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Note: This article contains information provided by the Minnesota Transportation Alliance.
(Published Apr 18, 2013)
The Senate Transportation Committee on Wed., April 17, abandoned an earlier “lights-on” bill and passed a package containing substantial increases in transportation funding. By all accounts, the new bill, SF 1173 (Sen. Scott Dibble, DFL-Minneapolis), is a comprehensive transportation funding package that includes significant new revenue for highways and transit statewide.
The bill passed out of the Senate Transportation and Public Safety Division on a roll call vote. It is scheduled for its hearing in the Senate Finance Committee the evening of April 18.
The package includes a new funding concept--a sales tax at the fuel distributor level--that was suggested by transportation advocates including the Minnesota Transportation Alliance. Proponents of the distributor tax argue that gas tax revenues are declining and any increase in the per gallon tax would not only fail to keep up with inflation, but would decline as fuel consumption is projected to decrease. An increase in fuel efficiency and the advent of more all-electric vehicles will mean the gas tax won’t generate the revenue previously projected. In 2008, a one cent increase in the fuel tax raised $32 million annually. Today, a one cent increase in the fuel tax generates $29 million annually.
A five cent increase in the current fuel tax would generate about $145 million per year. With the constitutionally required distribution of 62% to the trunk highway fund, 29% to the County State Aid Fund and 9% to the Municipal State Aid fund, that means about $85 million per year for state highways and bridges, $40 million for all 87 counties and about $12 million for all MSA cities with a 5 cent increase in the tax.
The proposal developed by the Senate Transportation and Public Safety Division would decrease the current 25 cent per gallon fuel tax by 6 cents per gallon and replace that tax with a 5.5% gross receipts tax on distributors. Due to the fact that the tax is a percentage of the price, the revenue will increase as the price increases automatically. There is more volatility with this revenue source as prices fluctuate, the base 20 cents per gallon plus the 3.5 cent per gallon fuel surcharge will remain in place and will provide more stability.
The estimates are that this proposal will generate an additional $230 million in FY2015, the first full year of collections, and that estimate grows in the future.
The division has determined that this fuel tax fits the constitutional dedication requiring revenue from a tax on fuel to be deposited in the Highway User Tax Distribution Fund so the money will have to be used for a highway purpose as is currently done with the per gallon fuel tax.
The Senate bill also includes an increase in the metropolitan area sales tax for transit of ½ cent for the counties currently collecting the ¼ cent sales tax for transit and an increase of ¾ cent for Scott and Carver Counties so the total sales tax rate for transit will be ¾ cent throughout the 7 county metro area.
The bill includes the expansion of the wheelage tax to all 87 counties at a rate of $10 per vehicle rather than the current $5 per vehicle and removes the requirement that counties in Greater Minnesota hold a referendum vote prior to imposing a local option sales tax for transportation purposes.
The Senate proposal also increases funding for Greater Minnesota transit by providing an increase in general fund dollars and by equalizing the sales tax on leased and purchased motor vehicles. Currently, the sales tax rate on the purchase of an automobile is 6.5%, but on a leased motor vehicle the sales tax rate is 6.875%. The proposal makes the rate consistent at 6.875%. The Constitution requires that all motor vehicle sales tax revenue be divided 60/40 between highway and transit purposes and state statute had split the 40% for transit with 36% for metro transit and 4% for Greater MN transit. The new proposal makes the transit split: 35% for metro transit and 5% for Greater Minnesota transit.
Summary of Proposal:
• New gross receipts tax on fuel distributors – provides additional $185.7M for State Road Construction in FY2014-15 biennium
• Equalization of MVST between leased and purchased vehicles – increases funds for trunk highway fund, CSAH, MSAS, townships and transit systems statewide
• Increase of ½ cent in metropolitan area sales tax for transit in the 5 counties currently levying the ¼ cent tax and ¾ cent in Carver and Scott counties
• Increase in general funds for Greater MN Transit and change in MVST distribution for transit from 36/4 between metro and Greater MN to 35/5 split between metro and Greater MN
• Increase in funding for CSAH, MSAS and township road and bridge funds through the gross receipts tax on fuel and increase in MVST for FY2-14-15 biennium:
• Expands authority for the wheelage tax to all 87 counties at a $10 annual rate until 2017. After 2017 counties can charge up to $20 per vehicle
• Removes the referendum requirement for the local option sales tax allowed under chapter 152 in Greater Minnesota and expands the use to transit operations as well as capital.
• Allows cities to create Municipal Street Maintenance Districts.
• Creates and funds the Corridors of Commerce program. This program gives priority for the new funding to improving segments that are two-lane segments in an otherwise 4-lane corridor.
• Provides new language for the Transportation Economic Development program and provides $20 million for the biennium in trunk highway funds.
Details are available on line:
Questions? Contact Anne Finn at email@example.com or at (651) 281-1263.
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