• E-mail
• Print
• Comment
• Font Size
• Digg
• del.icio.us
• Discuss article

$2.5B Sought for State Roads: Pawlenty Plan Would Require Voters to Approve Car Tax Shift

Posted on: Thursday, 2 February 2006, 12:00 CST

By Charles Laszewski, Pioneer Press, St. Paul, Minn.

Feb. 2--Gov. Tim Pawlenty announced Wednesday he wants to issue $2.5 billion in bonds for at least 21 new road projects throughout Minnesota.

But the plan hinges on Minnesotans voting in November to approve a constitutional amendment that would shift all of the money from the motor vehicle sales tax into the highway and mass transit budget. If the amendment passes, Pawlenty's intent is to use a large chunk to pay back the bonds over the next 30 years.

"He is literally betting on the come," Senate Majority Leader Dean Johnson, DFL-Willmar, said of Pawlenty's sole legislative proposal for road project funding this year. "We think it's better to pay as you go. Constitutional amendments are not easy to pass."

Pawlenty and Lt. Gov. Carol Molnau laid out their plan while standing on an uncompleted portion of Minnesota 610, then traveled around the state to tout it. The governor will ask the Legislature to pass a bill this session allowing him to issue the bonds for 10 years beginning in 2007 if the constitutional amendment passes.

Critics argue that such a plan would put the state in great debt after a decade and that there would be little money for future road and transit projects.

About 54 percent of the vehicle sales tax money now goes to roads and mass transit. The other 46 percent stays in the state's general fund. It was unclear Wednesday what tax increases or program cuts may result from a general fund gap.

If the amendment passes, money would flow to highway and mass transit in phases.

By 2012, $300 million is projected to be collected annually from the motor vehicle sales tax. However, Pawlenty said he intends for $110 million annually to pay the bonds over 20 years.

To gather support for the amendment and what it could do, he and Molnau presented a sample of 21 projects from around the state that could be sped up by three to eight years. There's just one project in the east metro -- widening Interstate 35E from University to Maryland avenues and rebuilding the Cuyuga bridge.

"It's illustrative to the people of Minnesota because they will be voting on the amendment," Molnau said. "These projects are drawn from the state's critical needs projects."

Pawlenty called it good business to issue the bonds and accelerate the projects because the inflation costs of road projects is about 9 percent and the interest rates on the bonds are about 5 percent.

In fact, Transportation Department spokeswoman Jeanne Aamodt said that in the past two years, road construction inflation has been 10 percent because of higher costs for fuel, steel, concrete and oil for making asphalt.

Johnson said Senate Democratic-Farmer-Labor Party members would look at Pawlenty's plan, but that they saw big problems with it. DFLers and Republicans agree there's a huge demand for money for transportation projects. But if the voters turn down the amendment, it's back to square one, he argued.

Further, funding highway projects through bonding, rather than cash, winds up costing about twice as much when interest payments are figured in, Johnson said.

However, Peter Saucen, assistant commissioner of finance, said Johnson's estimate was high and that bonding increases the cost by 50 percent, not 100 percent.

Sen. Steve Murphy, the DFL chairman of the Senate Transportation Committee, adamantly opposes Pawlenty's plan. He said that by 2015 to 2017, the debt would overwhelm the vehicle sales tax revenue. He said gasoline tax money would have to be diverted to pay off the bonds, leaving little money for new road projects.

It will be our children paying for the projects built for us, he said.

"About 2015, it will implode," Murphy said. "It would be increasingly difficult to do any projects without an increase in the gas tax."

Murphy also pointed out that for several years, the state's Finance Department has calculated more money would be collected from the vehicle sales tax than has actually come in. Last year, the vehicle sales tax brought in $167 million.

Metro Transit had to cut bus routes and raise fares because the vehicle sales tax projections were off by $60 million, Murphy said.

But Johnson acknowledged that the DFL, at the moment, has no plan. He faulted Pawlenty for vetoing a bill last session, passed by both houses of the Legislature, that would have raised the gasoline tax 10 cents a gallon and provided $7.3 billion for both roads and mass transit projects over 10 years.

Johnson said he believes Pawlenty when he says he would veto the gas bill again, so that is unlikely to be in a DFL package.

The Minnesota Transportation Alliance, which is made up of highway contractors, labor unions and city and county governments, was thrilled with Pawlenty's announcement, said Margaret Donohoe, the group's legislative director.

"We thought if the money is there, it makes sense to bond for trunk highway projects," she said. "The projects are all those that people know are out there and need to get done."

Charles Laszewski can be reached at 651-228-5458 or claszewski@pioneerpress.com.

GOVERNOR'S Transportation Plan

Proposal: Sell $2.5 million in bonds to finance major road projects around the state beginning in 2007.

Issues at hand: Before any bonds can be sold, Minnesota taxpayers must pass a constitutional amendment allowing all of the vehicle sales tax to go to highway and mass transit budgets.

What it means for taxpayers: Roads would be built without any new taxes immediately levied. However, by 2015 there may be no new money for roads while the vehicle sales tax pays off the bonds.

Vote on the constitutional amendment: Nov. 7

-----

Copyright (c) 2006, Pioneer Press, St. Paul, Minn.

Distributed by Knight Ridder/Tribune Business News.

For information on republishing this content, contact us at (800) 661-2511 (U.S.), (213) 237-4914 (worldwide), fax (213) 237-6515, or e-mail reprints@krtinfo.com.

Source: Saint Paul Pioneer Press (St. Paul, Minn.)

More News in this Category