Transportation Advancement Account Revenues Come In Below Initial Projections
The fund, which was established by legislation enacted in 2023, provides ongoing revenues to the Small Cities Assistance Account and the Larger Cities Assistance Account.
In a Dec. 16 email, the Minnesota Department of Transportation (MnDOT) alerted the League and other local government representatives that revenues coming into the new Transportation Advancement Account (TAA) are lower than expected.
The TAA was established in 2023 legislation, in part, to assist cities with transportation needs that are not part of the municipal state aid (MSA) system. TAA revenues come from a combination of a retail delivery fee and part of the sales tax on motor vehicle parts. The sales tax dedication is being phased in over a period of 10 years beginning in fiscal year 2024.
Background
The February 2024 forecast for fiscal year 2025 estimated TAA revenues would be $79 million. The November 2024 forecast revised this number to $51 million, a decrease of approximately 35%. The agency attributes the inaccurate projection to difficulty estimating the potential revenue from the newly imposed retail delivery fee.
The actual amount distributed in 2024 was approximately $11 million due to one-time funding. This means even with the lower projected revenue, the actual amount that an entity will receive will be more than what was received in 2024. Additionally, the revenue in the account will continue to grow with the phase-in of the dedicated sales tax. MnDOT plans to update the TAA portion of its website to help local governments plan for revenues in the next fiscal year. City-by-city estimates will become available when the agency has completed them. Access MnDOT’s TAA webpage for the latest information.
Highway User Tax Distribution Fund outperforms projections
The Highway User Tax Distribution Fund (HUTDF), which funds a significant portion of state and county roads and a smaller portion of streets in cities with populations above 5,000 is growing above projections. The November 2024 budget forecast shows the fund will grow by about 5%, twice the 2.5% increase initially expected.
The League will continue to track the implementation of the TAA and will report any updates in future editions of the Cities Bulletin.
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