Gov. Mark Dayton’s plan to inject $10.7 billion into roads, bridges and transit over the next 10 years through a series of increases in taxes and fees is the latest proposal to fund the state’s transportation system.
The governor’s plan, announced this week, is similar to one supported by a coalition of transportation and transit advocates and to the plan Senate Democrats put forward. But it’s light years away from House Republicans’ plan to put $750 million toward construction, maintenance and rehabilitation of highways, roads and bridges over the next four years — without new taxes.
Democrats and Republicans don’t even agree on the size of the deficit in the state highway fund.
While there’s a lot of ground to cover to unite the transportation proposals, St. Paul Area Chamber of Commerce President Matt Kramer said it’s encouraging that all of the major players are involved in the conversation.
“The actual proposals might be far apart, but there is agreement that we need to do something about it,” he said. “At least everyone is in alignment that we will do something.”
The governor’s plan calls for a new 6.5 percent gross receipts tax on fuel at the wholesale level, raising the tax on vehicle registration fees to 1.5 percent, increasing vehicle registration fees by $10 and requiring 15 percent in operating efficiencies at the Minnesota Department of Transportation. An example of operating efficiencies is finding cost savings in one project and applying it to another to stretch the department’s budget, Dayton said.
The overall plan is expected to generate $5.38 billion for state highways and bridges and $2.356 billion for local government transportation projects.
The governor also proposes a half-cent sales tax in the seven-county metro area for transit that would generate $2.8 billion over 10 years to pay for 20 new transitways in the metro area while $120 million in general fund money would go toward transit in Greater Minnesota. An increase in the sales tax is expected to cover the state’s share of capital costs for transit projects including the $1.653 billion Southwest Light Rail Transit line from Minneapolis to Eden Prairie.
A portion of the seven-county sales tax and general fund will be used for $75 million in bike and pedestrian infrastructure and the Safe Routes to School program. Dayton estimates the entire transportation proposal would create 119,000 jobs.
The governor said Monday that he isn’t married to any of the specific revenue sources in the plan and would work with Republicans to consider other ideas. But he criticized some of the GOP’s proposed solutions — such as efficiencies within MnDOT and value capture mechanisms — as nothing but slogans.
“It’s just pure fiction to say that these efficiencies … are going to come close to the needs for increased investment over the next decade,” he said at a press conference. “Similarly, reordering priorities — another one of these favorite slogans … what priorities are going to be reordered and what difference are they going to make relative to the $6 billion deficit?”
Republicans and Democrats haven’t even agreed on the size of the state highway transportation shortfall. Dayton’s office pegs it at $6 billion over the next 10 years to maintain and repair the existing system while making strategic investments.
Rep. Tim Kelly, the Red Wing Republican who chairs the House Transportation Policy and Finance Committee, said after the governor’s press conference that he’s not sure about the amount of the shortfall and wants to spend more time addressing questions about the state’s needs before creating a long-term funding plan.
“I think it’s irresponsible to create a long-term plan if we don’t understand and agree with what the need is,” Kelly said. The proposal introduced by House Republicans earlier this month offers a short-term solution that prioritizes roads and bridges throughout the state.
A long-term transportation funding package is more likely this year — with the state’s largest business advocacy group at least partially on board. The Minnesota Chamber of Commerce wants to see a 10-year plan to fund roads, bridges and the transit system. But so far, the chamber is not supportive of the governor’s approach to raise revenue through increased taxes.
“We hoped to see a transportation proposal that reflects focused priorities and recognizes the fact that businesses and individuals just weathered a series of tax increases in 2013,” Bill Blazar, Minnesota Chamber interim president, said in a statement.
Blazar echoed Kelly’s comments — the first step must be to agree on an investment plan for the system over the next 10 years and its estimated costs.
As federal transportation revenue has declined, Dayton said, Minnesota is not the only state struggling to pay for repairs and maintenance of the transportation system. While admitting it was politically harmful to raise taxes, he painted the task as an economic competitiveness issue for the state.
“If people can’t get to work, if they can’t get their kids off to school and activities, talented people are going to find somewhere to live where they can,” he said. “If business entrepreneurs and business owners can’t get their business products to markets without exorbitant delays and costs, they’re going to move somewhere or expand somewhere where they can.”
Under the status quo, with no new investment, 75 percent more of the state’s roadway miles will be in poor condition by 2024, MnDOT Commissioner Charlie Zelle told the Transportation Finance and Policy Committee on Monday afternoon. Only a limited number of expansions would be completed and many fewer MnPass lanes would be added.
The governor’s plan would repair or replace 2,200 miles of state roads and 330 bridges on state highways in addition to giving local governments the money to apply to their area’s transportation needs, he said.
The governor’s plan includes $1.6 billion for the Corridors of Commerce program, which targets investments on freight routes to help businesses. Kramer, the St. Paul Chamber president, said he was encouraged to see more funding for the program included in the governor’s plan because some road projects have more of an economic impact than others.
Kramer was less in favor of the governor’s gas tax plan because of its lack of transparency. The gross receipts tax is applied to the manufacturer, who then passes it on to consumers. At the lower end, the tax is expected to add 16 cents to the price of a gallon of gasoline, according to the governor’s office. If elected officials want to raise the gas tax, Kramer said they should do so at the pump.
When it comes to transportation and transit funding, the St. Paul chamber and others in the metro may differ from the statewide chamber, Kramer said. The state chamber suggests funding a 10-year transportation plan through operating efficiencies, general fund money and value-capture mechanisms.