Background on Governor McDonnell’s Borrowing Plan and the VDOT “Found” Money

According to his press release on December 9, 2010, Governor McDonnell’s Funding Plan proposes the following:

• Direct $150 million to transportation from budget surplus. These one-time funds will go to the Virginia Transportation Infrastructure Bank.
• Pass a constitutional amendment to permanently protect the Commonwealth Transportation Fund from transfers to the General Fund.
• Create “Virginia Transportation Infrastructure Bank” (VTIB) to multiply transportation dollars.
• Capitalize Bank with $150 million from surplus and $250 million from audit-identified funds; Goal is to provide an initial $400 million and $1 billion total during administration.
• Modify Virginia Code to authorize Direct GARVEE bonds. This would allow the Commonwealth to issue at least $1.1 billion in direct GARVEE bonds and utilize toll credits for state match.
• Accelerate the sales of bonds from 2007 transportation legislation to max of $600 million per year, providing ability to issue up to $1.8 billion in bonds during remainder of the Administration. For every $100 million spent on highway construction, it is estimated 3,000 jobs are created or supported.
• Increase the availability of Revenue Sharing, specifically eliminating the $1 million cap per project and $50 million program maximum.

You may have also heard about the money “found” in the audit of the Virginia Department of Transportation includes the following:

• $400 million in toll credits that have been requested by VDOT. Toll credits do not create new money — they would simply allow certain projects to be 100% federally funded instead of 80% federal and 20% state. So the only benefit of this is that you have state funds not tied to matching federal funds.
• The audit counts all of the federal dollars that are “apportioned” to the state. However, the state cannot spend all of these funds. States are given a certain amount of “obligation authority” which represents the amount of money the federal government agrees to pay the state back. There is typically a delta around 3-7% between apportionment and obligation authority.
• The audit counts the $524 M “federal reserve” that was created by the state when the federal trust fund became insolvent — gas tax revenues were no longer sufficient to pay states back as much as was promised in the federal program. Future federal funding levels are unknown and very uncertain, so this reserve is a prudent policy, particularly given the significant gridlock in Washington DC.
• Many of the other recommendations simply relate to spending money earlier in a fiscal year.
• A maintenance carry-over balance which could be spent faster, but it wasn’t spent as quickly during the period when state officials were ensuring that they fully obligated ARRA stimulus funds, to avoid loss of these funds to other states.