Wayne Sandberg, Washington County Public Works Abbey Bryduck, Association of MN Counties

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1 Wayne Sandberg, Washington County Public Works Abbey Bryduck, Association of MN Counties

2 County Wheelage Tax What is it? Experiences What to expect in 2014 City Options Local Option Sales Tax What is it? Experiences What to expect in 2014 and beyond

3 Wheelage: a tax or toll on the passage of wheeled vehicles History in Railroads An agreement between two railroads according to which, one railroad buys the right to run its trains on the tracks of the other, and usually pays a toll for the privilege. That toll is called a "wheelage" charge.

4 MN Statute County Wheelage Tax The Wheelage Tax is per vehicle (not per wheel) annual registration tax paid at the time of license tab renewals revenue to County where vehicle primarily stored at the time of registration

5 Taxed are: Vehicles that pay an annual registration tax Not Taxed are: Vehicles with a lifetime tax e.g. Trailers Exempted via Statute are: motorcycles motorized bicycles motorized foot scooters

6 , Subd 1, Sec (b) on each motor vehicle that is kept in such county when not in operation It depends on where the vehicle is primarily stored Not where you live we take your word for it

7 Example Family with a Cabin Fleets of vehicles Corporate Headquarters vs. Fleet Location OTHER EXAMPLES

8 Is enacted by a County Board vote. Must certify vote by August 1 of year prior (2013) Tax effective January 1 of following year (2014) Funds collected by State Distributed monthly to counties Collection Fee about 2%

9 Must be used for highway purposes As defined in MN State Constitution Article 14 Section 9 solely for highway purposes. Transit not eligible Most common usage Non State Aid Highway Pavement Improvements

10 Today set at $5.00 per vehicle Only Metro Counties eligible On January 1, 2014 will be $10.00 Every County eligible

11 Wheelage Authority in existence since the 1970s for the metropolitan area. $5.00 max per vehicle Required Road and Bridge Levy Offset Unused 2006 Clean Up of law removing outdated references to early 1970 s county levy s Offset remained 2007 Early adopters Washington, Dakota & Anoka

12 2008 the Road and Bridge Levy offset was removed Scott and Carver adopt Hennepin and Ramsey stay out Concern over regressive nature of the tax 2013 Authority is expanded to all 87 Counties Amount is set at $10.00 With option to set any amount up to $20.00 in 2017

13 Driver and Vehicles Services (DVS) Still using a 20 + year old mainframe Cannot handle different tax rates for one tax across multiple counties System upgrade & modernization will be done by 2017 Compromise with DVS $10.00 mandatory rate if adopted 2018 Rate can be anywhere from $0 to $20 (set in 2017)

14 After session ended and before August 1, Counties Adopted 4 Counties Continued 1 County Anoka ended the tax

15 Additional Revenue Source for your highways Especially the non state aid routes Transportation Alliance Publication Wheelage Tax Amounts This funding is significant Transportation Alliance estimates: If all 87 counties were to impose the wheelage tax at $10. Revenue raised = $46.8 Million statewide Compare this to a five cent gas tax increase Generates approximately $41 million for the County State Aid Fund. Gas Tax money limited to State Aid Highways Wheelage is not.

16 From the 2012 Dollar Bill Revenue A $0.05 Gas Tax Costs $40 / year for an average vehicle Raises $160 Million Statewide in revenue Directs $928,000 to Washington County For every $5.00 Wheelage Tax Costs $5.00 / year per vehicle Directs $1,000,000 to Washington County

17 Public perception Very few like additional taxes Taxed at time of License Tab Fee Renewal A User Fee Money stays locally People see the roads being paved 2006 about 6 phone calls from residents Moped issue Others happy roads are getting paved

18 Offset to the Property Tax Roads are one of the most valuable assets the public owns Maintenance is necessary Funding not coming from Wheelage will need to come from elsewhere Property Tax

19 Why should you implement a wheelage tax? Property tax relief Comprehensive captures non property tax payers A User Fee Can be paid anywhere in the state People see results

20 Chapter 426 Finance, Taxation WHEELAGE TAX. Any city may impose an annual wheelage tax upon motor vehicles using the public streets or highways, provided that. Cannot exceed 20 percent of all taxes imposed by the State on motor vehicles

21 However Cities of First Class (450 k or more) Cannot exceed $15.00 for trucks $10.00 for other motor vehicles Further Cities of First Class (less than 150k) Can tax up to 25% of total state taxes As long as it does not exceed: $50.00 on trucks $5.00 on other motor vehicles

22 City cannot tax non residents, unless the vehicle is used principally on the streets of that city. This is different from County mechanics NOT where you live, but where vehicle is stored

23 City of First Class over 450K population Money collected can be distributed across all areas of city No requirement to focus on roads Requires a referendum with simple majority Has 5 Year sunset clause built in City of First Class less than 150K population Requires a referendum with simple majority Has 1 Year sunset clause built in

24 Seems most beneficial to cities under 150k population Not sure if any city has implemented Calculation of allowable rate may become complicated Would likely need new infrastructure at DVS to implement May be good to work with them now so the new system can handle this if ever used

25 ¼ cent enacted in the metro area for transit only in Same bill created the Counties Transit Improvement Board (CTIB) to distribute the funds for capital transit projects in the form of grants. The legislation also provided for a local option sales tax in outstate MN of up to a ½ cent for capital construction of roads or transit on a per project basis enacted by referendum.

26 2013 Legislative Session, Wheelage tax authority was expanded to all 87 of Minnesota s counties Referendum requirement was removed from the local option sales tax in Greater MN, now to be enacted by county board following a public hearing. Authority for sales tax was extended to be used for transit operational costs in 2013.

27 MN Truckers Association, MN Auto Dealers Association MN Driver and Vehicles Services GOP referendum removal Despite this opposition, and the ultimate reduction of the transportation funding bill to a lights on appropriation, the County Transportation Governance Bill language prevailed.

28 The sales tax is enacted on a per project basis, and must blink off once sufficient funds are raised for a project. Proceeds must be dedicated exclusively to: Specific transportation project or improvement Capital or operating of a specific transit project Capital for a Safe Routes for School project

29 Wheelage can generate anywhere from $41,000 in Mahnomen County to almost $9 million in Hennepin County. Sales tax varies greatly depending on retail sales of a particular county, from $85,000 in Traverse County to $94.5 million in Hennepin.

30 The sales tax has been passed by Olmsted (under DMC authority) and Rice County. It is currently being considered in: Wadena, Otter Tail (Fergus Falls), Crow Wing (Brainerd), Hubbard (Park Rapids), and Beltrami County (Bemidji).

31 Adopted June 25 th Revenues distributed 60% maintenance, 40% construction, future most likely 100% maintenance Identified 10 years worth of projects Staffing levels will need to be addressed for a bigger construction program

32 Sales tax: $2,710, estimate Wheelage tax: $530,690 Bonding in 2009 for $13.1M Population of 6,500. Cities: Faribault, Northfield, Lonsville

33 Does not reduce state fund allocations, or replace funding for CSAH roads. Currently, credit for local funds in CSAH formula. Outside of the local option sources, county road systems can only be funded with property taxes.

34 Funding gap for CSAH is $9 billion over 20 years, or $450 M annual funding gap. Funding gap for local roads is $9 billion over 20 years, or $450 million annual funding gap. Still need significant fuel tax or other increases for CSAH and State Roads.

35 Contact: Abbey Bryduck, Association of MN Counties (651)