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C Motor Vehicle Excise Tax CITY OF CHANHASSEN 7700 Market Boulevard PO Box 147 Chanhassen, MN 55317 Administration Phone: 952.227.1100 Fax: 952.227.1110 Building Inspections Phone: 952.227.1180 Fax: 952.227.1190 Engineering Phone: 952.227.1160 Fax: 952.227.1170 Finance Phone: 952.227.1140 Fax: 952.227.1110 Park & Recreation Phone: 952.227.1120 Fax: 952.227.1110 Recreation Center 2310 Coulter Boulevard Phone: 952.227.1400 Fax: 952.227.1404 Planning & Natural Resources Phone: 952.227.1130 Fax: 952.227.1110 Public Works 1591 Park Road Phone: 952.227.1300 Fax: 952.227.1310 Senior Center Phone: 952.227.1125 Fax: 952.227.1110 Web Site www.ci.chanhassen.mn.us (! ~? .t~ MEMORANDUM TO: Todd Gerhardt, City Manager FROM: Justin Miller, Assistant City Manager::>~ O~ DATE: February 17, 2006 RE: Resolution of Support for Dedication of 100% of Motor Vehicle Sales Tax (MVST) to Transportation and Transit Purposes BACKGROUND During discussion of this year's legislative priorities, the proposed Motor Vehicle Sales Tax (MVST) constitutional amendment was brought up as a potential area of emphasis. The current proposal calls for 100% of the MVST to be dedicated to transportation and transit purposes. Currently, 46% of the MVST is directed to the state's general fund, where is helps fund other non-transportation services. The proposed constitutional amendment would dedicate at least 40% of the MVST to public transit assistance and not more than 60% to highway purposes. Attached to this report is a draft resolution that the Association of Metropolitan Municipalities is asking its members to adopt. Also attached is a memo from the Minnesota Chamber of Commerce supporting the amendment. The cities of Chaska, Eden Prairie, and Southwest Metro Transit have already approved the resolution of support. The City of Chanhassen . A growing community with clean lakes, quality schools, a charming downtown, thriving businesses, winding trails, and beautiful parks. A great place to live, work, and play. G:\Admin\JM\MVST amendment staff report.doc CITY OF CHANHASSEN CARVER AND HENNEPIN COUNTIES, MINNESOTA DATE: Februarv 27~ 2006 RESOLUTION NO: 2006- MOTION BY: SECONDED BY: A RESOLUTION SUPPORTING THE CONSTITUTIONAL AMENDMENT FOR MOTOR VEHICLE TAX DEDICATION TO TRANSPORTATION WHEREAS, the City Council of the City of Chanhassen is the official governing body of the City of Chanhassen; and WHEREAS, Minnesota's transportation infrastructure forms the backbone of the State's economy and has a direct impact on future economic development; and WHEREAS, funding for highway and transit systems in Minnesota has remained stagnant and is failing to keep pace with its growing population and growing demands; and WHEREAS, local governments throughout the State struggle to maintain local transportation systems while the State's gas tax has not been increased since 1988 and transit budgets have been cut in recent years, and WHEREAS, the Minnesota Legislature has repeatedly turned to revenue from the motor vehicle sales tax, which has been viewed as user fee revenue, in order to fund highway and transit systems including the current dedication of 54% of motor vehicle sales tax for transportation purposes; and WHEREAS, the Legislature passed a proposed constitutional amendment during the 2005 Legislative Session that would appear on the November 7,2006 ballot asking voters if the remaining 46% of motor vehicle sales tax revenue currently used for other purposes should be used for highways and transit systems; and WHEREAS, passage of this amendment would mean an increase in more stable revenue for highway and transit systems throughout the State and would raise approximately $300 million per year once the transfer of revenue is fully phased in by 2011. NOW, THEREFORE, BE IT RESOLVED that the City ofChanhassen strongly supports passage of the proposed amendment to the Minnesota Constitution dedicating all of the motor vehicle sales tax revenue to transportation with at least 40% of the revenue for public transit assistance and not more than 60% of the revenue for highway purposes. Passed and adopted by the Chanhassen City Council this 27th day of February, 2006. ATTEST: Todd Gerhardt, City Manager Thomas A. Furlong, Mayor YES NO ABSENT - A~~o(iation of Metropolitan Municipalities February 10,2006 . FES 7," - v 20D8 errv Ol~ (if! V{";/=~f1l,-, )~ . ~II,;,; 00"'-f\/ 'Uv!.:::'v Mayar Tam Furlang City 'Of Chanhassen 7700 Market Blvd Chanhassen, l\1N 55317 Re: Canstitutional Dedication of t.he Motor V ehicle Sales Tax Dear Mayar Furlang: In 2005, the legislature passed a proposed constitutional amendment that would dedicate .100% 'Of the existing motor vehicle sales tax (MVST) to the. highway user tax distributian fund. Previous legislation has already dedicated this maney to' highway and transit funding under state statute, but as a result 'Of budget shortfalls preceding administrations have used the money ta balance the budget. Placing the mator vehicle sales tax in the highway user fund through a constitutianal amendment would ensure dedicatian of the funds. The current praposed amendment, which is enclased, would take at least 40 percent 'Of the revenue generated by the existing motar vehicle sales tax and dedicate it to transit statewide, and wauld dedicate no more than 60 percent 'Of the funds towards highways statewide. The conversion of money from the general fund, where it had previously been rerouted, will take place over five years being fully phased in by 2011. There are tpree issues that have made the Canstitutional dedicatian controversial. First, the amendment language does not guarantee a fixed a.lll0unt for roads. Second, there is concern that the public will cansider the problem to be "fixed" if they vote for the amendment, when we know that the MVST amendment will 'Only provide about 25% 'Of the funding necessary ta maintain our current level of congestian. And finally, the dedication of MVST ta transportation financing will create a hale in the general fund. Critics corisider these issues ta be fatal flaws and are campaigning against the amendment as it is written. Nane of these issues, either singularly 'Or in combination is sufficient reason to oppose the amendment. While critics argue that roads Will be left out, each biennium 145 University Avenue West Saint Paul, Minnesota 55103-2044 Telephone: (651) 215-4000 Fax: (651) 281-129.9 E-mail: amm@amm145.org proceeds from MVST must be legislatively appropriated for roads and transit. Highway funding has a very strong constituency in the legislature and road construction will get its fair share. While it's also true that MVST will only provide a portion of the necessary transportation funding, ($300 million in additional funds compared to a $1 billion need), it represents an important first step toward additional funding. . And finally, while dedicating MVST to transportation may leave a shortfall in the general fund, MVST is a transportation related tax that should be dedicated to transportation uses. The AMM has taken a position, through its transportation policy committee and board of directors, of supporting the proposed constitutional amendment as it is currently drafted. It is acknowledged by transportation advocates and municipalities alike that the current draft of the proposed amendment could have been done differently, however drastic changes to the language at this late stage undermine the ultimate passage of the amendment. The AMM is aware of attempts to change the current language of the amendment and/or defeat the curr~nt amendment as it is proposed. The AMM is encouraging individual cities to pass resolutions supporting the passage of the constitutional amendment. Funding for highways and transit is increasingly more difficult to secure and a dedicated more stable source of funding must be sought. Enclosed is a sample resolution that can be used as a starting point for individual city resolutions. We are encouraging cities to pass the resolutions, return an adopted copy and the resolutions will be used in AMM's legislative campaign to show legislators that cities support the passage of the MVST amendment. If there are any-questions or concerns please feel to contact either Sarah Erickson at 651-215-4003 sarah(tiJ,amm145.org or LouisJambois at 651-215-400110uis@amm145.org for more information. c.c. City Administrator/Managers MN Chamber of Commerce 2005 Policies & Backgrounds Policy Committees Links 400 Robert Street North Suite 1500 St. Paul, MN 55101 ph 651.292.4650 ph 800.821.2230 fax 651.292.4656 Page 1 of 3 o COfflmflr~f February 15, 200E 'fHE VOI(~E OF BUSINESS About Us Grow Minnesola! News & Events HR Benefits Join Us metE Motor Vehicle Sales Tax (MVST) Constitutional Amendment The Minnesota Chamber of Commerce is actively working for passage of the Motor Vehicle Sales Tax (MVST) ballot question. If adopted, the amendment will trigger a gradual transfer of the sales tax collected from all motor vehicle sales from the general fund to transportation purposes. When the phase-in is completed in 2011, transportation funding would be boosted by more than $300 million per year. Dedication of all MVST revenue to transportation has been a longstanding priority of ours as one way to increase transportation funding on a permanent and substantive basis. The proposed amendment to the Minnesota Constitution will be on the ballot in the November 2006 election and will ask voters: "Shall the Minnesota Constitution be amended to dedicate revenue from a tax on the sale of new and used motor vehicles over a five-year period, so that after June 30, 2011, all of the revenue is dedicated at least 40 percent for public transit assistance and not more than 60 percent for highway purposes?" What will voters have a chance to vote on in November 2006? Minnesotans have an opportunity to permanently dedicate all existing MVST to transportation purposes. This is not a new tax. This was the intended purpose when the Legislature enacted this poliCY in 1981. However, lawmakers have used the money for other purposes, and today only 54 percent of the MVST dollars is used for transportation. The Legislature approved the amendment in the 2005 session, and voters have the final say on whether it is enacted. What will this mean for Minnesota? The amendment, if approved, calls for the funds to be phased in over five years beginning in 2007. When completed in 2011, the transfer would provide more than $300 million per year for transportation, or the equivalent of a 9.5-cent fuel tax increase. All of this money would be derived from the existing 6.5-cent tax collected on the sales of all new and used motor vehicles. This permanent injection of funds would be accomplished without raising any taxes. Why is this money needed for transportation? The state's transportation system - highways and transit - is at a crossroads. The state needs to invest an additional $1 billion per year to meet performance targets, according to the Minnesota Department of Transportation. Dedicating the remaining 46 percent of MVST funds will not meet all transportation needs, but it will make major headway into reducing highway fatalities in rural Minnesota and slowing the growth of congestion in the Twin Cities. Since 1981, the state's transportation infrastructure has lost more than $6 billion due to the diversion of MVST revenue to nontransportation purposes. Some policy-makers say the language of the proposed amendment is ambiguous and should be changed. Should the 2006 Legislature attempt to clarify the wording? The amendment has its best chance of passage by leaving the existing language. Everyone agrees the amendment could have been worded better, but there is great risk in trying to make a change now. Transportation interests and the Minnesota Chamber have been trying to permanently dedicate the MVST to transportation purposes for several years. A majority of the Legislature always has resisted. The amendment passed in the final hours of the 2005 regular session. Many lawmakers were not aware that the proposed amendment would go to voters, since Gov. Tim Pawlenty vetoed the overall transportation bill. The governor does not have authority to veto a proposed constitutional amendment passed by the Legislature. There is no guarantee that any effort to change the language will be successful. Previous legislatures have attempted to dedicate 100 percent of the MVST to transportation without results, and the same polarizing issues remain. Any attempt to change the language will http://www.mnchamber.com/priorities/MVST .cfm 2/15/2006 MN Chamber of Commerce Page 2 of 3 likely be futile because highway advocates will support it and transit advocates will oppose it. In the end, nothing will change except that we will have lost precious time needed to pass the amendment. A primary challenge in approving constitutional amendments is educating the public. We have less than a year to shape our message to voters and carry out an intensive campaign. If the amendment is revisited and retooled in the 2006 Legislature, it leaves only a few months to conduct a campaign and greatly diminishes prospects for passage. Unless the amendment passes, the Legislature will have no opportunity to debate how much additional money goes to which transportation projects. How can both rural and metro Minnesota be assured that they will receive adequate funding under the current language of the amendment? Some groups fear that the proposed constitutional amendment will divert construction money to Twin Cities transit systems, and transit supporters routinely complain that they don't get their fair share of state funding. In reality, if the amendment passes, the Legislature will maintain considerable control over a majority of these funds. Lawmakers historically have favored funding roads over transit. Highways also have other constitutionally dedicated funding, including the fuel tax and license tab fees. The overriding point, however, is that this amendment is likely a one-time opportunity to inject significant dollars on a permanent basis into the statewide transportation infrastructure - highways and transit. The additional money will be a major step toward improving safe and efficient movement of people and products throughout the entire state. A "no" vote will send the message to lawmakers that Minnesotans are satisfied with transportation funding, and it could be several years before the Legislature would seriously consider another proposal for substantive transportation funding. How is the MVST money distributed under current law? The Legislature, during the late 1980s, dedicated MVST revenue to highways and transit, intending that the money supplement other transportation funding. However, this dedication was periodically changed or suspended due to shortages in the general fund. It was abolished entirely beginning in Fiscal Year 1992. From then until 2001, all MVST revenue was deposited into the general fund and used for nontransportation-related purposes. The 2000 Legislature lowered vehicle license tab fees and filled the hole in the trunk highway fund - which is dedicated exclusively for highways - with MVST revenues. At the same time, lawmakers eliminated the Metropolitan Council and city authority to levy property taxes for transit by dedicating a portion of MVST for transit. Those two actions resulted in 54 percent of MVST being used for transportation. These actions simply restored lost revenues from other tax cuts and did not augment transportation spending. The current distribution of MVST revenues is: . General fund - 46.25 percent. . Highway user tax distribution fund - 30 percent. . County state-aid highways - .65 percent. . Municipal state-aid highways - .17 percent. . Metropolitan transit - 21.5 percent. . Greater Minnesota transit - 1.43 percent. Of the 54 percent that is dedicated to transportation, about 55 percent goes to highways and 45 percent to transit. The amendment, if passed, will trigger a gradual transfer of MVST money from the general fund to transportation purposes. How will the "hole" in the general fund be filled? The phase-in will occur over five years, beginning in 2007. When completed in 2011, the permanent transfer would provide approximately $300 million per year, or the eqUivalent of a 9.5-cent fuel tax - all without raising taxes. The current four-year budget forecast, released in November 2005, shows that transferring this money can be absorbed without leaving a hole in the general fund. This forecast, however, includes revenue from the health impact fee as approved by the 2005 Legislature. A district court judge ruled in December 2005 that this fee was constitutional; Gov. Tim Pawlenty said he intends to appeal the decision. The amendment, to pass, requires a majority vote? What does this mean? The state holds a higher threshold for amending the Constitution. Passage requires a "yes" vote by a majority of everyone who goes to the polls, even if individuals skip the specific ballot question. In other words, a "non" vote is counted as a "no" vote. Since a portion of voters usually leave constitutional ballot questions blank, it's estimated that passage will http://www.mnchamber.com/priorities/MVST .cfm 2/15/2006 MN Chamber of Commerce Page 3 of 3 require a "yes" vote of approximately 65 percent of those individuals who do mark the question. What is the MVST Coalition? The Minnesota Chamber of Commerce is one of the key leaders of a broad-based coalition supporting passage of the MVST amendment. Co-chairs are Jon R. Campbell, chief executive officer of Wells Fargo Minnesota Region, Minneapolis, and M. Lenny Pippin, chief executive officer of The Schwan Food Co., Marshall. Membership includes business and labor interests, local governments, environmental and nonprofit groups, plus the construction industry and transportation alliances. http://www.mnchamber.com/priorities/MVST .cfm 2/15/2006 --....---....---........___J......-..-..... ~ o N ,.". D o I 50 1 00 I 200 Feet I Proposed Satellite Fire Station January 17, 2006 . G :\ENG\Jo/een\EngProjects \ProposedFlreSnmap1.mxd i i I ~