Most of us view the road system as a pay-as-you-go proposition. We believe that vehicle licenses, parking fees and gas taxes fully finance the construction and maintenance of our roads. The truth is that less than 50 percent of the nearly $90 million the city of Minneapolis spends on driving-related projects each year is covered by transportation user charges. The remainder is picked up by Minneapolis residents and businesses, largely in the form of property tax assessments.
That the majority of money for local road construction and maintenance comes from property taxes will surprise most residents, but will not surprise transportation planners.
In the case of Minneapolis, about $48 million of non-transportation related revenue is subsidizing roads. Sixty percent of this money comes from property taxes. If these costs were paid from gas taxes rather than property taxes, the gasoline tax would have to be raised by 17.5 cents per gallon.
This 1992 report examines the current cost of Minneapolis roads and the sources of financing those roads. This paper does not examine the full cost of driving. Doing so would take into account a wide range of costs currently paid by society but not by drivers (e.g. medical, police and fire costs from accidents, environmental costs from burning gasoline, national security costs of protecting access to foreign sources of oil, etc.).