General Assembly negotiators continued to work toward a compromise transportation funding package Tuesday night, exchanging proposals that would make significant changes Gov. Bob McDonnell’s plan to pay for the state’s road, rail and transit needs.

The 10 House and Senate negotiators broke up for the night after House conferees presented an offer that would scrap the state’s 17.5 cents per gallon excise tax on gasoline, increase taxes on retail sales and car titling, and apply a new tax to the wholesale price of fuel. The proposal would generate nearly $870 million annually by 2018 and nearly $3.6 billion in transportation funds over the next five years.

House and Senate conferees discussed the proposal briefly and asked legislative staffers to review it, then agreed to meet again Wednesday morning. Earlier on Tuesday, the House and Senate pushed their self-imposed deadline for reaching a transportation deal to Wednesday, giving negotiators another 24 hours to work.

“I think we’ve made tremendous progress in three days,” said Del. Chris Jones, R-Suffolk, the lead House negotiator.

But the work doesn’t end when House and Senate negotiators reach a deal. Any compromise will have to be approved by majority votes in the House and Senate in order to reach McDonnell’s desk.

Del. Onzlee Ware, D-Roanoke, the lone Democrat on the House conference committee, said House negotiators were making “an honest effort to compromise” and mitigate some of the Democrats’ objections to McDonnell’s original proposal.

Senate Democrats so far have insisted on retaining a gasoline tax and have objected to McDonnell’s plan to divert revenue from the state’s general fund  –  which pays for education, public safety and other services – to pay for road needs. McDonnell and Republicans have insisted that any transportation compromise must include more general fund money.

Democrats occupy 20 of the 40 seats in the Senate, enough to block passage of the transportation bill. Republican Lt. Gov. Bill Bolling, the Senate’s presiding officer, can’t break tie votes on tax and spending bills.

“We’re in a better position than we were when we started,” said Sen. Janet Howell, D-Fairfax, a member of the Senate negotiating team. “Are we far enough to get votes? I don’t know yet.”

The proposal that House negotiators offered Tuesday night would eliminate the state gas tax at the pump, but apply a 3.5 percent tax to the wholesale price of gas and a 6 percent tax to the wholesale price of diesel fuel.  It also would increase the state’s sales tax from 5 percent to 5.3 percent and increase the vehicle titling tax to a rate 1 percentage point less than the state sales tax. The tax on automobile sales is now 2 percentage points less than the retail sales tax.

The House proposal would increase the share of the existing sales tax that goes to transportation from 0.5 percent to 0.675 percent over four years. And it would impose the $100 annual fee on alternative fuel vehicles that McDonnell first proposed last month.

Ware said the House plan includes funding to extend passenger rail service to Roanoke, a top regional transportation priority.

– Michael Sluss