The Minnesota Senate on May 10 passed a transportation appropriations bill that was amended to include an increase in both the metro area sales tax for transit purposes and the state gas tax.
(Published May 14, 2013)
Note: Portions of this article were provided by the Minnesota Transportation Alliance.
With the May 20th deadline for adjournment looming, legislative leaders and the governor agreed to budgets for the various areas of state government: education, public safety, environment, health and human services, etc. Transportation is listed as “pending”.
The Minnesota Senate on May 10 passed a transportation appropriations bill that was amended to include an increase in both the metro area sales tax for transit purposes and the state gas tax. The amendment provides a ¼ cent increase in the sales tax which would be levied in the seven county metro area on July 1, 2013 with revenue appropriated to both the Metropolitan Council and the Counties Transit Improvement Board. The sales tax is increased by another ¼ cent on July 1, 2015 for a total sales tax rate of ¾ cent in the seven county metro area for transit.
The bill also provides for an increase in the fuel tax on October 1, 2013 of 2.5 cents per gallon with another increase on October 1, 2015 of 2.5 cents per gallon for a total increase of 5 cents per gallon after October 1, 2015.
The fate of the transportation appropriations bill has been up in the air for the last couple of weeks. The bill passed out of the Senate Transportation Committee with a gross receipts tax of 5.5% on fuel sales at the wholesale level with a corresponding reduction in the per gallon fuel tax of 6 cents in addition to the ½ cent increase in the metro sales tax for transit. The bill was then sent to the Taxes Committee where an amendment to increase the fuel tax by 7.5 cents per gallon along with the ½ cent metro sales tax was offered and then another amendment to increase the fuel tax by 2.5 cents in 2013 and 2.5 cents in 2015 along with the ¼ cent sales tax in 2013 and ¼ cent sales tax in 2015 was briefly offered and then withdrawn. The Tax Committee ultimately passed a transportation appropriations bill with no tax increases.
The bill passed by the full Senate on Friday, raises $45.75 million in FY2014 and $113.5 million in FY2015 for metro area transit through the sales tax increase with a reduction in the general fund appropriation for metro transit of $23.4 million per year or $46.8 million for the biennium for a net increase of $112.45 million for the biennium. The first use of the money is for debt service on bonds, then $35.775 million for Metropolitan Council transit operations, then 100% of the operating subsidy for existing transitways and then other transit purposes.
The 2.5 cent per gallon increase in the fuel tax provides approximately $74.75 million in FY2015 – the first full year of the tax – for the Highway User Tax Distribution Fund or $44 million for the Trunk Highway Fund, $20 million for the County State Aid Fund to be distributed among all 87 counties, $6.3 million for all MSA cities and $3.7 million for township bridges and turnbacks.
The bill also includes expansion of the authority for counties to levy a wheelage tax of $10 per vehicle to all 87 counties. The legislation also removes the requirement that counties in Greater Minnesota hold a referendum prior to enacting a local option sales tax of up to ½ cent for transportation.
The bill does not include the authority for cities to create a street improvement district and it does not increase the motor vehicle sales tax rate to 6.875% as had been included in the bill as it was passed in the Senate Transportation Committee.
The bill does change the distribution of revenue from the sales tax on leased vehicles that currently is used for transportation. After the first $32 million in revenue is deposited in the general fund, the remaining funds are split so that $9 million is distributed to the 5 counties in the metro area other than Hennepin and Ramsey and the remaining funds are deposited in the Greater Minnesota Transit Assistance Account. There is also a change in the County State Aid formula such that revenue in excess of 20.5 cents per gallon in FY2014-15 goes to the excess sum rather than revenue above the current 20 cents per gallon and revenue in excess of 21 cents per gallon goes to the excess sum in the following biennium.
The bill does create a Corridors of Commerce Program for capacity development in corridors where a highway segment is not a divided highway but the corridor beyond that segment is an expressway or freeway or the highway terminus lacks an intersection or interchange with another trunk highway or provides freight improvement. MnDOT is to develop criteria for selecting projects. The bill provides $23.4 million in FY2014 and $36 million in FY2015 for the program.
No additional funding is provided for the Transportation Economic Development program (TED) but $20 million in trunk highway funds are set aside and the program is officially set in statute.
The bill provides an additional $20 million over the biennium for Greater Minnesota Transit.
The bill (HF1444) now goes back to the House where we anticipate that conferees will be appointed and a conference committee will start to meet to work out the differences between the Senate bill and the House bill which does not provide any tax increases or increases in funding beyond base levels other than an increase for Greater Minnesota transit and an additional $5 million per year in general fund dollars for TED. Expansion of the wheelage tax and the repeal of the referendum requirement for the local option sales tax in Greater Minnesota are not contained in the House Transportation bill, but are included in the House omnibus tax bill.
The governor reiterated his opposition to increasing the gas tax after the Senate vote. Not only does the governor continue to oppose an increase in the fuel tax, future revenue projections show revenue from the fuel tax decreasing over time as vehicles become more fuel efficient. The gap between what is needed to maintain the existing highway and bridge system and projected revenue is approximately $450 million per year over the next 20 years.
Debt service on trunk highway bonds previously issued continues to grow. The Transportation Appropriations bill passed by both the House and Senate provides $348.2 million for the biennium for highway debt service – up from the $310 million provided last biennium. The projection for the FY16-17 biennium is $379.6 million for highway debt service. Additional revenue is needed rather than simply adding more of a debt burden to the Trunk Highway Fund.
There is a target for a Capital Bonding bill. It has not been clear whether or not the legislature would act on a bonding bill this session. The Transportation Alliance testified in the Senate Capital Investment Committee last week in support of funding for transportation in the capital bonding bill for programs under the jurisdiction of MnDOT including:
• $20 million for the Local Bridge Program
• $64 million for the Local Road Improvement program
• $10 million for ports
• $4.9 million for Greater MN Transit facilities
Questions? Contact Anne Finn at email@example.com or at (651) 281-1263.
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