

    How much would Metro fares need to rise to make the system self-sustaining, with a reasonable maintenance money flow? Ideally the riders should pay, one way or the other. They certainly can’t push all the costs of rebuilding off on the general taxpayer.

    To what extent is the system already using special taxing districts to make the other beneficiaries pay? That makes more sense economically, although I understand that a general sales tax hitting the widest possible region is politically attractive because it can be minimal. I see LaRock’s point about Loudoun, but its citizens will be paying somehow.

  3. My comments on the 1% sales tax is that I agree that it may not be the best for NoVA. We already had the State of Virginia jack up NoVA sales taxes instead of a statewide increase in gasoline taxes for road projects. We cannot just have a bunch of outsiders jacking up NoVA sales taxes all the time. That’s for us to decide how to get the funds. Probably a higher NoVA fuel tax makes sense since we are lower fuel tax than MD DC.

    As far as fair payment amount, I dunno the answer. I have a defeatist attitude that our elected officials, in so many words, have lost control of NoVA tax increases and we are hosed. Going to be like New Jersey one day.

  4. First, WMATA needs to cut wages/compensation to be realistic like the airlines did when they had big financial problems. Maybe it’s a two-tier wage structure. Maybe it’s contracting out work. Operating costs need to be cut measurably.

    Second, Virginia needs to adopt a value capture tax plan that gets money (be it real estate taxes, sales tax, or both) from the landowners in the TOD areas (1/4 mile from a station). The arrival of Metro, be it in Fairfax County, Arlington, Loudoun or Alexandria has added massive wealth to landowners solely because of the presence of Metrorail. Why the devil shouldn’t they pay more for the very thing that made and continues to make them wealthy?

    Dan Clemente has a gr0up that is proposing three buildings all in excess of the height limits in the Tysons Comp Plan. One is more than 600 feet; one is more than 500 feet; and the third is 420 feet. Even if the group builds three buildings to 400 feet–the plan limit–they will make massive profits. And many want to tax purchases and/or gasoline. Why do either conservatives or liberals want to transfer money from ordinary people to a few already wealthy landowners? The very idea should make their skin crawl.

    And why shouldn’t those businesses and residents who have instant access to Metrorail pay higher rents, purchase prices and taxes to sustain the instant access and higher real estate values?

  5. Del. LaRock:

    I understand that you are a relatively recent addition to the Virginia General Assembly. Accordingly, you can’t be held personally accountable for the gas tax that was frozen in cents per gallon for 26 years. It was that dereliction of duty on behalf of the Virginia General Assembly that was the primary cause of the overall transportation mess in Northern Virginia (and other fast growing areas of Virginia). Had the gas tax been indexed to inflation there would have been vastly more money available to address the congestion issues in NoVa and elsewhere in Virginia. The sheer incompetence of your predecessors in the General Assembly for more than a quarter century was the proximate cause of our woes.

    The second biggest issue regarding congestion in Northern Virginia is the abject dysfunction between county governments and the state. County commissioners routinely approve construction projects that are guaranteed to turn badly congested roads into intolerably congested roads. Meanwhile, the state government in Richmond froze the gas tax in cents per gallon. You reference Einstein in your blog. Frankly, this requires no genius. A fairly alert dog would have seen this catastrophe coming.

    Your peers in Richmond and your allies in the county governments have done the citizens of Virginia a terrible disservice. You have dug an extremely deep transportation hole that will take decades to remedy. Fortunately, the much maligned Bob McDonnell took the very unpopular action of addressing transportation funding by pushing a Rube Goldberg style law through the General Assembly. Many GA Republicans howled like ruptured coyotes about “the biggest tax hike in Virginia history”. Shame on them. The tax hike was needed to address “the biggest fiscal negligence in Virginia history”. That’s one half of the story. The other half is the continued ineptitude of separating land use decisions from transportation policy. Nobody seems interested in addressing that. I guess it’s easier and more fun to carp about WMATA.

    While some of your points about WMATA are on target you bypass some realities as well. For example, the New York subway system is facing a crisis similar to Metro. Aging infrastructure was not addressed until it became a crisis. It seems that elected officials in multiple mismanaged parts of the country are willing to “look the other way” at growing mass transit problems since those problems aren’t visible to voters until they become crises.

    I also suspect (but don’t know) that you cherry picked some statistics …

    “In the last 2 years, Loudoun’s sales tax revenue increased 23%; that’s more than the other affected Northern Virginia jurisdictions increased in the last 10 years!”

    So, if I add up the increased dollars of sales tax revenue in Fairfax, Alexandria, Arlington, etc over the last 10 years that sum would be less than the sales tax revenue increase (measured in dollars) for Loudoun County over the last 2 years? Really?

    “This funding ratio is based on track miles, number of stations, ridership, etc. Virginia is assessed 28%, WDC 37% and Maryland 35%. The proposed 1% sales tax would have Virginia paying over half of the money needed to fill the $7.5 billion funding gap.”

    Don’t we need to look at the track miles, number of stations, ridership, etc AFTER the Metro extensions are complete? If, after expansion, Virginia has more than 50% of those track miles, stations, riders, etc – why would that ratio be wrong?

    In summary, incompetent governance by our state and local elected officials created the land use / transportation mess in Northern Virginia (and elsewhere in Virginia). In NoVa Transit Oriented Development (TOD) is probably the only way to unravel that mess. Given that NoVa generates billions of dollars more in state tax revenue than it consumes in state payments (and has for decades) it seems reasonable to me that rectifying the state-wide incompetence of our elected officials should be more than a local problem. When schools, police, Medicaid, roads, etc outside of NoVa need to be funded the GA is only too happy to dig its greasy hands deeper into NoVa’s pockets. But when NoVa needs to be a bit less of a cash cow for the rest of the state it’s all so terribly unfair.

    Don Rippert.

    • 100% percent of the blame for our traffic congestion belongs with local government. They approved changes to Comp Plans and up-zoning requests in the face of strong evidence that the roads and transit could not handle the increased growth. Yet, instead of telling landowners they can build what they are allowed by right under existing zoning, our local officials (who generally receive large campaign contributions from such landowners) willfully approved application after application.

      Moreover, empowered with the authority to negotiate proffers in kind or in cash sufficient to mitigate the impact of the up-planning and up-zoning on our roads and transit, they failed to do so and created the mess in which we lie. While I think the gas tax could have been increased earlier, it is not fair to make ordinary people make a transfer of wealth to landowners who should have paid for the transportation improvements needed because of their greater density. Adequate proffers should be collected and then realistic gas taxes imposed.

      • “100% percent of the blame for our traffic congestion belongs with local government. ”

        Bullshit. Not close to 100%.

        The roads and transit couldn’t handle the development because The Imperial Clown Show in Richmond held the gas tax flat in cents per gallon. No other state in America was dumb enough to do that.

        As I continually stress on this blog – a structure that separates land use decisions from road and transit decisions is doomed to fail. A big part of that separation is Virginia’s mindless devotion to a strict implementation of Dillon’s Rule. Richmond certainly wants to see the population of Northern Virginia increase so it can skim even more billions from NoVa. But Richmond has no interest in the transportation havoc that is caused when the population swells while the funding for roads is frozen.

        Virginia needs a new constitution.

    • The potential benefit to NoVA of an increased gasoline tax, is that the tax increase might not be totally passed thru to the consumer. The pump price we pay is based on a proprietary formula used by the gasoline marketers, and to some extent they may be trying to hold NoVA pump prices on a par with MD/DC who have higher gasoline taxes. So when the State of Virginia holds gasoline taxes at a very low level, that tends to put NoVA in a competitive disadvantage with MD/DC. In this theory, NoVA has to pay bigger profit margins for gasoline so the marketers can hold NoVA pump prices roughly equal to MD/DC.

      Re: Taxes – I would also ask, how does Virginia do in the metric of sharing tax burden with those from outside of the state (eg; by road tolls, gaso taxes etc)? Seems to me Virginia must be lousy at that metric, at NoVA’s expense. But I am not sure.

  6. Well Fairfax is largely responsible for many of the financial woes so why would Maryland or Arlington want to pick up more of the tab. Using my late friend Bob Simon’s notation Fairfax “doglegged” the metro around Tysons Corner rather than coming straight up the Dulles Toll Road as originally planned. It was done to redevelop the land in Tysons Corner as a result of the Metro going to Dulles.
    The extra construction and delay cost for the doglegging (Simon’s notation) was close to $2 billion and four stations were added making the trip to Dulles up to an hour longer. And that decision, a Fairfax one, delayed the opening for some two years. Loudoun is barely in the Metro…and getting them to pay a lot more will be difficult.
    Sometimes the rooster comes home to rest.

    • Absolutely true. Metro going through Tysons was done solely to enable landowners who make campaign contributions eligible for massive density on the backs to Dulles Toll Road users and increased the cost of the Silver Line and delayed its arrival.

      And so far, Tysons-related traffic is worse now than before the Silver Line opened, with much of its cutting through neighborhoods. I’ve seen photos of Maryland traffic backed up 20 cars deep on neighborhood streets, such that residents cannot get out of their driveways.

      Fairfax County’s Traffic Demand Management program is a joke. It relies on biennial employee/tenant surveys that always meet the targets rather than bona fide measurement. Local government in Virginia is many times more corrupt than state government.

      • “Local government in Virginia is many times more corrupt than state government.”

        Again, bullshit.

        State officials are rotting jail as we speak. Phil Hamilton. John W. Forbes II, Bob McDonnell (convicted but the law was overturned). These aren’t vague allegations. These are convictions in a court of law.

    • The Metro doglegged through Tyson’s because the only hope to save Tyson’s was Transit Oriented Development. The alternative would have been a constantly decaying Tyson’s with the constant cacophony of “suburban blight”, “suburban sprawl” coming from the lips of the “plan free” right wingers.

      Inner NoVa ought to be consolidated into a single city with a strong city charter. A percentage cap on the transfer of wealth out of that city ought to be implemented as part of the state’s constitution. Article XI of the Maryland Constitution creates the City of Baltimore and defines its governance structure and autonomy.

      It’s time to get NoVa out from under the thumb of the Imperial Clown Show in Richmond. At least then – there would be no doubt as to who was at fault for whatever issues confront NoVa.

      • DJR-the problem was the bulk of the costs for dog-legging the Silver Line through Tysons are largely being paid by Dulles Toll Road drivers and not the landowners who received the chance for massive profits due to density that was enabled by the arrival of rail. While many residents of the northern parts of Fairfax County are angry about the explosion of cut-through traffic caused by Tysons, I think many people would be more supportive of the added costs if the bulk of them had been borne by the benefited Tysons landowners. I hear this regularly from both Republicans and Democrats.

        So now is the time to impose a value capture plan on locations near all rail stations in NoVA to help fund WMATA.

        And, as far as a city is concerned, you would not get sufficient votes from Fairfax County supervisors to advance the effort. The County does not want the responsibility for local roads. Even assuming VDOT provided appropriate state funding to Fairfax as it does for other cities, towns, and the counties of Arlington and Henrico, FC DOT studies indicate real estate taxes would need to be increased by at least two to three cents to provide for adequate repair and maintenance. Given the voter rejection of the meals tax (something I supported to diversify revenues), I don’t think county residents would support becoming a city with an added tax burden.

  7. For the critics of Metro – I ask – what metrics are you using to judge them and are you comparing to other systems?

    Are there real benchmarks that have to be met instead of fuzzy subjective things that vary arbitrarily all over the map?

    And if you have benchmarks that are genuine and comparable to other systems then how would you expect them to be met without funds?

    Finally… if you want to talk about dysfunction – just refuse to adequately fund any operation and see what happens.

    The problem with LaRock and other opponents is that many of them really oppose the CONCEPT of Metro to start with. So you have to wonder if they really want a well-functioning system – that does cost money – or are they really wanting to see it stripped down to a bare bones operation that is so poorly funded that it atrophies?

    You can argue about sales tax but to use that argument as an excuse to not finding a way forward to adequately fund METRO – again one must wonder what the motive really is,

    Metro is accused of using Davis-Bacon – they do – so does VDOT yet no one jumping up and down about denying funding to VDOT until they “fix” their problems. It’s just plain ignorant.

    METRO has problems – yes – including governance – and it does need to be addressed but you don’t do that by continuing to starve of it the necessary funding it needs – to operate a quality operation.

    Compare it to other METROs – determine what are acceptable operating and capitalization standards – and then commit to solving the shortfalls AND adequately funding it,

    I’m not totally buying DJ’s “imperial clown Dillon Rule” shtick here because if NoVa itself can’t reach consensus then why blame others? If they could reach consensus and go as a region to the GA to demand the sales tax – they’d probably get it.

    Lowdown IS responsible for it’s share – they generate a significant portion of the regions traffic and consume significant road transportation resources to commute.

    So the very first thing I want to know about LaRock – is does he support METRO as a concept .. and if so WHAT does he SUPPORT as adequate funding ?

    MOve to solutions and stop obfuscating.

    • There are lot of arguments about the purpose of Metrorail. It appears to have been designed to bring workers to and from downtown Washington. Many of these workers are federal employees or employees of businesses serving or influencing the federal government. Of course, it serves other purposes, most especially bringing people to other stations within the system and allowing passengers to go to and from other transportation hubs, including DCA and Union Station. It was also intended to offer the same service to IAD.

      Some see Metrorail as a broader transportation system similar to the NYC subway system. But Metrorail, a two-track system, was not so designed. I don’t think there exists the money or the political will to convert Metro into a broader transportation system.

      Some see Metrorail as an enabler of dense development. And the evidence shows that TOD areas (1/4 mile from a station) can be good for such development. Here I argue that those who benefit from the ability to develop more densely in the TOD areas need to pay for the bulk of the costs of constructing and rehabilitating Metrorail since it gives them the high profits from density. Those same entities need to contribute to operating costs as well.

      In sum, I don’t think the Metro area would function as well if Metrorail simply disappeared as it does today. But it’s a big jump to conclude Metrorail benefits most people in Metro area. I believe only about 6-8% of the area’s residents take any form of transit. Most don’t see their commutes affected positively by Metrorail. And sometimes even those who travel near a Metrorail line will not see any long-range benefits in their commute. For example, the Final EIS for the Silver Line shows no substantial improvements in traffic congestion even on the parallel Dulles Toll Road. As a VDOT engineer told me some years ago, any benefits of rail will soon be overtaken by the additional traffic generated by the new development permitted by the creation of the Silver Line.

      So I think a good argument can be made that the bulk of the new tax money for WMATA should be obtained from those who directly benefit from rail – those who built/build densely and those who live or work in those buildings.

  8. I think as long as people refuse to WANT TO KNOW how much METRO – as it is now – should cost to operate – the amount needed to keep it from falling into dysfunctionality , maintenance failures, operational problems.. due to insufficient funding and bad choices forced when playing robbing Peter to pay Paul.

    You cannot begin to have an efficient and well-run system if you don’t have the minimum funding to do it – and people do not apparently want to know what it should cost – then on top of that – argue about who should pay.

    So METROs problems are rooted in the inability of NoVa citizens themselves to reach consensus on how to fund it… that’s the bottom line.. everything after that – hinges on what it costs to operate without having to put things off and shift funding from one need to a higher need.

    METRO does benefit everyone in the region – including tourists and air travelers and as such everyone should help fund it and especially so if you don’t like the chaos that comes when people short-fund – the first step is WANTING TO KNOW how much METRO – SHOULD COST!

    • Larry – I’m struggling with your statement that everyone in the region benefits from Metro. At a conceptual level, I think this is true. But the benefit for most people is tangential. Shouldn’t primary cost recovery come from those who benefit most? WMATA just raised fares for users. That’s a good move. However, it doesn’t directly reach the landowners (both developers and others) and tenants in the TOD areas who can walk to and from rail. Why shouldn’t these people pay more? Is it because the cost for Metro outweigh the benefits? Or is it protection for the big campaign contributors?

      It would be similar to a decision to build a new intersection on a freeway that would enable landowners to develop their nearby land. As I recall, when VDOT built the I-66 interchange for the Fairfax County Parkway, nearby landowners who up-zoned had to pay for much/all of the interchange. Why is Metrorail different?

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