Posted: 3:09 pm Tue, April 19, 2011
By BRIAN JOHNSON
Transportation projects, such as this bridge improvement on Rice Street over Highway 36, may have more financing options in the future. A bill in the Minnesota House of Representatives would allow local governments or private parties to essentially front the money for a transportation project on the Minnesota Department of Transportation
The Minnesota Department of Transportation is testing the waters on two unusual ways to pay for transportation projects.
A bill making its way through the Minnesota House would allow local governments or private parties to essentially front the money for a project that is on MnDOT’s long-term to-do list.
When the project’s turn comes around in the program – say, in eight or 10 years – MnDOT would reimburse the local payer.
MnDOT is pushing the idea, which is consistent with a trend toward alternative financing plans designed to allow state DOTs to expedite projects.
Also this week, MnDOT said it plans to recruit 500 people in Hennepin and Wright counties to test technology that someday could be used in a mechanism that would charge motorists for how many miles they drive instead of how much gas they burn.
Minnesota isn’t alone in looking at outside-the-box plans such as those. According to the American Association of State and Highway Transportation Officials (AASHTO), new financing models are considered critical in lean times.
MnDOT says it faces up to a $50 billion shortfall in transportation funding over the next 20 years.
“I think it’s fair to say that there are always more good projects awaiting funding than there is funding to undertake projects,” said Scott Peterson, MnDOT’s government affairs director.
At a recent state House Transportation Policy and Finance Committee hearing, the sponsor of the House bill, Rep. Mark Buesgens, R-Jordan, said House File 1378 is an example of government “doing things in different ways.”
“This legislation matches that philosophy, albeit in a very, very, very tightly controlled realm,” Buesgens said.
Rep. Mike Nelson, DFL-Brooklyn Park, said at the hearing he hoped the alternative financing wouldn’t bump other worthy projects in MnDOT’s program and instead sell projects “to the highest bidder.”
Peterson testified that the plan would not displace any other projects.
“Those would all proceed on schedule,” he said.
MnDOT currently is not authorized to enter into financing agreements with private sources, Peterson said in a phone interview. The plan could make sense for a transportation project that directly benefits a private development, he added.
An agreement with a private financing partner could have some conditions attached. For example, Peterson said, the “loan” to MnDOT could turn into a grant, or less money paid back, if the expected private development does not pan out.
Under the bill, MnDOT would select a pilot project for the plan.
Specifically, the bill states that MnDOT may “enter into agreements with governmental or nongovernmental entities, including private and nonprofit entities, to finance or invest in transportation projects, including repayment agreements.”
The bill cleared the House Transportation Policy and Finance Committee and is en route to the House floor, but it has not had a hearing in the Senate.
Transportation lobbyists tend to like the idea.
It brings “added construction investment to the marketplace today, and that is something that AGC and our members welcome and support,” said Tim Worke, director of the Associated General Contractors of Minnesota’s Transportation Division. “It also could be argued that it is cost-efficient in saving on construction inflation and the costs of monetary inflation.”
Margaret Donahoe, executive director of the Minnesota Transportation Alliance, noted in an email message: “We are supportive of the legislation. We agree that alternative funding options need to be an option in the future, and the goal should be to increase the overall level of funding for transportation projects.”
Meanwhile, the “mileage-based user fee” has been discussed for years as a possible alternative or complement to the gas tax, one of the three main sources of Minnesota highway revenues. The other sources are vehicle registration and motor vehicle sales taxes.
The problem: Gas tax receipts have been dwindling in recent years as people drive more fuel-efficient cars. The mileage-based system would help, in theory, because it would not be directly tied to consumption of gas.
States such as Oregon and Iowa have been pioneers in mileage-based user fees. As reported by Finance & Commerce, Oregon completed a mileage-based user fee study in the spring of 2007.
Some people have privacy concerns about the mileage-based system, which includes the use of smartphones and GPS applications that provide travel data. But the system is “designed to record miles and road use while strictly protecting the privacy of the participants,” according to a MnDOT news release.
In 2007, the Minnesota Legislature set aside $5 million from trunk highway funds to pay for the mileage-based test project, according to MnDOT.
Three groups of volunteers will get a stipend to test the devices for six months each, and MnDOT is paying $395,000 for a policy study from the University of Minnesota’s Humphrey School of Public Affairs, according to MnDOT.
By the numbers
$50B
Shortfall in transportation funding over next 20 years