Minnesota's highway revenues fall $18 billion short of needs over next 20 years.

DALLAS -- Minnesota's transportation revenues will be $18 billion shy of the funding needed to provide a safe and efficient highway system over the next two decades, state transportation officials warn.

The state's official 20-year highway investment plan due to be unveiled after Labor Day will show $39 billion of highway needs through 2037 but only $21 billion of available revenue, said Charlie Zelle, director of the Minnesota Department of Transportation.

"The growth in current revenue sources will not meet what we need to spend to provide a competitive system by 2037," Zelle said Wednesday. "This number will only continue to rise if we as a state do not pass a comprehensive transportation funding plan."

State highway revenues will dip below the amount needed to maintain Minnesota's highway system as early as fiscal 2018, Zelle warned.

"Minnesota's infrastructure will continue to deteriorate without a significant infusion of resources to address critical needs," he said.

More than half of the state's highways are at least 50 years old and 40% of the bridges are more than 40 years old, Zelle said.

Minnesota motorists pay a gasoline tax of 28.5 cents per gallon that includes a surcharge of 3.5 cents per gallon to support $1.2 billion of state bonds authorized in 2008 for bridge projects through 2018.

Additional bonds could provide more funding for highways but Minnesota DOT is getting close to its self-imposed cap of 20% of annual revenues for debt service, Zelle said.

The peak debt service, accounting for 17.5% of the revenues or almost $240 million, will occur in fiscal 2018 and then decline over the next 15 years if no new debt is authorized, he said.

State funding for highway projects has declined from $1.1 billion in 2014 and $1 billion in 2016, Zelle said.

The $930 million, 246-project highway construction effort in 2016 included 44 fewer projects than last year, he said.

The $18 billion shortfall is $6 billion more than the expected revenue gap from a 2013 assessment, Zelle said.

Inadequate investments over the past four years have resulted in an increase of $3 billion in the shortfall due to deferred maintenance, with another $3 billion expected to be lost to inflation over the next 20 years, he said.

There is strong, bipartisan agreement among lawmakers that something must be done to improve transportation funding, Zelle said.

"If we don't act on this universally recognized problem, system repairs and needed investments will cost even more," he said.

The 2016 legislative session ended at midnight on May 22 without agreement on competing highway plans that could have significantly reduced the expected revenue shortfall.

Gov. Mark Dayton and the Democrat-Farm-Labor majority in the Senate had favored a transportation revenue plan that would have added a 6.5% sales tax to the state's gasoline tax. The increased levy would have generated an additional $580 million per year.

Dayton also had proposed $1 billion of state highway revenue bonds issued over four years to fund state projects and $567 million of state general obligation bonds for local road and bridge efforts.

A transportation plan that had been supported by the Republican-controlled House would have increased transportation revenues by $7 billion over 10 years without a gasoline tax increase. The Republican plan included $2 billion of new debt for state and local roads.

The state will receive $3.45 billion of federal highway funding through fiscal 2020 through the five-year Fixing America's Surface Transportation (FAST) Act, which was enacted in late 2015. The funding of almost $700 million per year is an increase of more than 11% from Minnesota's federal highway funding in fiscal 2015 of $629 million.

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