Minnesota Department of Transportation

511 Travel Info

MnDOT Policies

Greater Minnesota Transit Account Balance

MnDOT Policy FM022
View/print signed policy (PDF)

Policy statement

This policy provides for an appropriate level of reserve in the Greater Minnesota Transit Account to protect against uncertainty and volatility in revenue. State statutes do not require a specific balance be maintained in the Greater Minnesota Transit Account, but a sufficient amount should be maintained to avoid a deficit or significant surplus in the account at the end of a biennium. Therefore, setting an appropriate amount for the unreserved, undesignated fund balance is an important management decision that statutes reserve for the Commissioner.

The Greater Minnesota Transit Account should be programmed to maintain an undesignated, unreserved account balance of:

  • not less than 10 percent of the total annual Transit Assistance Fund balance forward, and
  • not more than 20 percent of the total annual Transit Assistance Fund balance forward

This uncommitted account balance should be measured against the account balance brought forward from the prior year. 

Reason for policy

Investments in Greater Minnesota transit are guided by the Greater Minnesota Transit Investment Plan, which MnDOT is directed to prepare under Minnesota statute 174.24, Subd. 1a. The Investment Plan calls for meeting 90 percent of transit needs by 2025, as directed in statute. Additionally, the goal is to continue to meet 90 percent or more of the need beyond 2025. Investments toward reaching the goal must fit within the available revenue. This policy will ensure the programmed investment pushes toward the goal as quickly as possible, to reduce the risk transit services face due to a lack of reserve funds to address catastrophes and inaccurate revenue forecasts.

The revenue used to calculate a fund balance is always based on a mixture of estimated and actual revenue for a given budget period. Having an undesignated, unreserved budget balance of not less than 10 percent of the Greater Minnesota Transit Assistance Account balance forwarded will protect against events that could potentially affect this revenue. This may include a significant shift in motor vehicle sales and lease trends or a substantial economic recession causing a reduction in expected revenues. In addition, it provides a funding source for assisting transit providers who experience a catastrophe in which equipment is destroyed while insurance is settled.

The Greater Minnesota public transit participation program should be managed to prevent the undesignated, unreserved account balance from exceeding 20 percent limit so that designated transit funds become actual service as promptly as possible. This must be done within the confines of Minnesota Statutes 174.24, Subd. 3a,  paragraph c, which requires a local match for operations and Minnesota Rules 8835.0320, subpart 3, which requires a local match for capital assistance. Statutes and rules allow for deviations to be made for local match in hardship or exceptional circumstances. To maintain the Greater Minnesota Transit Account balance below 20 percent of the Transit Assistance Fund balance forward, MnDOT would offer opportunities for transit systems experiencing hardship or exceptional circumstances to apply for grants with a lower local match.

Who needs to know this policy

  • Office of the Commissioner
  • Chief Financial Officer
  • Modal Planning and Program Management Assistant Commissioner
  • Financial Controller & Director, Financial Management
  • Director, Office of Transit and Active Transportation
  • Director, Government Affairs

Definitions

Transit Assistance Fund

Minnesota Statute 16A.88 established a Transit Assistance Fund to receive revenue from motor vehicle sales tax (MVST) and motor vehicle lease sales tax (MVLST) to be used to fund transit in the State of Minnesota. The MVST appropriation to the Transit Assistance Fund must be at least 40 percent of the total revenue according to the Constitution, Article XIV, Sec. 13, and is currently set at 40 percent by Minnesota Statute 297B.09. Of this revenue, 90 percent is allocated to metropolitan transit and 10 percent is allocated to the Greater Minnesota Transit Account. In addition, the Greater Minnesota Transit Account receives 38 percent of the total MVLST revenues.

Greater Minnesota Transit Account

Minnesota Statute 16A.88 Subdivision 1a established the Greater Minnesota Transit Account to receive funds from the Transit Assistance Fund directed to transit in Greater Minnesota (outside the seven-county Twin Cities metropolitan area). As stated above, Greater Minnesota Transit Account receives 10 percent of the of the total MVST revenue appropriated to the Transit Assistance Fund and 38 percent of the total MVLST revenues.

Account Balance

The amount of revenue from the MVST and MVLST dedicated to Greater Minnesota Transit less any contractual obligations (expenditures and encumbrances) at a point in time. MVLST is accounted for in the current fiscal year, but Minnesota Statute 297A.815, Subd. 3(b) does not call for revenues to be deposited until July 15 of the following fiscal year. It is always expected that this revenue is carried forward each year and is available.

Procedures

In conjunction with Minnesota Management & Budget’s (MMB) annual budgeting process prescribed at Minnesota Statutes §16A.103, the MnDOT Financial Analysis and Forecast Director and staff, in cooperation with Office of Transit and Active Transportation staff, prepare a formal fund statement for the Greater Minnesota Transit Account share of the Transit Assistance Fund in November and February every fiscal year.

The fund statement covers the current fiscal years and either three or four fiscal years into the future. An account balance is calculated as part of preparing each of these statements. This statement provides the basis for evaluating the account balance and any budget proposal under consideration in conjunction with this policy. In addition, MnDOT’s Office of Financial Management prepares ongoing, unofficial financial statements and, in conjunction with MMB, year-end formal financial statements. The fund statements are viewed to see if any major changes in the account balance have occurred.

Both the Office of Transit and Active Transportation and Budget staffs regularly monitor trends related to external factors that might affect future revenues.

Possible Strategies

If any forecast projects the account balance target will not be met, MnDOT will propose mitigating actions. Potential actions include:

  • Supplemental budget submissions
  • Postponement or acceleration of grant applications and awards
  • Modifications of local match rates

These steps should occur by the end of the biennium, unless the Commissioner finds that an emergency warrants a longer period of adjustment.

Responsibilities

Commissioner

Ensures an appropriate account balance is maintained in the Greater Minnesota Transit Account.

Chief Financial Officer and designees

Ensures the budget process provides appropriate information to the Commissioner and the Transit Director, to meet the obligations of this policy.

Director, Office of Transit and Active Transportation

Follows this policy to ensure an appropriate account balance will be maintained.

Managers, Supervisors responsible for the Public Transit Program in Office of Transit and Active Transportation

Follow this policy to ensure that an appropriate account balance will be maintained.

Frequently Asked Questions

What factors might affect the size of the account balance during the course of a year or biennium?

The primary factor is the possibility of actual state revenues being different from the forecast amounts. If revenue is less than forecasted and the estimated spending is not changed, the account balance will be lower than the forecasted amount. Conversely, if revenue is higher than forecasted and the estimated spending is not changed, the account balance will be higher than the forecasted amount. For example, actual MVLST revenues in 2011 through 2016 were off from the most recent (February) forecast by a minimum of 18 percent. In 2017 they were off by 9 percent.

History

Effective

July 27th, 2018

Ownership

Please go to the MnDOT Org Chart to find specific contact information: Org Chart.

Responsible Senior Officer

Deputy Commissioner/Chief Engineer

Policy Owner

Financial Controller & Office Director
Office of Financial Management

Policy Contact

Office Director
Office of Transit and Active Transportation