How does MnDOT fund transportation projects?
What are the sources of transportation funding?
Transportation projects in Minnesota can be funded from various funding sources. A majority of the funding comes from the federal government through either the Federal Highway Administration (FHWA) or the Federal Transit Administration (FTA), or from the Minnesota state trunk highway fund. Special funding packages are also provided through both the federal and state governments to augment transportation funding but these are not dedicated sources of funding over the long term.
Federal Highway Funding
Minnesota receives federal funding for roadways that are on the federal-aid road system from the Federal Highway Administration. All federal highway funds are received on a reimbursable basis. This means that project sponsors must pay for the project and be reimbursed by FHWA when the work is done. Minnesota receives federal highway formula funding that is distributed to all states based on a formula. A majority of the federal formula funds provided to Minnesota are distributed by formula to the eight Area Transportation Partnerships (ATP) for programming priority transportation projects in their area of the state. There are also federal discretionary funds that must be applied for on a competitive basis. Some federal highway funds come to Minnesota through a process called “earmarking” which is the legislative assignment of funds for specific projects. Most federal funding requires a “match” of state or local funds. The federal government also provides a process to secure funds for emergency projects resulting from natural disasters or catastrophic disasters.
Federal Transit Funding
Federal transit funding is provided through the Federal Transit Administration and includes both formula and discretionary programs. Much of the transit program is based on grant applications. Federal funds make up a small percentage of total operating costs for the small urbanized and rural programs. See the MnDOT Transit Office for more information.
State Highway Funding
MnDOT receives state transportation funding through a dedicated funding source. The state collects a motor fuel tax, a motor vehicle tax (MVST), and vehicle registration fees which feed the Highway User Tax Distribution Fund. Ninety-five percent of the HUTDF is divided by legislative mandate between Minnesota’s municipal state-aid roadway system, county state-aid roadway system, and the State trunk highway system (9%, 29% and 62% respectively). The 62% going to the state trunk highway system is deposited into the State Trunk Highway Fund and is used for both the operations and construction sides of MnDOT. The construction program is referred to as the State Road Construction Program (SRC). These funds can only be spent on transportation projects within state trunk highway rights-of way. MnDOT uses these funds to match federal funds on projects, buy right-of-way, or to fund non-federal highway construction projects.
More on Minnesota's Highway Finance
State Transit Funding
State transit funding assistance comes from two sources; the General Fund and Motor Vehicle Sales Tax (MVST). See the MnDOT Transit Office for more information.
Special Funding Packages
Both the federal and state governments augment transportation funding at times with special funding packages. Minnesota has had special bonding programs in the past. These include the 2000 Interregional Corridor, Bottleneck and Partnership Program, the 2003 Bond Advance Program (BAP), and the American Recovery and Reinvestment Act (ARRA) funding for transportation projects.
Another special funding source is the Transportation Revolving Loan Fund (TRLF) Seeded originally with federal funds, the TRLF provides low interest loans for transportation projects through a periodic application process. As the loans are paid back, more loans are provided. Since its inception in 1997, the TRLF has been capitalized with approximately $50.3 million, which includes:
- $4 million federal general SEED funds (1998-2005)
- $31 million federal formula funds (1998-2000)
- $7 million state trunk highway funds (1999-2000)
- $16.5 million state general fund funds (1998-2000) - $8.2 million was taken back in 2003 to help balance the budget.
The TRLF has leveraged $50.3 million to provide over $160 million in loans to date.