Minnesota Chamber of Commerce proposes alternative transportation funding mechanism

Minnesota Chamber of Commerce

Republicans in the Legislature and state business leaders aren’t even taking Gov. Mark Dayton’s transportation proposal out for a test spin before declaring it unacceptable. 

But state business leaders do have a tax increase proposal of their own. 

Dayton’s plan calls for a 6.5 percent per gallon tax on gas at the wholesale level, an increase in license tab fees and registration fees, and a half cent sales tax increase in the seven-county metro area. 

The response from Senate minority leader David Hann: “The Legislature should take the time to adequately define our transportation needs, and then come up with solutions that actually address it, without raising taxes.”

Legislative Republicans and the Minnesota Chamber of Commerce support plans to use general fund revenues and wring efficiencies out of the current system, a proposal that critics say would fall far short of the $6 billion the state will need over the next ten years.

But the state Chamber of Commerce isn’t entirely opposed to raising taxes to fund transportation. It’s asking the Legislature to consider a “value capture user fee,” essentially a property tax increase on properties that would be enhanced by transportation improvements.  

“Think of it as a special assessment,” said Bill Blazar, the Minnesota Chamber’s acting president. “You would have to show that public improvement has raised the value of the property so it’s a benefit test, not speculation.”

Blazar said there’s a number of legislators, both DFL-ers and Republicans, that “at a minimum see the need to look at the alternatives.”

In 2008, the last time gas tax was raised, the Minnesota Chamber was one of the major players in what eventually turned out to be a 8.5-cent gas tax increase. The Chamber even supported the override of Gov. Tim Pawlenty’s veto. 

That was then. “In the last seven years, I think the way we use the transportation system has changed fundamentally,” Blazar said. “Just the number of people who work at home.  Secondly, the technological changes — the most prominent is the electric vehicle — and then, third, the fact that you had such a big tax increase in 2013.”   

Move Minnesota, a coalition of labor and interest groups, supports the governor’s plan.  “A great first step,” is how spokesman Darin Broton describes it. 

Broton predicts movement on either raising the sales tax on fuel or a simple percent per gallon tax increase. Unlike Blazar, he sees similarities between 2008 and 2015.  “This [opposition to gas tax increase] is how the chamber positioned itself in 2008. They didn’t come in until the last minute to support the override,” he said. “What else is sort of similar, a number of regional chambers have been pushing for new revenue.”

Blazar contends the new revenue is there in the value capture user fee. “We’re optimistic that value capture or something like will be part of the final legislation.”

You can also learn about all our free newsletter options.

Comments (16)

  1. Submitted by Dennis Tester on 01/27/2015 - 10:43 am.

    People who agree

    with the governor’s $6 billion tax increase shouldn’t go around saying things like it’s “a great first step.”

    It’s exactly the wrong message to be sending to the beleaguered taxpayers who just saw a $2 billion tax increase and have come to believe that it’s never enough for these people.

  2. Submitted by Sean Olsen on 01/27/2015 - 10:44 am.

    Make our already overly-complicated property tax system even more complicated? Sounds wonderful!

  3. Submitted by Ray Schoch on 01/27/2015 - 10:50 am.

    Not only

    …will the “value capture user fee” not fly, it won’t even get out of the hangar to the runway.

    To begin with, even since I arrived in Minnesota 5 years ago, studies have been done around the topic of Minnesota’s transportation needs, including one by MNDoT. Some have concluded that more mass transit is needed, others have concluded that more revenue needs to be directed to roads. Either way, David Hann is hoping that skillful use of smoke and mirrors will distract the public from the knowledge that the state’s transportation needs have already been rather well defined. Those needs require more revenue, even if we abandon mass transit completely. Unstated “efficiencies” to be found in MNDoT and other state agencies are largely Republican mythology, since state, county and local staffs were cut repeatedly during the Pawlenty years, and are nowhere near the level they were before investment bankers brought the economy to its knees. There are few meaningful efficiencies to be found.

    So, there aren’t nearly enough “efficiencies” to fund the infrastructure work that needs to be done, and we already know what the state’s needs are. We also already know that providing for those needs will require more revenue. Hann’s suggestion that this can be done without a tax increase suggests that Republican reliance on magical thinking is still with us.

    “…a property tax increase on properties that would be enhanced by transportation improvements” sounds suspiciously like a property tax increase primarily directed at property within walking distance of mass transit in the Twin Cities, and at similar distance from major highways in “greater Minnesota.” Historically, CofC types usually want to court, not antagonize, business owners and the well-to-do.

    In fact, this is so blatantly against the business and wealth-protecting past instincts and statements of the CofC that I suspect something is missing. The devil, as they say, is in the details, so I’d like to know more about what Mr. Hann thinks this proposal’s specifics will amount to, and who is likely to be most affected.

  4. Submitted by Nathaniel Finch on 01/27/2015 - 10:58 am.

    Crazy idea

    How are you going to determine a property value increase was the result of a transportation improvement and not the result of some other factor? Property owners with deep pockets will undoubtedly fight their “value capture user fees.” And what about road improvements that are necessary, but which don’t directly increase any nearby property values? Who’s going to pay for those. A lousy idea all around. The governor’s proposal makes a lot more sense.

  5. Submitted by mark voorhees on 01/27/2015 - 11:13 am.

    Address transportation needs

    We need to fix our roads and bridges. The GOP take is to do the minimum amount of work in the least amount of time which is a kick-the-can-down-the-road approach. A minimalist attitude.

    It’s better to address the matter up front and get the work done for the long term. Having safe roads and bridges improves our out-state business transportation needs and encourages growth.

  6. Submitted by Neal Rovick on 01/27/2015 - 11:37 am.

    A recent news report put the cost of rebuilding a two-lane rural highway at a million dollars a mile and a freeway interchange at 50 million dollars.

    Under the CofC proposal–who would pay for the million or so a mile–the farmer next to the roads, the tree farm owner next to the road, the next town down the road, or the town of 1200 people 5 miles down the road?

    And with respect to the interchange in the middle of nowhere (35 and 90)–who really benefits?

    How would the heavier (physically heavier) users of the road or interchange pay?

    It ‘s a recipe for never-ending lawsuits and a do-nothing end effect,

    • Submitted by Alex Cecchini on 01/27/2015 - 01:40 pm.

      Answers

      Who would pay? A combination of everyone you mention, each the proportion of value that new exit/interchange and road expansion provides. Those closest to it would pay more. I strongly suspect something like this would cut back the number of freeway-adjacent Walmarts, shops, etc that benefit from huge public expenditures without paying anything for the increase in land values.

      For interchanges in middle of nowhere? They should be funded by road user fees. I-35 / I-90 does not provide access to any property. It is a true interchange of roads. Ideally, tolling of those freeways would allow the DOT to understand travel behavior (needs) by knowing who simply cruises along vs who exits to different directions. The size/design (& therefore cost) of that interchange would be determined by a known need by users who are willing to pay for their travel at that speed on that route.

      Heavy users? Ideally a gas tax does that now. Road wear does increase to the 4th power of axle weight. But a road designed to handle double the wear doesn’t cost 2x as much (more like 5-10% more for highways). So, a gas tax (for vehicles with far lower fuel efficiency) helps in that regard, and a weight-adjusted, route-specific VMT tax (toll) would go one step further. Not difficult. https://www.youtube.com/watch?v=1KEdqDnVIZ4

      • Submitted by Neal Rovick on 01/27/2015 - 04:42 pm.

        So for the 10’s of thousands of miles of rural highway needing replacement, what is the value of a new road vs. the old road with curves, roadbed and guardrails not up to current standard.

        I have a feeling that a road will have to be in a virtually undriveable condition before even the most immediate neighbors feel like contributing to the million dollar a mile. And people who pass through are likely choosing between alternative routing.

        That’s still a recipe for much argument–“I think the road is not up to standard–here’s your bill for $150,000”

        • Submitted by Alex Cecchini on 01/28/2015 - 12:06 pm.

          Replaced vs New

          I would say that the amount of ‘upgrades’ to the ‘standard’ for roads across the state is a major reason for why we have such a high bill in the first place – more pavement (shoulders, lane widths, etc), and materials (guard rails, etc) than that road justifies based on the annual traffic counts. I’d say the definition of new from a value capture perspective should be “additional lanes, interchanges, and access points (including turn lanes, stop lights, etc that allow drivers access to private property)” whereas regular maintenance still falls under user fees.

          “Virtually undrivable” is a tricky thing to define. Americans probably find many European city streets, with 7.5′ wide lanes and cobblestones for the surface “virtually undrivable.” Likewise, there are tons of gravel roads out there giving access to private property that can’t handle heavy loads/high traffic counts and are pretty rough to drive on. We should be exploring this option for many places that aren’t roads connecting places.

  7. Submitted by Todd Hintz on 01/27/2015 - 12:14 pm.

    “Wring Efficiencies”

    We already tried to wrong efficiencies from the system and you know what that got us? A major freeway bridge collapsed in the middle of a metropolitan area because they were re-decking the damn thing when they should have been replacing it. But our Republican governor at the time, Tim Pawlenty, wanted to do the minimum necessary to get by and “wring efficiencies from the system.”

    Brilliant flippin’ idea.

    Look, it takes money to build a society. You can cheap out on it and, at the end of the day, get what you pay for. Or you can reinvest in your infrastructure and build a system that works for all people and businesses alike.

  8. Submitted by Alex Cecchini on 01/27/2015 - 01:32 pm.

    There needs to be a comprehensive approach

    This is actually a very good idea for new construction. It’s how private streetcar and railroad developers paid for their capital expansions over 100 years ago. It would provide a better feedback loop for land-owners who support new interchanges on the grounds that they become instant millionaires. It would also help wean ourselves off federal money, which is no longer a certainty given the federal HTF insolvency. We’d be better able to build our own projects as necessary. We know it can be done – places all over the world currently do something similar to this, and we have 65 years of experience seeing what property values do in response to new road interchanges that give access to property.

    But this funding stream alone shouldn’t be viewed as a fix to maintaining the existing system. An increase to the gas tax is easy enough for now. But we need a mix of tolling existing capacity (which provides route-specific funding feedback mechanisms and can also smooth congestion more efficiently) and VMT fees to account for shifts to electric vehicles over the next 20-40 years.

    It’s been stated that an additional $250m/yr is the dollar value just to maintain our existing road network in sub-optimal pavement conditions. This should be funded by a gas tax bump.

  9. Submitted by John Ellenbecker on 01/27/2015 - 03:20 pm.

    Efficiencies?

    Republicans keep arguing that they can wring greater efficiency out of government – why weren’t they able to do it during the 8 years of the Carlson administration and the 8 years of the Pawlenty administration?

  10. Submitted by RB Holbrook on 01/27/2015 - 03:55 pm.

    Who Benefits?

    We can expect to see at least some Republicans supporting this one. It is a clear attempt to pander to rural interests.

    Whose property value benefits most from easy access to transportation? I’m not an expert, but I’m guessing roads are a more important variable in the value of urban or suburban property than in rural property. Consider especially that property located close to mass transit tends to go up in value.

    So this would just be another way for outstate to stick it to the city folks. Nice pandering.

  11. Submitted by Sheldon Gitis on 01/27/2015 - 05:32 pm.

    freeways=urban blight

    Since when does dirty, dangerous, noisy highway traffic increase residential property values? When homes are bulldozed for highway expansion, it’s not the homeowners who get relocated who are most harmed, it’s the ones left behind who get screwed. Who’s going to pay for the property value decreases in the blighted, motorway hellhole neighborhoods?

    https://www.youtube.com/watch?v=nijZWcqEoJQ

  12. Submitted by Kim Millman on 01/28/2015 - 07:03 am.

    Hmmmm Who Would Really Pay?

    The already burdened middle class homeowners would be the only ones paying. Who wouldn’t pay? Those who use and do the most damage to the roads, rich businesses who have the money to fight a classification of any type of enhanced property value.

    I have to hand it to the chamber of commerce (aka wealthy large businesses) for creative ways to make the hard working middle class pay for things large established businesses reap the most profit from.

    The middle class needs an equivalant lobbying group – maybe the “Working Class Chamber”

Leave a Reply