Minnesota lawmakers search for way out of transportation-funding jam after years of patches

ST. PAUL, Minn. — If Minnesota lawmakers can come up with the green, drivers will be seeing many more orange cones in years to come.

When Gov. Mark Dayton and the Legislature return to work next month, few issues will be more central and more vexing than the search for the first substantial transportation funding plan since 2008. That year it took a veto override to enact a gas-tax increase, a quarter-cent metropolitan area sales tax bump and other fee hikes to pay for new or refurbished roads, bridges and mass transit projects.

Not even a decade later, state officials warn that buying power has diminished due to pricier materials, labor costs and land acquisition. They say they'll need to come up with at least $6 billion in the next two decades to prevent serious deterioration of existing roads and to add new options in places with congestion or safety concerns. And with population growth, especially around big cities, supporters of commuter trains and dedicated bus routes argue it would be a mistake to leave transit behind.

Margaret Donahoe, co-chair of the Move MN coalition advocating for a large-scale funding package, said pledges of a transportation fix came from both political parties during the just-finished campaign and "there will be pressure" on lawmakers to deliver. The group of road builders, transit backers, labor unions, businesses and local officials will put its own ideas on the table in January.

Lawmakers have talked up transportation before only to settle on temporary patches even when Democrats had complete statehouse control. With power split between Democrats and Republicans, it's natural to wonder about chances for a deal this session.

But Senate Transportation and Public Safety Committee Chairman Scott Dibble, a Minneapolis Democrat, is optimistic.

"It takes a number of years to build the case and to build the political will," Dibble said. "It just feels like all the work over the past two years has brought us to the point where we have a real likelihood and prospect of passage."

Still, cobbling together a plan and getting votes to pass it will be a challenge.

Dayton and majority Senate Democrats say they'll seek new transportation taxes, likely on fuel purchases and possibly even broader than that. Republicans who will command the House haven't rule out new taxes of some kind, but have made clear they'd prefer other approaches.

Kelly said his first task will be figuring out what's really necessary and then figuring out how to pay for it. To start with talk of bumping up the gas tax is premature to him.

"We're caught in this situation that we've been funding it the same way for 20 years," Kelly said. "Is that the right way to do it anymore?"

The Minnesota gas tax is 28.5 cents per gallon, below Wisconsin's 30.9 cents but above Iowa, North Dakota and South Dakota.

Dayton has floated the idea of a sales tax on gas at the wholesale level, which would be distinct from the existing per-gallon levy but no doubt would be passed on to consumers anyway.

Governors of other states, including Republican-led Michigan, are also pushing gas-tax plans and say the proposals are more politically feasible as pump prices fall fast.

Minnesota takes in roughly $860 million a year in fuel taxes. Vehicle registration fees and a car-sale tax generate $1 billion for the state highway account. Federal aid has typically added a lot, but that's projected to fall by $226 million — or 24 percent — over the next two years.

In recent years, the state has ramped up borrowing to provide bursts of money, particularly for big projects that are tougher to fit into the regular construction budget. As a result, debt due on highway bonds is shooting up, from about $120 million this year to about $190 million by 2016 and steadily more in the years to come.