Finance

Highway funding in the United States has traditionally been done through user fees, most notably motor vehicle fuel taxes. However, there are growing concerns among some policymakers that fuel taxes are no longer adequate, sustainable, efficient, or equitable. Entities in the United States and abroad have conducted pilot projects or implemented mileage-based fees, including several specifically designed for heavy trucks. There are two major concerns related to truck travel: (1) heavy trucks consume a great deal of roadway capacity due to their size, operating characteristics, and annual miles traveled; and (2) roadway wear and tear caused by the combination of truck mileage and heavy loads is significant and disproportionate to the number of trucks on the road. The concept of mileage-based user fees has seen increasing support from a number of groups in recent years; however, it faces opposition from many in the general public and from the trucking industry. This paper is part of a larger effort exploring the benefits to the freight industry of mileage-based user fees, while highlighting industry concerns over its implementation.

The Mileage-Based User Fee (MBUF) Policy Study Supporting Technical Information document is intended to offer necessary detail regarding the work performed and reviewed as part of the MBUF Policy Study. The document serves to complement the separate MBUF Policy Task Force Report; it summarizes activity within and inputs informing all phases of the MBUF Policy Study process, including findings from: Greater Minnesota listening sessions; 2011 MBUF Symposium in Breckenridge, CO; perspectives from national experts; national expert and transportation finance roundtable events; Internet panel survey of Minnesotans; and additional targeted outreach. The MBUF Policy Study was commissioned by the Minnesota Department of Transportation (MnDOT) to identify and evaluate issues related to potential future implementation of an MBUF system in Minnesota. Under a potential MBUF system, drivers would be charged based on the number of miles they drive, regardless of the type of energy source used to propel the vehicle, instead of being charged by the gallon for fuel consumed in operating a vehicle. Over a period of approximately one year, the MBUF Project Management Team - comprised of individuals from MnDOT and the Humphrey School of Public Affairs, as well as consultants - secured valuable quantitative and qualitative policy feedback, drove completion of several deliverables including development of potential MBUF business models, and staffed a Policy Task Force.

In 2008, a series of follow-up focus groups was conducted with drivers in Minnesota in order to further understand their perceptions of a mileage-based user fees, especially in light of a several of major transportation events including an Interstate bridge collapse, soaring gas prices and a motor fuel tax increase. Overall, Minnesotans are much aware of the recent transportation-related events because they received substantial media attention and because skyrocketing gas prices had induced some changes to driving behavior. Unlike drivers in the Phase I focus groups, it appears the recent events have impacted drivers to the degree that they are now able to make the connection between current events and the long-term impacts on transportation funding. While some are able to understand and express this issue independently, others need to have the connection made for them. Regardless, participants understand the connection and agree that a decrease in the number of miles driven or reduced amounts of gas purchased will result in less revenue available from the gas tax. Some see the situation as 'zero-sum' in that they believe the impact of driving fewer miles or driving lighter, more efficient vehicles will create less damage to the roadways and, therefore, require less revenue for repair. While few had heard of a mileage-based user fee concept prior to the focus groups, they understand the concept and appear to perceive it as a logical alternative which maintains the "pay for use" aspect of the current gas tax. Participants' understanding of the concept was underscored by the types of questions raised, which attempt to understand the details of how the program might be implemented. Phase I is report 2007-50.

Around the country sentiment is growing that the motor fuel tax is becoming outdated and will be a less reliable source of revenue in the future due to issues such as increasing efficiency of vehicles, alternative fuels, and inflation. A potential alternative funding tool being considered is the mileage-based user fee. In order to better understand issues, attitudes and perceptions regarding mileage-based fees, Minnesotans were recruited to participate in a series of focus groups regarding mileage-based user fees. In addition, a panel of key experts on the topic was surveyed via an online bulletin board. Phase II is report 2008-55.

This report examines the changes in city and county spending observed between 1993 and 2003 to determine whether there have been any major changes in the trend toward government spending.

This project is an effort to identify the most relevant, useful, and applicable research on local transportation finance issues for local government practitioners in Minnesota.

Local governments in the U.S. use a variety of tax mechanisms to fund local roads. Twelve options are examined in this report related to property access, vehicle use or local economic activity. The most frequent local levies are property taxes, special assessments, vehicle registration taxes, motor fuel taxes and local sales taxes. The overall mix of local road funding also varies widely by state and region. Nebraska, Wisconsin and Kansas have local road revenues most like Minnesota, while local roads funding in New Hampshire, Florida and Nevada is the least similar. The benefits of any individual road tax must be judged in the context of the larger state and local tax system.

The future adequacy of Minnesota road funding is evaluated in a 27-year forecast of current law road taxes (motor vehicle registration tax, motor vehicle sales tax, and motor fuels excise tax). Revenue projections are compared with inflation-adjusted base costs in three economic growth scenarios (Trend, Optimistic, and Pessimistic), using two price deflators (core-CPI and state/local government costs). The Trend scenario predicts road tax revenues will lose purchasing power to inflation by 2020, but over the forecast period cumulative revenues and costs nearly balance out. According to this scenario, current tax policy can support 2003 service levels into the future, but not fund system improvements. The Optimistic scenario forecasts a surplus in purchasing power in all 27 years, providing the opportunity for significant new spending without changing current law. Under the Pessimistic scenario, tax revenues fall short of inflationary costs by 2012, with the annual loss in purchasing power reaching $1 billion by 2030. In this scenario, road tax policy changes are needed to avert significant declines in road service.

A burgeoning population seeking relatively affordable housing is placing high demands on outlying, auto-dependent residential markets. Simultaneously, public policies addressing housing, transportation, and land use aim to increase homeownership, decrease drive-alone travel, and harness outlying development. A relatively new mortgage lending procedure aims to address each of these public policy aims synergistically by allowing low- and moderate-income households the opportunity to purchase homes in transit-accessible neighborhoods that would otherwise be unobtainable because of cost. The goal of this research is to evaluate this initiative, as well as position it within the broader goals of smart growth, describe its application, and comment on its prospects. This report constitutes a primer of the current state of knowledge about these unique loan programs.

Minnesota state and local roads generate 52 billion vehicle miles of travel (VMT) annually at a cost of $2.6 billion. Spending averages 5 cents per VMT statewide, but travel on local government roads, especially low volume networks, costs more. State road aid reduces the local tax effort significantly in most high cost areas. State and local road funding is supported primarily with motor fuels excise taxes, vehicle registration and sales taxes, local property taxes, and state property tax relief. The average Minnesota household pays about $600 annually for roads, but this estimate varies widely with household characteristics. Substituting travel-dependent taxes for fixed or hidden charges could improve the tax system efficiency, and potentially distribute the road tax burden more fairly. Compared to current law, even radical tax reform may not change the road tax bill for some households.