Betsy Parker of Mn/DOT’s Office of Government Affairs discussed transportation proposals for the legislature, noting that results may not be clear until the last days of the session in early May. Key elements of the governor’s budget recommendations include:
- Implementation of the constitutional amendment to dedicate motor vehicle sales tax (MVST) to transportation.
- Trunk highway investment: The budget includes a one-time transfer of $100 million from the general fund to the trunk highway fund to complete priority projects, and recommends that $1.7 billion be authorized for trunk highway bonding over the next 10 years. “The proposal has received a cool reception, to put it mildly, from Democrats,” Parker said. The governor feels it is responsible to bond for highway construction, she explained, so that roads can be used while being paid for.
- Mileage-charge demonstration: To reduce the reliance on the gas tax as a transportation funding source, $5 million from the $100 million trunk highway fund transfer is directed toward a pilot project to demonstrate technologies that would allow a fuel-neutral mileage charge.
- Truck weight: Mn/DOT will pursue last year’s proposal to allow heavier trucks if axles are added to protect the pavement. These truckers would be required to obtain permits and pay permit fees.
“One burning issue at the legislature is where the money is spent,” Parker said. Some people may be surprised that roughly 55 percent of state construction funding from 2003 through 2005 went to Greater Minnesota and 45 percent to the metro area. Future construction is expected to have a similar split, she said.
The biggest slice of state transportation appropriations—34 percent—is state aid to local governments. Other expenditures are state highway construction (27 percent), multimodal systems (15 percent), operations and maintenance (12 percent), infrastructure planning and investment (9 percent), and general support and electronic communications (3 percent).
Another burning issue at the legislature is how to fund transportation, Parker continued. At 34 percent, the state fuel tax makes up the largest slice of the state transportation revenue pie, followed by the motor vehicle registration tax (27 percent), federal fuel tax grants (17 percent), MVST (9 percent), federal aid to local roads (7 percent), and federal and investment income and other fees (6 percent).
The problem, Parker said, is that inflation is growing but the three key revenue resources are not. The gas tax hasn’t been raised since 1988, and tab fees were actually lowered under former governor Jesse Ventura. And even though MVST revenues will grow thanks to the amendment, she said, estimates predict small growth to 2011 due to less demand for new autos as baby boomers age (which affects tab revenues as well).
In contrast, Minnesota’s Construction Cost Index is estimated to have increased by around 19 percent during 2006 (final numbers were not yet available). This is significantly higher than the general inflation rate and historically at the highest level to date, Parker said.
The growth is driven by the record-level price increases in asphalt (with a producer price increase of 55.8 percent), which, in turn, are driven by the unprecedented increases in crude oil prices over the last few years. Oil price increases affect not only asphalt prices but also transportation costs, excavation costs, and machinery operations. For example, Mn/DOT experienced a 34.4 percent increase in unit cost of bituminous surfacing over the last three quarters, she said.
“When you look at declining or flat revenues on one hand and inflation on the other,” Parker concluded, “there is a lot to argue about to pay for transportation.”
For more information about the budget, visit the Mn/DOT Web site at www.dot.state.mn.us.
—Pamela Snopl, LTAP editor
(Edited from Parker’s presentation handouts.)