Transportation Economics/Revenue/Minnesota

Financing Local Transportation Infrastructure in Minnesota


Local governments in Minnesota spent about $2.68 billion on roads in 2008. The bulk of these funds (around two-thirds) are appropriated from local general revenue sources. Sources such as property taxes and special assessments on property owners play an important role in providing revenues for local transportation infrastructure. Minnesota has also has a system of local government aid grants, which are provided by the state for the purpose of easing local tax burdens in cities with smaller property tax bases. Some of these funds are used by local governments for transportation purposes. While data on these expenditures for transportation purposes are not reported on a consistent basis, one estimate using 1996 data for local governments in the Twin Cities metropolitan area suggested that roughly 25 percent of local road spending came from state general-purpose aid to local governments [1].

Local revenues are also supplemented with state highway aid, which accounted for about 28 percent of local transportation funds in 2008. By state law, nine percent of the funds collected by the state's Highway User Tax Distribution Fund (HUTDF), which collects revenues from state motor fuel taxes, vehicle sales taxes and registration fees, is redistributed to cities with a population greater than 5,000. Counties also supplement their own local revenues with a significant share of the HUTDF funds -- 29 percent of the funds collected by the HUTDF are distributed to counties. State highway aid distributions to counties and cities totaled $438 million and $116, respectively in 2008 (see here). Finally, local governments received a small share of their revenues from the proceeds of bond sales. These bonds typically tend to be general obligation bonds, which are repaid out of general revenue sources.

Revenue for Highways in MinnesotaEdit

The state of Minnesota spent $2.36 billion on highways in 2008. The largest source of these revenues (42 percent) was state-level highway user taxes. As described in the previous section, the HUTDF collects revenues at the state level from a set of three taxes on motor fuel, vehicle sales and vehicle registration. By constitutional provision, 62 percent of these revenues are directed to state highway construction and maintenance, with the remainder distributed as aid to counties and cities. The second largest source of state government transportation funds, accounting for about one-third of all funds is federal highway aid. These revenues are collected from federal excise taxes on gasoline and other motor fuels, then distributed back to the states by formula. The third largest source of state funds falls under the category "Other Imposts and General Funds", accounting for about 12 percent of revenues. In the case of Minnesota, this relates to other state-level charges that are not listed under the heading of state highway user taxes. The State of Minnesota did not appropriate any general funds for transportation in 2008. Local government payments also accounted for a small share of revenues. These revenues are due to a cost participation policy followed by the state's department of transportation in which local governments are asked to contribute toward the cost of some cooperative construction projects engaged in by state and local units of government, and where some mutual benefit is recognized between both parties. An example might be a project that provided access to an interstate highway in a newly-urbanizing location.


For comparison purposes, the same chart has been produced below using data from all 50 states. A few observations emerge when looking at the distribution of revenue sources in the two charts. First, Minnesota relies to a greater extent than other states on highway user taxes to fund its highways, collecting about five percent more of its revenues from this source than the national average. This is coupled with the observation that federal highway aid accounts for a greater share of highway funds in Minnesota than the national average (34 percent versus 27 percent). A related point is that many other US states make use of tolling to a greater extent than in Minnesota. Nationwide, this share is around five percent of all revenues, whereas in Minnesota the use tolling is nearly non-existent, with the exception of a couple of high-occupancy toll facilities. Other states also received a greater share of revenues from bond proceeds than Minnesota. Unfortunately, it is difficult to tell from Federal Highway Administration data whether general sources of revenue or user charges were used to secure the bonds.



Financing Transit in MinnesotaEdit


Revenue Category Amount
Fares 99,054.40
Other Directly Generated 11,491.10
UZA Formula 19,621.50
Capital Program Funds 2,474.00
Other Federal 1,273.60
State General Revenue 87,517.30
State Dedicated (MVST) 122,225.90
Local General Revenue 2,820.50
Dedicated Other (Local Property Taxes) 6,439.30
TOTAL 352,917.60
Property Tax 36,434.00
Vehicle Sales Tax 25,081.70
Federal Capital Grant 53,772.10
UZA 55,909.00
Other Federal 450.00
TOTAL 171,646.80

Metro Transit, Metropolitan Council and Metro Mobility (2008) data from National Transit Database

The category 'Other Revenue' is a summation of a number of smaller sources of revenue, such as advertising and interest income.


  • Operating Expenses - $125,000,000 (837 vehicles -> $149,000 / vehicle)
  • Capital Expenses - $33,063,000 (Rolling Stock 23,617,000; Facilities 6,277,000; Other 3,173,000)

Operating expenses for Metro Transit and Met Council fixed-route bus services (excluding light rail, vanpool and any demand-responsive transit services) in 2008 were just over $276 million. The two organizations operated a combined fleet of 1,022 buses during peak periods that year, giving us a rough estimate that the average bus cost around $270,000 to operate during the year. Light rail operating expenses for the year were around $23.7 million.

Cost Category Unit Cost
operating cost / vehicle revenue hour (MT bus) $115.27
operating cost / vehicle revenue hour (MC bus) $117.08
operating cost / vehicle revenue hour (LRT) $341.16
operating cost / vehicle revenue mile $3.30
maintenance cost / vehicle revenue mile $1.10
non-vehicle maintenance / vehicle revenue mile $0.20
general administration / vehicle revenue mile $0.90


  1. Ryan, Barry; Stinson, Thomas (2002) (PDF). Road Finance Alternatives: An Analysis of Metro Area Road Taxes. University of Minnesota Center for Transportation Studies. 
Last modified on 17 June 2010, at 18:53