Refinancing saves much money

One recent action taken by the Department of Transportation is expected to save significant money in these tough economic times.

The House Transportation Policy and Finance Committee learned Jan. 10 that some of the state’s transportation accounts are seeing monetary reductions but one saw a large gain.

Refinancing debt service at a lower interest rate early in fiscal year 2011 is expected to save about $115 million through fiscal year 2013, based on a November forecast prepared by the department.

“This is one of the positive, bright spots,” said Warren Skallman, MnDOT budget director.

“The total authorization from the Legislature is approximately $2.5 billion for all debt over all years,” Skallman said. “From these authorizations, currently in our budget document we have $938 million as the amount that has been issued.” He said almost the entire larger amount has been assigned to projects, but for cash flow purposes the bonds have not been sold.

“Prudent move,” said Committee Chairman Mike Beard (R-Shakopee).

On the positive side of the ledger, gas tax revenue is forecast to bring in an additional $13 million (0.8 percent) in fiscal years 2012 and 2013, based on projected higher consumption rates. The state’s gas tax is scheduled to increase by half a cent on July 1, 2011, and again one year later to 28.5 cents per gallon. The increases are for debt service related to the 2008 transportation law that allowed for $1.8 billion in trunk highway bonds for fiscal years 2009 to 2018.

Skallman noted that motor vehicle sales taxes are down $54.3 million (7.4 percent) and vehicle registration taxes are down

$23.5 million (2 percent) from a February 2010 forecast.

Beard tried to paint an optimistic outlook about transportation funding, when compared to other areas of the state budget that could get chopped as lawmakers try to resolve a projected $6.2 billion budget shortfall. Most of the transportation budget comes from constitutionally dedicated funds that are paid by users. Just 1 percent comes from the state’s General Fund.