County board approves $10 ‘wheelage tax’ to support road projects

Vehicle owners will pay starting Jan. 1

by Katy Zillmer

Sun POST Newspapers

An additional $10 fee will be charged to owners of registered cars and trucks in Hennepin County effective Jan. 1, 2014.

The fee, known as a “wheelage tax,” was approved 4-3 by the Hennepin County Board of Commissioners July 16 to generate revenue for road and bridge improvements on county roads.

District 4 Commissioner Peter McLaughlin proposed the fee and supported it along with Commissioners Jan Callison, Gail Dorfman and Linda Higgins. Commissioners Mike Opat, Randy Johnson and Jeff Johnson voted against the fee during the July 16 meeting.

McLaughlin said the fee would generate approximately $8.6 million in revenue per year.

For the next four years at least $2 million of the revenue would be used to pay debt on existing county road and bridge projects, McLaughlin said.

“It would be a reduction in the property tax levy to support pre-existing debt,” McLaughlin said. “That debt service payment ranges from $6 to $8 million a year. This is $2 million that would otherwise require property tax support.”

Commissioners in favor of the tax agreed users of the roads in the county should pay for improvement and maintenance.

“I continue to believe that this is a relatively modest increase (in) payment,” Callison said. “We’re asking the users of the system to fund the system so that it continues to work well. Our roads and bridges are really important and the backbone of our system. I am also a proponent of shifting away from borrowing.”

Opposing commissioners responded that there are other sources of funding in the county budget to support road and bridge projects.

“I agree that we should be spending a larger proportion of our transportation budget on roads and bridges … but to me it isn’t about bringing more money into the system, it’s about prioritizing our current transportation spending,” Jeff Johnson said.

Hennepin County has more than 2,200 miles of paved roads and maintains 450 traffic signals in the suburbs and 329 in Minneapolis.

There are 147 county bridges, including 72 that are more than 35 years old.

The county has used an average of $26 million per year in property taxes to fund roads and bridges.

Johnson also said he does not support the county’s overall 20-year transportation plan. He questioned how the county can spend money on doubling transit ridership and bicycle use, building sidewalks and projects in Minneapolis such as The Interchange and the Lowry bridge, but not have funds to keep the roads safe.

“To me it’s not that we don’t have enough money, it’s that we’re choosing to spend it elsewhere,” Johnson said. “We don’t need to create yet another tax on our constituents in order to properly fund our roads.”

Opat said that he does not support the wheelage tax because it is regressive and will have more of an impact on low-income residents.

“The problem with this tax is that it will be permanent,” Opat added. “There’s no doubt about it that once it’s on that license tab list (there is) going to be little appetite to go back and have to supplement it with other monies.”

The Registrar of Motor Vehicles collects the tax as part of the vehicle registration process.

Dakota County, which started to collect a $5 wheelage tax in 2006, volunteered to pay the startup costs for the Registrar of Motor Vehicles to have the system to collect the taxes. The cost was $150,000. Each county that decides to collect the tax must reimburse Dakota County for a share of the start up costs.

Hennepin County previously assessed a $5 wheelage tax from 1972 to 1974. The state Legislature approved legislation in 1971 to allow counties to implement the tax and set the limit at $5 per vehicle, except for motorcycles, motorized bicycles, scooters and other vehicles listed in the statute, according to information presented to the board last week.

The tax was increased by the Legislature to $10 per vehicle in 2013. That amount is effective Jan. 1, 2014 through Dec. 31, 2017.

Counties may elect to levy a wheelage tax up to $20 per year starting Jan. 1, 2018.

Hennepin County owes $20,000 to Dakota County to start collecting the tax and there is an estimated $40,000 in annual administrative payments to the state for collection and disbursement activities, which leaves the net revenue at approximately $8.6 million.

The board may vote to stop collecting the tax in the future as long as it does so in time to notify the Registrar of Motor Vehicles by Aug. 1 the year before the fee would be collected again.

Other uses of the Hennepin County revenue from the wheelage tax include painting traffic signals over a three-year period, synchronizing signals at intersections and installing LED lights to provide a savings on maintenance and operating costs, McLaughlin said.

Synchronizing traffic signals creates efficiency by reducing the time vehicles idle at intersections.

“It’s going to save the traveling public time and fuel costs,” McLaughlin said. “This will allow for more efficient movement in the county,” he said.

There is also a three-year maintenance plan in place to show how the revenue from the tax is working.

McLaughlin said assessing the tax helps accomplish the board’s goal of making 67 percent of all county roads and surfaces in good or better condition within five years.

“That’s a goal that we’ve had,” he said. “A goal without resources is not much of a goal.”

Commissioner Gail Dorfman said the tax is needed for the county to catch up on transportation repairs.

“Everybody, regardless of their income, who has a car and uses it to get to work deserves to have a county road system that is safe and maintained, “Dorfman said. “It seems like the responsible thing to do,” she said.

 

Contact Katy Zillmer at katy.zillmer@ecm-inc.com

 
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