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Virginia approves transportation funding overhaul

WASHINGTON (Reuters) - Virginia's Legislature approved on Saturday an overhaul of its transportation funding system, moving the state away from a reliance on gasoline taxes to fix its roads and highways.

The bill providing $880 million a year for transportation passed on the last day of the state's legislative session and is now headed to Governor Bob McDonnell to sign.

The legislation includes McDonnell's proposal to scrap the state's 17.5 cent-per-gallon gasoline tax charged at the pump. It also creates a tax on wholesale gasoline and diesel, raises the sales tax, draws $200 million from the state's general fund and charges a registration fee for hybrid, electric and alternative-fuel vehicles.

McDonnell, a Republican who cannot seek re-election this year, said in a statement, "With this bill, gas prices will be reduced, and we will reduce our historic reliance on the gas tax which is in a long-term decline."

The main source of highway funds in about half the states comes from a motor vehicle fuel tax, according to the National Conference of State Legislatures. That is on top of the tax of 18.4 cents a gallon the federal government charges drivers.

"As cars get significantly better mileage and more Americans choose alternative fuel vehicles, it is an inescapable fiscal reality that the gas tax is no longer a dependable, sustainable source of transportation revenue," McDonnell wrote in a letter to legislators officially closing the session.

(Reporting By Lisa Lambert; Editing by Peter Cooney)

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