Democrats' $800 million transportation plan relies on new taxes

Transportation finance bill
Sen. Scott Dibble, right, unveils the Senate's transportation finance bill Monday, Jan. 12, 2015, at a Capitol press conference, in St. Paul, Minn.
Glen Stubbe / Star Tribune via AP

Democrats in the Minnesota Senate on Monday released their plan for raising $800 million a year for roads, bridges and mass transit construction.

That's more than four times the amount of transportation funding proposed by House Republicans last week.

But Senate Democrats say their revenue plan is warranted because Minnesota needs a big investment to solve one of the state's biggest challenges: an outdated road and bridge system.

Toward that end, Senate Transportation Committee Chair Scott Dibble has proposed raising nearly $700 million more in new revenue each year to repair and expand the state's roadways. That money would come from a new 6 and a half percent gas sales tax imposed at the wholesale level on gasoline and higher car registration fees.

Dibble's plan would add a one-cent increase to a metropolitan area sales tax to pay for transit projects in the Twin Cities. It also would authorize more than $1.5 billion in borrowing for other road projects.

For Dibble, DFL-Minneapolis, the hefty price tag is a matter of keeping Minnesota competitive.

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"Roads and bridges are deteriorating, more people are moving here and their ability to get around is increasingly hampered," he said. "And as our economy continues to grow and improve, the ability for people to get to jobs, the ability of goods and services to get to market is just simply not keeping up with that need."

Officials at the Minnesota Department of Transportation say it needs $6 billion over 10 years for the state's roads, with most of that money going to modernizing existing roads, and some of it also going to new projects. Dibble's bill goes even further, raising about $7 billion over 10 years.

A plan by Gov. Mark Dayton, expected later this month, is expected to mirror Dibble's. Both Dayton and Dibble say a tax increase is justified because the state needs a long-term funding strategy.

Dibble's proposed wholesale tax would be on top of the current gas tax, which is levied on a per-gallon basis. The Minnesota Department of Transportation says that as people drive less and cars become more efficient, the current tax is bringing in less money.

Republicans are critical of the DFL proposal.

Rep. Tim Kelly
Rep. Tim Kelly, R-Red Wing, Sept. 26, 2012.
Alex Kolyer / For MPR News 2012

"To come out and talk about tax increases for that amount I think is premature," said state Rep. Tim Kelly, R-Red Wing.

Kelly, chair of the House Transportation Committee has proposed a much smaller plan that would put about $187 million a year into roads and bridges over the next four years.

Most of that money could come from authorizing the Department of Transportation to spend money it already has in the state's highway fund and giving the department $200 million from the state's $1 billion surplus.

Dibble acknowledges the distance between his proposal and the Republican's plan, but he said finding a compromise isn't out of the question so early in the session.

Republicans, however, think Democrats may be taking a political risk by backing a tax increase for transportation. Several DFL senators backing Dibble's proposal won by narrow margins in 2012 and are up for reelection in 2016.

State Sen. Vicki Jensen, DFL-Owatonna, opposed Dayton's income tax increase to balance the budget in 2013, but she said this tax hike is different.

"When it comes to this infrastructure issue, I can't think of another path," Jensen said. "I can't find another path that will lead us to the solutions we need across this state without some increase in revenue."