Costs, Revenue, and Profit
This content covers topics related to costs, revenue, and profit in economics. It discusses the meaning of cost, opportunity cost, measuring opportunity cost, explicit and implicit costs, economic profit, accounting profit, and production functions in the short run.
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Governors Budget Presentation House Transportation Finance Committee Charlie Zelle Commissioner, MnDOT March 2, 2017
NexTen for Transportation 10 year Investment Plan Commitment to a long term investment plan for roads and bridges over the next ten years $6 billion gap is projected between funding needs and estimated revenues for roads and bridges Without additional resources there will be Increased deterioration of pavement and bridges Very little, if any, expansion to address population & economic growth 2
NexTen Strategies Pavements: Extend the asset lifecycle by using newer longer lasting materials and preventive maintenance Target segments of pavement with little remaining service life Bridges: Accelerate the planned improvement program Expand preventive maintenance to extend asset lifecycle Twin Cities Mobility: Add capacity through prudent improvements to intersections, interchanges and lane additions to address continuity Prioritize expansion of MnPASS system 3
NexTen Strategies Safety: Invest in low to mid cost improvements along corridors and at intersections Installation of rumble strips, median barriers, and lighting Greater Minnesota Mobility: Increase the capacity of the Interregional Corridor (IRC) network Bicycle Infrastructure: Expand local bicycle networks and the state bikeway network via solicitation program or local planning assistance Pedestrian Infrastructure: Address sidewalk deficiencies and fill gaps in sidewalk network Greater ADA accessibility 4
NexTen Strategies Roadside Infrastructure: Meet recommended condition targets for aging roadside infrastructure (e.g. culverts, overhead signs, signals, etc.) Local Partnerships: Establish Main Street program to address both statewide and local objectives Support jurisdictional transfer of road ownership where agreements are in place 5
NexTen for Transportation 10 year Investment Plan Funding Components: New revenues dedicated to roads and bridges: Implement a 6.5% gross receipts tax on fuel Increase registration fees for motor vehicles from 1.25% to 1.50% and base tax from $10 to $20 over four years Authorize $2 billion in bonds over the next 10 years A $10 surcharge for both annual motor vehicle registration and motor vehicle title transfers Leverage MnDOT efficiencies (up to 15% of the new revenue) 6
NexTen for Transportation 10 year Investment Plan Proposed Gross Receipts and Registration Tax Revenues ($1,000s) FY 2018 FY 2019 FY 2020 FY 2021 Net Wholesale Gross Receipts Tax 318,845 495,792 493,839 490,901 Registration Taxes 21,750 90,800 117,510 167,320 Less DOR Admin Costs (234) (222) (222) (222) Total, HUTD Fund 340,361 586,370 611,127 657,999 Trunk Highway 195,763 338,049 352,659 380,311 County State Aid 91,567 158,120 164,954 177,887 Municipal State Aid Streets 28,417 49,072 51,192 55,206 5% Setaside (CSAH) 16,618 28,697 29,937 32,284 DNR 7,996 12,433 12,384 12,311 Total Distributions 340,361 586,370 611,127 657,999 7
NexTen for Transportation 10 year Investment Plan $6 billion for state roads and bridges $5.46B from new revenue and bonding $0.54B in efficiencies Outcomes include: 1,700 miles of roadway repaired/replaced 235 bridges $1.6 billion Corridors of Commerce for strategic expansion $2.416 billion for counties, cities, and townships 8
Gross Receipts Tax on Fuel Adheres to language in Minnesota s Constitution dedicating revenue to highways Charged to distributors (same as existing gas tax) Inflation buffer to track closer with construction costs similar to sales tax 12 other states have implemented similar funding solutions 9
Vehicle Surcharges Special Revenue Fund A $10 surcharge for each annual motor vehicle registration and each motor vehicle title transfer Will raise an estimated $57M per year in the Special Revenue Fund for transportation needs not eligible for Trunk Highway funding: Greater Minnesota transit - $10 million Bike and pedestrian infrastructure, including Safe Routes to Schools $2.25 million Safe Routes to School administration - $250,000 Americans with Disabilities (ADA) projects for local roads - $4 million Aid for Cities with Populations under 5,000 - $19 million Aid for Large Cities - $19 million Aid for Tribal Roads - $2.5 million 10
Additional Investment at a Glance $11.946B $8.986B $2.96B Metro Transit Roads and Bridges $6B State Roads $5.46B investment $0.54 efficiencies $2.416B $0.57B County, City, Townships Vehicle Surcharges $0.025B Bike & $0.10B Greater MN Transit $0.19B Cities Under 5,000 $0.19B Large Cities $0.025B Tribal Road $0.04B ADA Local Projects Ped/SRTS 11
Governors Budget Presentation House Transportation Finance Committee Tracy Hatch Deputy Commissioner Chief Financial Officer / Chief Operating Officer March 2, 2017
Governors Operating Budget Requests FY 18-19 FY 18-19 Total ($ in thousands) Operating Change Item Fund Cyber Security Risk Management and Agency Priorities Trunk Highway $19,850 Snow and Ice Contingency Trunk Highway - Workforce Optimization Trunk Highway $50,750 Operating Pressures Trunk Highway $31,325 State Road Construction Trunk Highway $361,300 Pavement Preservation Trunk Highway $20,000 Building Services Appropriation Trunk Highway $34,000 Road Equipment Fund Trunk Highway $20,000 Intelligent Transportation Systems Trunk Highway $8,000 Tribal Training General $410 Working Capital Loan Fund General $1,500 Port Development Reappropriation General - State Plane Purchase General $10,000 Aeronautics Appropriation Increase State Airports $6,000 13
Cyber Security Risk Management and Agency Priorities Trunk Highway Fund Appropriation increase of $10.5 million in FY18 and $9.35 million in FY19 from the Trunk Highway Fund The proposal would: Address cyber-security, risk management and protection of the state s sensitive data assets Upgrade/replace MnDOT s IT portfolio to ensure reliable delivery of agency products Improve data tracking, project management and reporting abilities to better inform agency stakeholders See p. 48 of Governor s FY18-19 Budget 14
Snow and Ice Contingency Trunk Highway Fund Establish Snow and Ice statutory language to provide funding to cover costs in extreme winters Ability to use fund balance to stabilize other maintenance activities Weather patterns over the past few years have resulted in varied costs Funding stability for snow and ice means better planning (and better assets) in all other maintenance areas See p. 33 of Governor s FY18-19 Budget 15
Workforce Optimization Trunk Highway Fund Base budget increase of $25 million from the Trunk Highway Fund An increase in maintenance operations staff of approximately 260 FTEs which will: Provide snow plow truck operators sufficient to operate the fleet two shifts per day Reduce dependence on other non-maintenance staff to plow snow in the winter Increase ability to staff critical spring and summer maintenance work See p. 50 of Governor s FY18-19 Budget 16
Operating Pressures Trunk Highway Fund Base increase of $10.8 million in FY18 and $20.5 million in FY19 from the Trunk Highway Fund To sustain existing purchasing power to relieve operating pressures of commodity inflation Address compensation pressures related to: Healthcare costs Proposed pension contribution increases Step increases See p. 41 of Governor s FY18-19 Budget 17
State Road Construction Trunk Highway Fund Increase the state road construction appropriation to enable MnDOT to spend additional federal funding available through the FAST Act An increased appropriation in the Trunk Highway Fund: $105 million in FY17 $215.4 million in FY18 $145.9 million in FY19 See p. 31 of Governor s FY18-19 Budget 18
Pavement Preservation Trunk Highway Fund Base increase of $10 million from the Trunk Highway Fund Funding will be used to support longer lasting durable pavement preservation techniques Examples of these longer lasting pavement preservation techniques include mastic patching, micro-surfacing and slurry seals MnDOT expects that the miles of pavement in poor condition will continue to increase. This funding will allow the agency to strategically plan repairs and utilize durable pavement preservation techniques See p. 35 of Governor s FY18-19 Budget 19
Building Services Appropriation Trunk Highway Fund Base increase of $17 million from the Trunk Highway Fund Maintain critical statewide facilities: $6 million for Facilities Maintenance Program which enable MnDOT to upgrade its current buildings (projects less than $2 million) $10.75 million for facilities replacement and upgrades (projects over $2 million) $250,000 annually for the lease increase on Central Office Building See p. 52 of Governor s FY18-19 Budget 20
Road Equipment Fund Trunk Highway Fund Base increase of $10 million from the Trunk Highway Fund Funding will allow MnDOT to: Replace equipment at planned lifecycle Reduce equipment repair costs Limit unscheduled downtime and the need for reserve equipment MnDOT s operations and maintenance activities are dependent on a large fleet of equipment with varying lifecycles See p. 40 of Governor s FY18-19 Budget 21
Intelligent Transportation Systems Trunk Highway Fund Base increase of $4M from the Trunk Highway Fund Proposal will advance development deployment of ITS Technologies which will either match federal grant opportunities or advance ITS technology in: Connected Vehicles and Autonomous Vehicles (CV/AV) Work zones Snow and ice operations. ITS capital asset replacement at life cycle targets Operations and maintenance to provide additional statewide incident and congestion management support See p. 44 of Governor s FY18-19 Budget 22
Tribal Training Funding General Fund Appropriation of $192,000 in FY18 and $218,000 in FY19 from the General Fund Provide tribal training for state agencies Training informs employees about consultation and coordination with tribes and tribal governments See p. 47 of Governor s FY18-19 Budget 23
Working Capital Loan Fund & Port Development Reappropriation General Fund Working Capital Loan Fund: a one-time appropriation of $1.5 million from the General Fund Support low interest loans to small businesses that are owned by socially or economically disadvantaged individuals interested in working on MnDOT projects See p. 37 of Governor s FY18-19 Budget Port Development Assistance Reappropriation: Cancel the unencumbered portion of the 2015 General Fund appropriation and reappropriate the funds in 2018 The Red Wing Port Authority and the Port Authority of Winona are currently developing projects that will use this appropriation See p. 23 of Governor s FY18-19 Budget 24
State Plane Purchase General Fund One-time appropriation of $10 million from the General Fund to replace two aging King Air aircraft that are 35 and 23 years old Proceeds from the sale of the existing aircraft will also be used towards the purchase of the new plane The age of the current aircrafts causes high down time for repairs and maintenance and increased operating expense See p. 17 of Governor s FY18-19 Budget 25
Aeronautics Appropriation Increase State Airports Fund Appropriation increase of $3 million annually in FY2018-19 biennium and $1 million annually in FY2020+ from the State Airports Fund Additional funding for construction, pavement maintenance and other improvements at the state s 135 airports The aeronautics base appropriation has not increased in 20 years The increase will help keep pace with inflation and increasing project demands See p. 19 of Governor s FY18-19 Budget 26
Governors Freight Rail Budget Requests FY 18-19 FY 18-19 Total ($ in thousands) Freight Rail Change Items Fund Freight Rail Appropriation General $1,600 Passenger Rail Program General $800 MN Rail Service Improvement Program General $2,000 Rail Safety Inspectors Special Revenue $1,473 Rail Safety Account Special Revenue $7,450 Railroad Assessment for Safety Improvements Special Revenue $65,000 27
Freight Rail Appropriation General Fund Provide $800,000 base funding from the General Fund Funding will support a portion of MnDOT s critical freight rail activities Manage rail grade crossing safety improvement projects Develop, execute and administer project agreements with railroads Assist communities with improving safety and emergency services access Maintain federally-mandated inventory of local grade crossing conditions Support economic development and ensure eligibility for federal funding by developing statewide rail plans Administer freight program funds See p. 21 of Governor s FY18-19 Budget 28
Passenger Rail Program and MN Rail Service Improvement Program (MRSI) General Fund Passenger Rail A General Fund base increase of $400,000 to fund Passenger Rail Office responsibilities for: Environmental studies, Design, Traffic Engineering and Legal Services Adequately staff to accommodate environmental, predesign, and planning work for passenger rail services identified in the approved State Rail Plan See p. 30 of Governor s FY18-19 Budget MRSI A General Fund base appropriation of $1 million for a dedicated funding source for preserving and enhancing rail service primarily for short line and regional railroads Modifies language to allow grants for projects generating development benefits See p. 24 of Governor s FY18-19 Budget 29
Rail Safety Inspectors and Rail Safety Account Special Revenue Fund Rail Safety Inspectors - Hire up to 5 additional rail inspectors, plus a program manager, funded through assessment on Class I and Class II railroads. Estimate: $615K in FY 2018, $858K in FY 2019, $818K in FY 2020, and $841K in FY 2021 Provide more comprehensive inspection activities, ensure compliance with federal and state safety regulations, help reduce rail accidents See p. 26 of Governor s FY18-19 Budget Rail Safety Account Dedicate all State Patrol fine revenues currently deposited in the Trunk Highway Fund, about $3.725 million annually Increase in the number of small safety projects that can be administered and delivered rapidly, such as: sign replacements, crossing closures, roadway enhancements, signal circuitry upgrades 30
Railroad Assessment for Safety Improvements Special Revenue Fund $32.5 million annually through an assessment on Class I railroads Fund improvements to highway-rail grade crossings on rail corridors transporting crude oil and other hazardous materials Improvements include: Upgrades to existing warning devices Construction of highway-rail grade separations See p. 28 of Governor s FY18-19 Budget 31
Policy Provisions with Fiscal Impact Sponsorship of Highway Property Agreements for maintenance and improvement of trunk highway property Authority for signs to recognize participants Truck Permits Repeal linking expiration date of permit to registration Cancel $30,000 for linking MnDOT permit system to DPS registration system County State Aid Highway Calculation Apportionment sum is 68%, excess sum is 32% Fixes statute to match change made in 2015 Utility Relocation on Interstates New utility installations would be relocated at utility s expense All existing utilities continue to be relocated at state s expense 32
Thank you again! Tracy Hatch tracy.hatch@state.mn.us 651-366-4811 33
