Transportation Finance: An Overview

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1 Transportation Finance: An Overview Presented by: January 24, 2017 Krista Boyd Fiscal Analyst

2 Transportation Budget: Agencies & Programs Department of Transportation (MnDOT) Multimodal Systems Aeronautics, Transit, Freight, Passenger Rail State Roads Construction, Maintenance, Program Delivery, Debt Service Local Roads County State-Aid, Municipal State-Aid Agency Management Metropolitan Council Metro Transit Bus, Light Rail and Commuter Rail Department of Public Safety State Patrol Patrolling Highways, Commercial Vehicle Enforcement, Capitol Security Driver and Vehicle Services Traffic Safety Pipeline Safety Administration and Related Services 2

3 Transportation Funding: Constitutional Framework Minnesota Constitution, Article XIV: Creates three highway systems: trunk, county state-aid and municipal state-aid Creates major transportation funds in state treasury Highway User Tax Distribution Fund Trunk Highway Fund County State-Aid Highway Fund Municipal State-Aid Street Fund Establishes dedicated transportation taxes Motor Fuels Excise Tax (gas tax) Vehicle Registration Tax (tab fees) Motor Vehicle Sales Tax (MVST) Allows state to sell bonds to construct and improve trunk highways 3

4 Transportation: Highway Funding Motor Fuel Excise Tax (100%) $899 m Vehicle Registration Tax (100%) $702 m Motor Vehicle Sales Tax (60%) $429 m Collection Costs, DNR & Other $25 m Highway User Tax Distribution Fund FY 2016 $2.0 billion Misc. Revenue $5.0 m 95% Distribution 5% Set-Aside Trunk Highway Fund (62%) $1,182 m County State- Aid Hwy Fund (29%) $553 m Muni State-Aid Street Fund (9%) $172 m Town Roads and Bridges (46.5%) $47 m Flexible Hwy Account (53.5%) $53 m Federal Aid $426 m MV Lease Sales Tax $29 m 4

5 Transportation Revenues Motor Fuels Excise Tax (Gas Tax) Per the Constitution, 100% of gas tax proceeds are deposited in the Highway User Tax Distribution Fund (HUTDF) Current tax rate is 28.5 cents per gallon, including a 3.5 cent-per-gallon surcharge dedicated to trunk highway debt service Last increase was in 2008 (from 20 cents to 25 cents, plus surcharge) Previous increase was in 1988 (from 17 cents to 20 cents) A portion of gas tax revenues are transferred to Dept of Natural Resources accounts for gas tax paid for non-highway use FY 2016 gas tax revenue: $899.3 million ($31.5 million per penny) 5

6 Transportation Revenues Unrefunded Motor Fuels Tax Transfers, FY 2016 (dollars in millions) Non-highway Use % of gas Transferred from HUTDF to FY 2016 transfers Motorboat 1.500% Water recreation account (MS 86B.706) $ Snowmobile 1.000% Snowmobile trails and enforcement account (MS 84.83) $7.219 All-terrain vehicle 0.270% All-terrain vehicle account (MS ) $1.949 Off-highway motorcycle 0.046% Off-highway motorcycle account (MS ) $0.332 Off-road vehicle 0.164% Off-road vehicle account (MS ) $1.184 Forest roads 0.116% State forest road account in the Special Revenue Fund (MS 89.70) $1.002 TOTAL 3.096% $ Unless otherwise noted, accounts are in the Natural Resources Fund. 6

7 Transportation Revenues Vehicle Registration Tax (Tab Fees) Per the Constitution, 100% of registration tax revenues are deposited in the HUTDF Passenger vehicles pay the tax based upon age and value of vehicle: $10 plus 1.25% of base value (subject to depreciation schedule) Vehicles 11 years and older pay $35 (minimum rate) Trucks pay based upon weight and age of vehicle FY 2016 registration tax revenue: $701.6 million 7

8 Transportation Revenues Motor Vehicle Sales Tax (MVST) Until FY 2002, 100% of MVST revenues deposited in General Fund In FY 2002, HUTDF began to receive a percentage of MVST revenues In FY 2003, the legislature eliminated the use of property taxes for transit operations, and dedicated a portion of MVST to transit 2006 constitutional amendment dedicated MVST revenues to transportation purposes: not more than 60 percent to the HUTDF not less than 40 percent for public transit assistance Current statutory allocation of MVST revenues: 60% to HUTDF, 36% to metro transit, 4% to greater MN transit FY 2016 MVST revenue: $428.8 million (HUTDF) $285.7 million (TAF) 8

9 Transportation Revenues Motor Vehicle Lease Sales Tax (MVLST) Until FY 2010, 100% of MVLST revenues were non-dedicated and were deposited in General Fund The 2008 Legislature passed a phased-in statutory dedication of MVLST to transportation funds Per statute, $32 million annually is withheld from MVLST revenues and remains in General Fund The remainder is allocated: 50% to greater MN transit, 50% to CSAH for metro counties (excluding Ramsey and Hennepin) FY 2016 MVLST revenue: $29.2 million (CSAH only) 9

10 Transportation Highway User Taxes: Revenue History M I L L I O N S $2,000 $1,500 $1,000 $500 $0 Gas Tax Registration Tax MVST 10

11 Transportation: HUTDF Revenue Projections $2,500 M I L L I O N S $2,000 $1,500 $1,000 $500 $529 $540 $479 $507 $447 $429 $702 $744 $772 $796 $815 $826 $899 $905 $910 $916 $919 $912 $ Gas Tax Registration Tax Motor Vehicle Sales Tax 11

12 Transportation Spending (Funds) Constitutional Funds: Highway User Tax Distribution Fund Trunk Highway Fund County State-Aid Highway Fund Municipal State-Aid Street Fund Other Major Funds: Transit Assistance Fund State Airports Fund 12

13 Highway User Tax Distribution Fund (HUTDF) Pass-through fund MN Constitution requires deposit in the HUTDF of: 100% of gas tax revenues 100% of vehicle registration tax revenues No more than 60% of motor vehicle sales tax revenues HUTDF resources are distributed as follows: 95% Distribution: 62% to the Trunk Highway Fund 29% to the County State-Aid Highway Fund 9% to the Municipal State-Aid Street Fund 5% Distribution (can be changed every 6 years): 30.5% to town roads 16% to town bridges 53.5% to flexible highway account (turnbacks, etc.) 13

14 Trunk Highway Fund (THF) The Trunk Highway Fund (THF) receives 62% of the 95% HUTDF distribution In FY 2016, total revenue to the THF was approximately $1.7 billion, including: $1.2 billion from HUTDF transfers $426 million from federal highway aid agreements Revenue in the THF must be directly appropriated. In FY 2016: 86% to MnDOT for highway construction and maintenance, and for agency operations 9% to the Department of Public Safety, for State Patrol operations 5% to debt service payments on trunk highway bonds Constitutional limitations on use of THF: Construction, improvement and maintenance of trunk highways Payment of principal and interest of trunk highway bonds 14

15 County State-Aid Highway Fund (CSAH) County State-Aid Highway (CSAH) Fund receives 29% of the 95% HUTDF distribution ($553 million in FY 2016) MN Constitution: [CSAH] shall be apportioned among the counties as provided by law. CSAH revenues are distributed to the state s 87 counties through a statutory formula as follows: The apportionment sum (68% of fund), distributed: 10% equally to each county 10% based on each county s proportional share of vehicle registrations 30% based on each county s proportional share of CSAH lane-miles 50% based on each county s share of 25-year construction needs The excess sum (32% of fund), distributed: 40% based on county s share of vehicle registrations 60% based on county s share of construction needs CSAH also receives a portion of MV lease sales tax revenues, distributed to Anoka, Carver, Dakota, Scott and Washington counties based on population ($29 million in FY 2016) 15

16 Municipal State-Aid Street Fund (MSAS) The Municipal State-Aid Street Fund (MSAS) Fund receives 9% of the 95% HUTDF distribution $172 million in FY 2016 MSAS revenues are distributed to cities with population over 5,000 through a statutory formula as follows: 50% based on each city s population 50% based on each city s 25-year construction needs 16

17 Transit Assistance Fund (TAF) MN Constitution (as amended in 2006): not less than 40 percent [of MVST revenues] must be deposited in a fund dedicated solely to public transit assistance as defined by law. The Transit Assistance Fund (TAF) was created in statute, and receives 40% of MVST revenues, distributed as follows: 36% to metropolitan transit assistance account ($257 million in FY 2016) 4% to greater Minnesota transit assistance account ($29 million in FY 2016) The greater MN transit account in the TAF also receives a statutorily dedicated portion of motor vehicle leasing sales tax revenues ($29 million in FY 2016). Funds in the TAF are statutorily appropriated to the Metropolitan Council and commissioner of transportation, to be used solely for transit purposes. 17

18 Transit Funding State funding sources for transit: General Fund: direct appropriations in biennial budget Transit Assistance Fund: statutory appropriations Motor Vehicle Sales Tax (MVST) Metro and Greater MN Motor Vehicle Lease Sales Tax (MVLST) Greater MN only METRO TRANSIT: Bus and light-rail transit in the 7-county metro area is operated by the Metropolitan Council and by several Suburban Transit Providers (replacement service or opt-outs ) GREATER MINNESOTA TRANSIT: Programs are locally-operated transit services that receive state and federal assistance through MnDOT s Office of Transit. 18

19 Transportation: Transit Operations All Funds, FY Metropolitan Transit Base Budget $771.4 million (1.0% of total All Funds) Greater MN Transit (MnDOT) Base Budget $170.1 million (0.2% of total All Funds) General 23% General 20% Trunk Highway 1% Transit Assistance 77% Transit Assistance 79% 19

20 State Airports Fund (SAF) The State Airports Fund receives statutorily dedicated revenues related to aviation activities: Aviation fuel tax (aviation gasoline and jet fuel) Aircraft registration tax Airline flight property tax Aircraft sales tax Revenue in SAF is appropriated by legislature in biennial budget SAF appropriations serve Minnesota s 135 publicly owned airports, coordinated through MnDOT s Office of Aeronautics: Capital improvements to facilities, equipment, and runways Maintenance and operations assistance Navigational aids and weather systems MnDOT operations and staffing 20

21 Transportation: State Airports Aviation Fuel Tax $6.1 million S TAT U TO R I LY D E D I C AT E D R E V E N U E Aircraft Reg Tax $2.5 million Airline Flight Property Tax $7.0 million Aircraft Sales Tax $4.9 million State Airports Fund FY 2016 $21.5 million Direct appropriations MnDOT Office of Aeronautics: Grants to state airports Misc. Revenue $1.0 million 21

22 Transportation Bonding Trunk Highway Bonds: Proceeds only used for trunk highway purposes, must be deposited in Trunk Highway Fund Debt service on bonds is paid from THF MnDOT Debt Management guidelines: THF debt service must not exceed 20% of annual state revenues General Obligation (GO) Bonds: Used to fund non-trunk highway transportation projects, such as transitways, rail, local bridges and roads, ports and airport improvements Cannot be used for trunk highway projects 22

23 Federal Transportation Funding Federal Aid Highway Program is a reimbursable program; authorized amounts are distributed to Minnesota after the state bills the Federal Highway Administration (FHWA) for eligible project costs Reimbursements for trunk highway projects are deposited into the Trunk Highway Fund FY 2016 federal revenues to the THF were $426 million Separate federal funding is allocated for transit, rail, aeronautics and local road projects; these amounts are primarily deposited into the state s Federal Fund 23

24 Transportation Budget All Funds, FY Base budget $7.2 billion (9.3% of total All Funds) Municipal State Aid 5% Special Revenue 4% General 3% State Airports 1% Other 1% Transit Assistance 10% Trunk Highway 40% Federal 15% County State Aid 21% 24

25 Transportation Budget All Funds, FY Fund FY Trunk Highway 2,910,249 County State-Aid 1,495,811 Federal 1,045,555 Transit Assistance 716,748 Municipal State-Aid 375,864 Special Revenue 314,798 General 243,592 State Airport 40,700 Other (SGSR, HUTD, Gift) 40,734 Total (dollars in thousands) 7,184,051 25

26 Transportation Budget General Fund, FY Base budget $243.6 million (0.5% of total General Fund) Dept of Public Safety 11% MnDOT (other) 1% MnDOT (transit) 14% Met Council (transit) 74% 26

27 Transportation Budget General Fund, FY Agency FY Metropolitan Council 179,640 Department of Transportation 37,116 Department of Public Safety 26,836 Total (dollars in thousands) 243,592 27

28 Department of Transportation All Funds, FY Base Budget $5.9 Billion (7.7% of total All Funds) Federal 15.9% Municipal State Aid 6.4% Special Revenue 2.7% Transit Assistance 2.1% State Airports 0.7% Other 0.3% General 0.6% County State Aid 25.4% Trunk Highway 45.9% 28

29 Department of Transportation DE All Funds, FY Fund FY Trunk Highway 2,704,767 County State-Aid 1,495,811 Federal 939,067 Municipal State-Aid 375,864 Transit Assistance 158,086 Special Revenue 124,968 State Airport 40,700 General 37,116 Other 19,536 Total (dollars in thousands) 5,895,915 29

30 Department of Public Safety (Transportation Programs) Driver and Vehicle Services Program operations are funded by fees for registration, titling, and drivers license transactions Fee revenue deposited in Special Revenue Fund operating accounts DVS account revenues are directly appropriated ($60 million/year) State Patrol Funded by direct Trunk Highway Fund appropriation ($90 mill/year) Capitol Security funded by direct Gen Fund approp ($9 million/year) Office of Traffic Safety Funded by direct Trunk Highway Fund appropriation ($450,000/year) Required match for approx. $40 million in annual federal funding Office of Pipeline Safety Funded by direct Special Revenue Fund appropriation, from pipeline safety inspection fee revenue ($1.4 million/year) Office also receives USDOT grant ($2.0 million/year) 30

31 Department of Public Safety (Transportation Programs) All Funds, FY Base Budget $516.7 million (0.7% of total All Funds) Federal 20.6% General 5.2% Highway User Tax Distribution 3.5% Other 0.6% Special Revenue 30.3% Trunk Highway 39.8% 31

32 Department of Public Safety (Transportation Programs) DE All Funds, FY Fund FY Trunk Highway 205,482 Special Revenue 156,712 Federal 106,488 General 26,836 Highway User Tax Distribution 18,246 Other (SGSR, Gift) 2,952 Total (dollars in thousands) 516,716 32