Voters to decide on vehicle tax

Advocates push for constitutional amendment increasing funding for roads and transit

When Gov. Tim Pawlenty vetoed a bipartisan transportation bill last year that would have generated more than $7 billion for highway and transit projects over the next decade, hopes for a much-needed solution to the state's transportation funding woes faded.

But one item in the plan survived the governor's veto pen. A proposed constitutional amendment to gradually dedicate all of the proceeds from the state's motor vehicle sales tax to transportation needs didn't require Pawlenty's approval. Instead, it will be up to voters who head to the polls this fall to decide whether millions of dollars in state revenues should be spent on highway and transit projects.

Minnesotans will be hearing a lot about the motor vehicle sales tax over the next few months as transportation advocates gear up to spend millions of dollars on a campaign promoting the proposed constitutional amendment.

&#8220We really view this as the first step in dealing with the congestion and safety problems in the transportation system,” said Margaret Donahoe, the legislative director at the Minnesota Transportation Alliance, a coalition of transportation advocacy groups. The Alliance is one of the organizations that will lead the campaign to push for the passage of the amendment.

Currently 53.75 percent of the revenue generated by the motor vehicle sales tax is used for transportation needs such as funding mass transit projects and repairing highways. The remaining 46.25 percent goes into the state's General Fund, which covers expenses such as education and health care. The proposed amendment calls for the percent of the motor vehicle sales tax dedicated to transportation to increase to 63.75 percent in 2008. The transportation percentage would rise 10 percent each year until reaching 100 percent in 2012.

According to the Minnesota Department of Transportation, the amendment would provide an additional $2.65 billion for transportation over 10 years. Of that funding, $1.04 billion would go toward transit, $950 million toward state highways, and $580 million toward city and county roads.

When fully phased in, the additional motor vehicle sales tax revenue that would be channeled toward transportation funding by the amendment is estimated at approximately $300 million annually.

The cash flow the amendment would generate would help, but it won't solve all of the state's transportation funding problems. With the metro area expected to grow to 4 million people by 2030, the Minnesota Department of Transportation estimates that the state needs to invest an extra $1.7 billion per year in highway and transit just to keep pace with the increasing number of highway repairs and transit projects needed to support that kind of population increase.

But if the amendment is passed, the steady stream of transportation funding the amendment would provide would help Minnesota compete for increasingly competitive federal funding for new transit projects. Transportation projects currently rely on the State Legislature to approve bonding on a case-by-case basis. States that have a dedicated revenue source for transportation projects are more likely to receive matching federal funding, said Katie Walker, Hennepin County's Southwest Rail Corridor transit study project manager.

It simply makes sense that a tax on vehicles be used to fund transportation projects, she said.

&#8220In some ways, this is kind of saying, ‘This was always meant to be transportation money, so now we're going to take it because we do have a lot of transportation needs,'” Walker said.

Getting the amendment passed

But first Minnesotans heading to the polls have to pass the constitutional amendment, and the task of convincing voters to approve it won't be an easy one, Donahoe said.

&#8220It's going to be a challenge. It's kind of an obscure issue that a whole lot of people don't pay attention to, and so we have a big education effort in front of us,” she said.

In Minnesota, a majority of people who show up at the polls must vote &#8220yes” in order for a constitutional amendment to pass. If a voter chooses not to answer the question regarding the constitutional amendment, the vote is counted as a &#8220no.”

Walker said she's afraid voters won't know what the amendment is and will simply ignore it, not understanding that by default their vote will then be a &#8220no.”

&#8220I've had that happen to me - I've gone to vote and you think, ‘Well, I don't know if this is good or bad, so I just won't vote for it at all,'” she said.

That's why transportation advocates are determined to raise awareness of the amendment between now and November. The campaign to promote the amendment is anchored by the Minnesota Transportation Alliance and the Minnesota Chamber of Commerce. It also has the approval of a long list of advocacy groups, businesses, labor groups and local governments, ranging from the American Automobile Association (AAA) to the Sierra Club to Target Corporation.

These organizations may seem like strange bedfellows, but each has an interest in the passage of the amendment. From reducing congestion and repairing highways to providing environmentally friendly mass transit options to ensuring Minnesota has the transportation infrastructure needed to support a growing economy, there is a wide array of reasons that have drawn these organizations together to push for additional transportation funding.

Minnesota Transportation Alliance member Bill Schreiber estimates the campaign will cost $3 million and rely on the work and contributions of a multitude of organizations.

&#8220This clearly has to be balanced. It can't be a metro effort or a rural effort,” Schreiber said. &#8220It's a Minnesota effort.”

In addition to businesses and advocacy groups, the amendment also has the support of a wide range of city and state officials. State Rep. Frank Hornstein, DFL-Minneapolis and a member of the House Transportation and Transportation Finance committees, said the governor's veto was made at the expense of Minnesotans battling increasingly congested roads badly in need of repair. The amendment is not the answer to the state's transportation funding problems, he said, but he supports it because it will at least provide some additional money for roads and transit. He said he thinks his constituents will support the amendment.

&#8220They know that transportation is a huge, unmet need,” he said. &#8220They're stuck in traffic and people really don't have adequate choices for transit. They know that's a problem that needs to be addressed.”

Councilmember Ralph Remington (10th Ward) also supports the amendment.

&#8220Particularly if you look in the Uptown area and you look at the amount of density that we're now building up to, we have to really provide options other than the automobile,” Remington said.

The proposed constitutional amendment even has the support of Pawlenty, who refused to sign off on the larger transportation funding package because it would have raised money largely by increasing the gas tax and license tab fees, measures not in line with his no new taxes pledge. Now Pawlenty is encouraging voters to support the amendment, which would boost transportation funding without raising taxes. He wants to borrow $2.5 billion in bonds for at least 21 new transportation projects and then use the money generated from the motor vehicle sales tax amendment to pay off the debt.

What if it doesn't pass?

If the constitutional amendment doesn't pass, transportation advocates and local officials worry that transportation funding won't simply be back at square one - it'll be worse off.

&#8220If it doesn't pass, then I think not only will we still be stuck where we are today with not enough funding, but I think we'll continue to go backward because the perception will be that the public really doesn't support transportation funding,” Donahoe said.

&#8220It's like saying, ‘Legislature, place your spending priorities elsewhere,'” Schreiber said.

The failure of the amendment could also impact future funding for transit projects that many Minneapolis residents - especially those Downtown and in Southwest - have long been waiting for. Schreiber and Walker point to the Northstar Commuter Rail, which is several years behind its initial schedule after battling funding problems. Walker said the same thing could easily happen with the Southwest Corridor.

&#8220What's going to slow us down is more likely to be funding,” she said. &#8220It's the money.”

Schreiber said the lack of adequate transportation funding could pose a serious threat to the future development of transit projects.

&#8220If the amendment doesn't pass, it wouldn't only negatively impact a project like the Southwest Corridor that is years away from completion, but it could adversely affect the Central Corridor, which is next in line,” he said.

Amendment isn't all glitter and gold

But the passage of the constitutional amendment is a far cry from a solution for the state's transportation funding crisis. Local officials say what the state needs is a comprehensive plan like the one the governor vetoed.

&#8220No one should be under the illusion that this alone will either make up for the shortcomings in the governor's policy or that it will adequately fund transportation. We need this and more,” Hornstein said.

Hornstein lashed out at the governor's lack of transportation funding and said he will continue to push for increased transportation funding.

But the other concern some critics have of the constitutional amendment is that it will leave a huge gap in the state's General Fund. The 46.25 percent of the motor vehicle sales tax that currently goes into the General Fund will gradually leave a hole that could affect funding for critical services like education and health care.

&#8220It's really a robbing-Peter-to-pay-Paul type of situation,” Hornstein said, adding that he will push for more funding to make up for the gap that would be created in the general budget. &#8220It is really scandalous that we have a State Department of Transportation that is essentially out of money and with really no plan to raise money. This has to change, and the motor vehicle sales tax dedication is the beginning of that.”

Donahoe also acknowledged that the gap in the General Fund is a concern, but maintained that the five-year phase-in plan should help cushion the blow. She also said future legislative sessions could mend the gap by increasing state funding for a number of programs.

&#8220We're not antitax, so if folks are concerned about other programs, there's nothing stopping future legislators and future governors from making sure that those programs get funded,” she said. &#8220So we don't think this has to be a zero-sum game that if we win, someone else loses.”

There are other concerns as well. The Coalition of Greater Minnesota Cities is upset over the wording of the amendment, which states that at least 40 percent of the motor vehicle sales tax must be used for transit and no more than 60 percent for highway purposes. The organization is concerned that the highway funding needed for rural cities could be forgotten.

&#8220From our perspective, they're setting a floor for funding transit from the motor vehicle sales tax and a ceiling for contributions to the highway user tax distribution fund for highways,” said John Sundvor, a lobbyist and senior media adviser with Flaherty and Hood, the public relations firm representing the Coalition of Greater Minnesota Cities.

But Donahoe said the concerns about the amendment pale in comparison to what will happen without adequate transportation funding.

&#8220We're getting to a point where congestion is getting worse,” she said. &#8220And unless we start planning now how to deal with that increase, we're really going to be mired in congestion and gridlock.”