MnDOT may cut back highway, bridge plans

Shortfalls in sales tax money and license tab fees may delay some projects that were to begin in 2010 and '11.

By JIM FOTI, Star Tribune

Last update: April 3, 2009 - 5:20 AM

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The Minnesota Department of Transportation may be awash in stimulus money, but the agency is now looking to cut $150 million from its construction program over the next two fiscal years.

That's because the same recession that brought the half-billion-dollar federal windfall has all but killed Minnesotans' interest in buying cars, meaning a steep dropoff in sales tax and license tab fee revenues that help pay for road construction. MnDOT's metro district is set to take a $67 million hit.

"Our sources of revenue, although different from the general fund, are still subject to the vagaries of the current economy," said Kevin Gutknecht, MnDOT's communications director. "We have projections that are telling us that our revenues are going to be down."

With stimulus projects leaping ahead on the calendar and the final state budget not yet approved, "It would be way too early to say any one project would be cut," said Abby McKenzie, director of MnDOT's Office of Investment Management.

But cuts are expected. MnDOT offices around the state have until May 1 to figure out what can wait as the department scales back its construction plans by about 7 percent.

"We'll know then what the impacts will be," McKenzie said.

Big-ticket metro projects currently scheduled for the 2010 and 2011 fiscal years include replacing the Lafayette Bridge on Hwy. 52 in St. Paul and the Hastings Bridge on Hwy. 61. The cuts would make their funding more complicated, McKenzie said.

Projects such as the Lafayette Bridge couldn't be part of the stimulus plan, in part because they require land purchases, which can take 18 months. That means they wouldn't create jobs soon enough, she said.

"Highway user taxes," as they're called, aren't the only revenue source for state construction projects; other federal money and state bonding funds are used as well.

Collections from the recently raised state gas tax are not part of the current problem. Despite the continued drop in the number of miles that Minnesotans drive, revenues from the gas tax didn't change much in the latest budget revision in February, said Norman Foster, MnDOT's interim chief financial officer. That's because the reduction in driving had been underway for some time and was largely accounted for in previous forecasts. He said such revenues are predicted to stay about the same for the next four years.

But the plunge in vehicle sales was larger than had been projected, prompting MnDOT to review its construction ambitions.

Among the graphs included in an internal MnDOT memo from last week was a chart tracing national auto sales, and the drop over the past several months looks like a double-black-diamond ski run.

Using that national data and adjusting it for Minnesota incomes, state officials are predicting that revenues related to car sales and tab fees will rebound by the 2012 and 2013 fiscal years.

About half of the $150 million in construction cuts is because of the drop in revenues and higher debt costs, Foster said. The other half is to allow for a fund balance, or reserve, "in case things get worse," he said. Earlier forecasts had aimed for a balanced budget.

While MnDOT is eyeing the future warily, the orange barrels will still be out in force. "Even with these cuts, fiscal '10 and '11 are likely to be among the biggest construction programs we've ever done," McKenzie said.

Jim Foti • 612-673-4491