Local Government Funding and Financing of Roads: Virginia Case Studies and Examples from Other States

About the report:

Several Virginia localities have used local funding and financing sources to build new roads or complete major street improvement projects when state and/or federal funding was not available. Many others have combined local funding sources with state and/or federal funds to accelerate a project of importance to the locality. The purpose of this study was twofold: (1) to determine the extent to which local governments have completed road projects under Virginia statutes that enable various types of funding and financing tools and to document lessons some localities learned in the process; and (2) to identify examples of locally generated funding sources from other states not currently used in Virginia that could be promising for road projects. To achieve the first purpose, case studies and a survey were used to gather the necessary information. To achieve the second purpose, a literature review was conducted.

Different localities had different enabling factors that led to their decisions to apply local funds to road projects. Enabling factors that were evident from the case studies included the following:

• high growth rates and the resultant increases in tax receipts
• regional medical centers associated with substantial ancillary land development
• local government staff with experience managing road construction projects
• a combination of future-focused transportation plans and negotiation during the land development process
• a record of success with similar projects
• collaboration with universities and other local governments
• careful budgeting and saving.

Examples of locally generated funding sources from other states that are not widely used in Virginia include transportation utility fees, local motor fuel taxes, mileage-based user fees, special property taxes on non-residential parking spaces, a tax per employee, concurrency, availability payment public-private partnerships, and various types of special districts.

In addition to identifying the enabling factors listed, the study concludes that Virginia’s local governments have become major funding sources for road improvements of local importance. This role intensified as state funding levels decreased before Virginia’s 2013 transportation funding revisions, but some localities said that they could not sustain this trend over the long term. Even so, localities have an interest in using local dollars to advance local priority projects.

The study recommends that the Virginia Center for Transportation Innovation and Research and the Virginia Department of Transportation’s Local Assistance Division (1) develop a “road show” summarizing the findings from the case studies conducted in this study, with a focus on options for local funding that other localities might find useful; and (2) enhance an existing annual workshop that focuses on local project administration to add consideration of innovative local funding tools currently in use by jurisdictions outside Virginia.

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