Funding transport in Minnesota

I was interviewed by the Heartland Institute about transportation funding in Minnesota. Being leery given their reputation, I asked for the questions in writing. I was right to be leery, they still managed to misattribute opinions to me in the posted article despite the interview being in writing. I have asked for a correction and will update if they provide one. Update June 17, 2016: Posted article is corrected.

These are the actual questions and my actual answers.

Fresno Gas Prices (Dec 2001)

On May 27, 2016, at 13:43, Jeff Reynolds <jefferyreynolds@comcast.net> wrote:

Hi David,

Thanks for taking a bit of time for my article. I have just a couple of basic questions.

1.       What are the pros and cons of this particular user fee that was proposed in MN?

Why we should raise gas taxes now:

• Road quality is not where we would like it and will only get worse if insufficient revenues are raised to maintain and reconstruct existing infrastructure, as existing roads continue to age and deteriorate.

• Raising gas taxes is more administratively efficient in the short run than implementing tolls or mileage fees, especially tolls requiring lots of infrastructure. It presently has lower collection costs. There is no guarantee that will remain true as new technologies change the cost of collection.

• Currently roads are only partially funded with gas taxes, general revenue is a major source. This charges non-users as well as users, and sends no signal about the appropriate amount of roads that should be built or how scarce road space should be allocated.

• So, states like Minnesota can (they are perfectly capable of, the price of gas tax is a small share of the price of gas, and a 5 or 10c increase is well within weekly volatility of gas prices) (and should for the reasons above) raise the gas tax before using property taxes or general revenue to pay for roads.

We do need to be careful that the money gets spent on maintaining the valuable parts of the existing system, not building wasteful new facilities. There is a serious lack of trust in existing institutions. Minnesota, like all states, has built roads for political reasons rather than because demand warranted it.

In contrast, the vehicle sales tax or property tax (in its various forms) favors travelers who drive more miles per vehicle (i.e. rural travelers), and provides no incentives to reduce demand. It encourages people to keep vehicles longer, which keeps older technology around longer (whether this is an environmental cost is unclear, as the environmental cost of building new vehicle is not small). Dedicating transportation-sourced sales tax to transportation expenditures is a hidden subsidy, since those funds are no longer able to pay for the general costs of government. Why should sales taxes on gasoline or motor oil only pay for roads, but sales taxes on everything else pay for schools and police?

2.       Is more revenue necessary, or would MN be better served to reprioritize its spending?

Minnesota, like all states should reprioritize its spending, favoring maintenance and preservation over new construction, but it should also reform where it gets its funds for transportation. There is no good reason that transportation should be subsidized by general funds dollars, which is true now for more than half of all state and local transport expenditures. Roads, like electricity and natural gas should be thought of, and managed like a utility, and the beneficiaries should pay proportional to use. This requires significant governance reforms, but would help reduce politically-driven investments.

3.       Why did the legislature reject these proposals?

Republicans are afraid of voting for gas tax increases. After the I-35w Bridge Collapse in 2007, a gas tax hike was brought to legislature in 2008.

The “Override Six” are Republicans who voted with the DFL (Minnesota Democratic Party) to override Gov. Pawlenty’s veto of the gas tax bill. Four of them lost their seats due to Primary challenges, while the Republicans lost two of those seats to the DFL in the 2008 General Election. This lead to the rule that voting in favor of a gas tax increase can be dangerous to your political health, if you are a Republican.

4.       What’s next for MN and its infrastructure?

The Governor and some are discussing a special session of the legislature, but in the absence of that, it will come up again next year, after the election, and the DFL might recapture both Houses and then in that event will likely pass some form of gas tax increase statewide and raise the transit sales tax in the Metro area to pay for transit capital expenditures for new LRT and Bus Rapid Transit lines.

— David