Proposed Amazon delivery fee to raise money for Minnesota transportation appears dead

A new fee on home deliveries — think Amazon and Pizza Luce — to boost state transportation projects appears to be at death’s door after the sponsor of the fee admitted Thursday he doesn’t have enough DFL votes in the state Senate. 

The 75-cent fee would have raised more than $150 million a year and was seen as an alternative to higher gas taxes, which have been politically unpopular and not increased since 2008. In addition, gas tax revenue has been flat and is projected to start declining as vehicles become more efficient or go electric.

A delivery fee has now proven to be politically unpopular, too. During a meeting of the Senate Taxes Committee, Senate Transportation Committee Chair Scott Dibble moved to amend his transportation budget to remove the fee. The same amendment cut but didn’t kill another new money source: a sales tax in the seven-county metro region. What was once a 0.75% sales tax for regional transit became a 0.50% percent tax. What would have raised $600 million a year would now raise $400 million a year.

The two changes reduced the increased revenue for transportation from $1.1 billion a year to $700 million. The delivery fee revenue would have been distributed among state highway accounts and city and county road funds. The metro area sales tax would go to transit and roads in the metro region, with most going to transit.

Dibble said he asked to amend his own bill because he didn’t have the votes in his caucus. He blamed the newness of the delivery fee, a transportation funding method that is used in Colorado but few other jurisdictions.

“It’s taking a little more time working through the policy and politically, a lot of people didn’t understand it,” the Minneapolis DFLer said after the taxes committee vote. He called the two changes regrettable because even with them in his budget bill, the state was only solving part of its transportation funding shortages.

“We’re falling further and further behind in keeping up our roadway system, which is in very poor repair,” he said. Remaining in his bill are increases in the car registration tax and the motor vehicle sales tax.

The delivery fee remains in the House Transportation budget bill, and Dibble said he expects it will be discussed when the House and Senate try to reconcile their bills in conference committee later in April. But he said it would be a “tall order” to win support for it in his caucus later.

While he called what remains of his revenue plan “a good step,” he said legislators will have to return to the issue of ongoing funding in future sessions. 

“These maintenance needs aren’t going to go away. They’re just going to get more expensive,” he said. Dibble favors a gas tax increase, something many other states are doing. But it has become a campaign issue that Republicans have used against the DFL, leaving many members, especially those in swing districts, reluctant to take on. That political reality is what led the transportation chairs to look to other ideas such as the delivery fee and a fee on rideshare rides like those on Uber and Lyft. That, too, was proposed and discarded this session.

While sales taxes are not new and lawmakers are familiar with them, Dibble said there were not enough votes in his caucus for the 0.75% increase. He said he would have preferred a full percentage increase in the sales tax as a way of shoring up a bus and rail system Dibble described as near collapse from a lack of ongoing revenue.

DFLers have majority control of both chambers, but the Senate advantage is just one vote. Republicans are unanimously opposed to tax increases for general services or transportation. They have proposed using surplus money to catch up on road projects and to devote more of sales taxes collected on the sale of auto parts to transportation. The proceeds are now split between road funds and the state general operations budget.

The prime sponsor of the delivery fee in the House said she isn’t ready to give up. Rep. Erin Koegel, DFL-Spring Lake Park, said she expected it would remain in the House bill.

“It was a surprise to me,” Koegel said of the Senate action. “I was still hoping that it would get somewhere, but it’s now up to our constituents to really push the issue and make sure they know we can’t continue to ignore our streets and roads.”

Koegel said she looked at what Colorado was doing because of opposition to gas tax hikes. If other legislators don’t like her new ideas, they can return to the “tried and true” way of funding transportation. But she said it is frustrating when politicians oppose any new revenue because of politics. And per gallon gas taxes are less reliable because they are based on gallons sold, not price, and do not increase by inflation while construction and maintenance costs do. And electric vehicle owners pay no gas taxes.

“I don’t want to wait for another bridge to collapse before people start to take this seriously,” she said.

A social media campaign against the delivery fee by a group of businesses that rely on delivery helped build public opposition. Lawmakers returned to their districts for the Easter-Passover break to voters who had been told about the proposed fee by opponents.

“Tell Legislators: NO delivery tax. Act Now!” read a Facebook message sponsored by the Minnesota Retailers Association. It included a link to a website nodeliverytax.com, where a prompt was provided to message legislators. Bruce Nustad, the president of the association, said the campaign was sent statewide but with extra emphasis on the metro, northern Minnesota and southern Minnesota.