Transportation commissioner talks gas tax, debt service fee | Local News

Minnesota Department of Transportation Commissioner Margaret Anderson Kelliher is proposing a combination gas tax increase and debt service fee that would raise gas prices anywhere from 13 to 15 cents per gallon to pay for badly needed transportation improvements.

Kelliher talked about her idea during a visit to Rochester. 

She said the fee would be used to pay off outstanding bonds that are consuming more of the department’s budget, estimated at $275 million in a few years. Sustainable funding will also be key for future projects, including achieving “a long-term solution” along U.S. Highway 14 and paying for an interchange at Byron.

Right now, most projects in the Rochester district are paid for through one-time funding or bonding, a funding approach that lacks sustainability given the state’s growing transportation needs. 

“There is a real need in this community to address not only the transportation movement of cars and transit, but people want to bike safely and they want to walk safely. And to be able to do that, you actually need more resources,” Kelliher said during a meeting with the Rochester Post Bulletin editorial board Tuesday. 

Last year, DFL Gov. Tim Walz proposed a 20-cent hike in the gas tax, but it died in the GOP-controlled Senate. 

State Sen. Dave Senjem, a Rochester Republican, said he was skeptical of Keliher’s idea. 

“It’s going to bring a up a lot of questions,” Senjem said. “I think it’s going to be a little too cute too sell.”  

A sticking point for many Republicans with regard to Walz’s gas tax proposal was his idea to shift money from a sales tax on car parts to the general fund, then filling the hole in the transportation budget with gas tax money. Walz is no longer proposing that shift.

“We should start anew and look at ways we can build from there,” Kelliher said.

Lawmakers are expected to take up a capital investment bill as part of next year’s short session. The last time a debt service fee was enacted was in 2008 when a 3 1/2 cent surcharge was passed by the Legislature. At the time, gasoline was a dollar higher than it is today, officials say.

Unlike a gas tax, which goes up by a specific amount when approved by lawmakers, the Legislature would authorize the transportation commissioner to tack on the fee but it could also impose restrictions on how it is done.

Kelliher said the state’s precarious funding situation only allows it to do preservation projects in the system. Expansion projects are far down on the list. A report card issued by the Society of Civil Engineers at the start the session earlier this year graded the state’s road system for future capacity and condition a D- and its bridges a C.