Increases in funding, fees and taxes all part of transportation law

A big boost in funding across all modes of transportation and new sources of revenue to operate and maintain the system are key parts of the transportation finance and policy law.

It appropriates $8.8 billion in the 2024-25 biennium, including $7.85 billion for the Department of Transportation, $579.47 million for the Department of Public Safety, and $230.23 million for the Metropolitan Council.

Sponsored by Rep. Frank Hornstein (DFL-Mpls) and Sen. D. Scott Dibble (DFL-Mpls), provisions take effect July 1, 2023, unless noted.

HF2887*/SF3157/CH68

Biennial Budget

Among the MnDOT appropriations are $4.46 billion for state roads; $2.46 billion for local roads; $488 million for agency management, which includes money to match federal discretionary grants; and $440.3 million for multimodal systems, including rail and air transportation.

While most of the law’s spending comes from dedicated user funds, such as the gas tax and the motor vehicle registration tax, the law includes $1.35 billion in net biennial General Fund spending, which is $1.08 billion over base. The General Fund spending is primarily onetime, as the increase over the base for the out years — the 2026-27 biennium — amounts to $130,000.

For the 2024-25 budget biennium, onetime General Fund appropriations over base include:

• $216.4 million to match discretionary grants under the federal Infrastructure Investment and Jobs Act;

• $194.7 million in state monies for the Northern Lights Express passenger rail between Duluth and the Twin Cities (the federal government is anticipated to cover the other 80% of project costs) as well as money to expand Amtrak operations in the Twin Cities-Milwaukee-Chicago corridor;

• $120.7 million for various specified transportation projects;

• $50 million to extend the Blue Line light rail from Target Field to Brooklyn Park. All but $10 million is contingent upon entering a full-funding grant agreement with the Federal Transit Administration;

• $40 million for transit in Greater Minnesota;

• $39 million for the active transportation program;

• $36 million for airport infrastructure;

• $20 million to Twin Cities metropolitan area counties for transportation purposes;

• $18 million for local bridge improvements;

• $18 million for local road improvements; and$13.6 million to electric vehicle infrastructure program; and

• $11.4 million (over fiscal years 2025-27) for sustainable aviation fuel tax credits.

The law also provides dedicated funds for small cities, appropriates money for a new state patrol helicopter and an airplane (using Trunk highway Fund dollars), fund a MnDOT utility aircraft, and offers a total of $4 million for an electric bicycle rebate program available through June 30, 2026.

Trunk Highway Bonds

The law authorizes spending $599.2 million over the next three fiscal years from the proceeds of trunk highway bonds. Among the appropriations are:

• $200 million for state road construction;

• $153 million to the Corridors of Commerce program;

• $87.4 million for MnDOT facilities;

• $68.7 million for improvements to Highway 65 in Anoka County;

• $42 million to make improvements including pedestrian and bike trails on Highway 8 in Chisago County and expand marked segments to four lanes; and

• $30 million to build a third lane on Highway 10 in Coon Rapids.

Revenue raisers and finance

The law will increase revenue dedicated to transportation through several tax changes. This includes raising the state’s gas tax by indexing it to inflation as reflected in Minnesota Highway Construction Cost Index beginning Jan. 1, 2024. No year-over-year percentage change may exceed 3%.

The law also revises the motor vehicle registration tax by modifying the core rate as well as the schedule for rate depreciation as vehicles age, resulting in an overall revenue increase. (A grandfather provision prevents an increase in the tax for vehicles previously registered in Minnesota.) The rate changes begin for registrations on or after Jan. 1, 2024. The rate on the motor vehicle sales tax is increased as well, from 6.5% to 6.85%, and the revenue split is adjusted in a way that directs most of the revenue increase to Greater Minnesota transit.

A 50-cent fee on delivery orders greater than $100 will begin July 1, 2024. The fee is generally imposed when the retail sale of the property is subject to the state general sales tax, but also it includes clothing and will not apply to prepared food and baby products. Retailers with annual sales of less than $1 million will also be exempt.

Money from the retail delivery fee and from reallocation of a growing percentage (over 2024-33) of sales tax revenue from motor vehicle repair and replacement parts will go into a new transportation advancement account, to be distributed as follows:

• 36% to metropolitan counties with a new formula-based allocation;

• 27% to small cities, distributed under the small cities assistance program;

• 15% to larger cities under a new account established in the law;

• 11% to town roads;

• 10% to the county state-aid highway fund; and

• 1% to support food delivery programs such as Meals on Wheels.

Moreover, a new sales tax in the seven-county Twins Cities metropolitan area will be imposed by the Metropolitan Council at a 0.75% rate, starting Oct. 1, 2023. Most of the revenue will be used for metro-area public transportation, including improvements to bus shelters and a no-fare pilot project. A portion goes to counties for transportation purposes, and a share is set aside for active transportation projects determined by the council’s Transportation Advisory Board.

Associated transit finance changes modify the funding sources to be used for transit guideway operations and maintenance, which includes shifting it away from counties. It is effective October 1, 2023.

Among the fee changes, the law will increase the driver’s license and identification card fee by $6 or $6.75 (depending on the credential) as well as increase the associated filing fee by $3 or $8. The filing fee for motor vehicle transactions such as tab renewals is also increased, and a new $1 surcharge is imposed when the vehicle transaction is handled by a deputy registrar (rather than an office run directly by the Department of Public Safety). Car dealers will be allowed to charge more for documentation.

Policy changes

The legislation creates a transit rider investment program to address ridership and safety concerns, especially on light rail. TRIP personnel will check fares, offer assistance, issue administrative (instead of criminal) citations, administer naloxone, and act as a social services liaison. The law also reduces the penalty level to a petty misdemeanor for some fare and transit rider violations.

Lions Club International plates, Minnesota Professional Sports Team Foundation plates, Blackout plates for contribution to driver and vehicle services account, and Minnesota Missing and Murdered Indigenous Relatives are new specialty plates authorized.

Among the numerous changes, other policy provisions will:

• modify the process for the Corridors of Commerce program administered by MnDOT;

• set new requirements on analysis and offsetting the impacts of greenhouse gas emissions as part of some trunk highway expansion projects;

• prohibit holding a cell phone while driving;

• include post office vehicles and any vehicle with activated emergency, flashing or warning lights, under the slow down or move over law;

• authorize live teleconference and online driver’s education programs that match requirements of in-person instruction;

• create a task force to study and make recommendations on Metropolitan Council governance;

• effective June 24, 2023, require Class I and Class II railroad trains to have at least two crew members;

• allow 15-year-olds to drive for farmwork on any farm, not just their parent’s farm;

• exempt veterans with 100% disability from paying driver’s license fees, vehicle registration taxes and fees, and certificate of title fees;

• allow collection of race and ethnicity data from driver’s license applications starting Jan. 1, 2024. Submitting the information is voluntary and is for the purpose of research, evaluation and reports;

• require plans, coordination and exercises in case of a railroad emergency;

• designate the Deputy Josh Owen Memorial Overpass in Pope County;

• designate the Jim Oberstar Bikeway between the Twin Cities and Canadian border;

• require bike and pedestrian safety training in schools effective Aug. 1, 2023;

• eliminate prohibitions on commuter rail planning and development, including the “Dan Patch” corridor from Minneapolis to Northfield;

• establish a Transportation Fuel Standard Working Group as well as a Greenhouse Gas Emissions Impact Working Group;

• require various legislative reports; and

• authorize studies of speed cameras and a road funding gap.

HF2887* / SF3157 / CH68