Published September 7, 2003
Minneapolis/St Paul StarTribune
We tend to assume that driving pays entirely for itself, and that that’s reason enough for government to favor roads over other transportation choices. Not only do drivers pay for their cars, we believe, but also for gasoline that is taxed enough to cover the construction and maintenance of all the roads we’ll ever need.
But this is a myth.
Minnesota’s 20-cent gasoline tax would have to rise by 39 cents to cover all of the state’s current road-related expenses. To start building the roads we actually need in order to deal with congestion, the tax would have to rise 42 cents beyond that, pushing the price of gasoline beyond $2.60 a gallon.
Clearly, somebody besides the driver is paying for Minnesota’s roads. Drivers-through gasoline taxes, car registration fees and sales taxes on vehicles-actually pay only 62 percent of the costs of roads. General taxpayers “subsidize” the rest, no matter how much or little they drive.
Because of this arrangement, a good portion of Minnesota’s demand for roads is forced to compete with the whole array of other pressing government needs. This competition now threatens the integrity of our road system, especially in busy urban areas. It also chokes off opportunities to provide other viable transportation choices, like transit.
The problem’s roots date back to Model T days. Dirt roads were fine for horses, but muddy roads were terrible for cars. The political cry to “Get the farmers out of the mud!” led to changing the state Constitution in 1920. A system of paved trunk highways, plus help for county and city roads, was to be funded by a gasoline tax and a vehicle registration fee. Thus pavement replaced dirt.
Much has changed in 83 years, but the outline of that financing structure remains in place. A formula for the distribution of state gasoline tax revenues (62 percent to the state, 29 percent to counties and 9 percent to cities) took effect in 1956, but that hasn’t changed either, even as the state has become considerably more urban and our economy more diverse and sophisticated. We still have a transportation financing scheme designed mostly to get farmers out of the mud.
Thanks to this antiquated system, Minnesotans who tend to drive the least-urban residents-tend to pay a disproportionate cost for roads. Not only is this unfair; a heavy reliance on property taxes leaves the entire road system vulnerable to other budget constraints.
St. Paul offers a good case study. Public Works is the largest department in city government, accounting for more than a third of municipal operating costs. It spends most of its money on roads-$67.3 million last year.
But only about 30 percent of that comes from driver-generated income on parking, snow-plowing fees and so on. The other 70 percent comes from general revenues, assessments based on street frontage and type of property, and an infusion of $10.3 million from the city’s general fund-money that must compete with police and fire operations and other pressing needs.
That’s still not the whole picture. Debt service is a major part of city spending. This year, 36 percent of St. Paul’s $78 million in bond repayment will go to cover road projects. That’s an additional $19.9 million draw on the city’s hard-pressed general fund.
The bottom line is this: Only 24 percent of the cost of St. Paul’s roads is borne by driver-generated taxes and fees. The other 76 percent is a subsidy from general revenues and property assessments. There’s no reason to believe that St. Paul’s situation is atypical for cities and older suburbs.
This scenario is repeated in developing suburbs as well, where state-aid roads are only a part of the picture. Feeder streets that are not part of the antique aid system are also funded by local property taxes, and these costs have to compete with other brand-new infrastructure that has to be built daily.
This pressure is worsened by the state’s reluctance to keep up with transportation needs. The Transportation Policy Institute recently estimated Minnesota’s unmet needs at $1.2 billion a year to prevent further congestion, bridge closures and so on. The current rate of spending doesn’t even begin to meet our needs, says Anne Finn of the League of Minnesota Cities.
“We’re just not planning for the long-term viability of our paved streets,” said Don Sobania of the St. Paul Public Works Department. “My crystal ball doesn’t show me where that money will come from.” A lot of the blame for this situation belongs to a funding system that does not direct money to where more of it is spent-the cities.
We’ve been less than honest with ourselves about how transportation is paid for in Minnesota. We’ve heard a lot of misleading rhetoric in recent years about cars and roads being the superior choice because they are entirely paid for by users, while transit is heavily subsidized. But if you add up all the money spent in Minnesota on transportation, then subtract the money contributed directly by users-at the gas pump, through registration fees, through sales taxes on new vehicles or at the transit fare box-you’ll find a leftover subsidy of $1.3 billion from general taxpayers. Of that total, 89 percent went to roads.
Our transportation financing system is as outdated as the Model T it was meant to accommodate. Relying on a patchwork of local property taxes to shore up the road system obscures Minnesota’s real transportation picture and crowds out the funding of transit and other alternate modes. It’s time to stop pretending that driver-related taxes and fees pay the entire cost of building and maintaining our roads.
Erik Hare is a research engineer living in St. Paul.