Walz budget includes ambitious transportation funding package — What does it mean for cities?

Gov. Walz has talked openly about his intention to propose a comprehensive transportation package that includes a gas tax increase, tab fee increase and other new revenues for transportation. His administration made good on those promises in Tuesday’s budget release by proposing a package that would result in a net increase in funding by more than $8.5 billion over the next 10 years from a variety of sources. The proposal would undo past statutory dedications of general fund revenues to transportation and replaces them with constitutionally dedicated funding sources.

Here are the major highlights, courtesy of MnDOT:

  • Initiates a 20-cent gas tax increase (phased-in over two years) and indexing the gas tax to inflation (beginning in FY 2023) to raise approximately $6.5 billion over 10 years
  • Increases the registration tax (increased tax rate from 1.25 percent to 1.5 percent and base tax fee from $10 to $45; change the depreciation schedule) to raise approximately $4 billion over 10 years
  • Increases the motor vehicle sales tax from 6.5 percent to 6.875 percent to raise approximately $300 million for roads and bridges over 10 years, with additional funds raised for transit purposes
  • Authorizes $2 billion in trunk highway bonds over eight years starting in 2022
  • Proposes an increase to the Working Family Credit of $100 for each single or head of household recipient and $200 for each married filing jointly recipient to offset gas tax increases for low-income Minnesotans

More information can be found at dot.state.mn.us/transportationfunding/.

What the Walz plan means for city streets

The large increase in revenues flowing through the constitutionally dedicated system will have immediate benefits for Municipal State Aid (MSA) cities—those with a population over 5,000. Cities over 5,000 can find what the budget proposal would mean for them by clicking HERE.

For cities under 5,000, the answer is a little more nuanced. The bill does not currently include funding for the Small Cities Assistance Program, but the administration has communicated to us that they would like to work actively with the Legislature and stakeholders to find a sustainable, dedicated funding source for all cities. The primary reason small cities don’t appear in this proposal is that the Walz Administration chose to avoid putting general fund dollars toward transportation purposes, opting to rely on existing dedicated sources instead. There is not currently a constitutionally dedicated source for small city streets.

What the Walz plan means for highway expansions

While the Walz plan does not mention Corridors of Commerce by name, the total transportation funding package would fund the state’s transportation system at a level that would allow for expansion projects to be addressed in MnDOT’s regular program, not a special program like Corridors. In fact, shortly after the budget release, MnDOT released a list of projects—including some expansion projects—that the agency would intend to add to its 10-year construction plans if this full package is adopted. You can find that project list HERE.

If you have any questions about the Governor’s transportation plan and how it could impact Greater Minnesota communities, please contact CGMC transportation lobbyist Shane Zahrt at sazahrt@flaherty-hood.com.