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tax treatment that local property taxes receive. Local property taxes are deductible, thus lowering state <br />and local income tax burdens by reducing taxable income. The state has no authority to make special <br />assessments tax deductible for federal income tax purposes, but they do have the authority to extend <br />this tax deductibility to the state income tax code. <br /> <br />3. Provide cities with additional local taxing authority, including the authority to establish a <br />"Transportation Utility". <br /> <br />While all cities face major challenges in providing funding for street improvements and maintenance, <br />mature cities must find ways to provide an appropriate level of maintenance and establish a cost- <br />effective construction and reconstruction program. Because of the limitations of special assessments, <br />general fund appropriations, and other potential funding sources, most of these cities find it extremely <br />difficult to develop a financing program to fund the needed improvement and maintenance program. <br />Accordingly, it is recommended that the legislature adopt legislation authorizing cities to levy local <br />taxes dedicated for transportation infrastructure, including authority to establish a "Transportation <br />Utility" if they so desire. <br /> <br />A Transportation Utility is a system for raising money to support road and bridge maintenance and <br />construction that is allocated to users based on the amount of traffic generated. The term "utility" is <br />employed because it is similar to a storm water utility which allocates storm water drainage system <br />costs to property owners based on the volume of storm runoff draining from their properties. <br /> <br />Under a transportation utility, roadway users pay for roadway costs based on their use. Specific <br />allocation systems can vary, however, the basic approach is to charge institutions based on the traffic <br />they generate. Factors to consider include the number of employees, frequency of commute, and the <br />availability of other traffic management strategies, such as subsidized mass transit, carpooling, etc... <br /> <br />Like a storm water utility, a transportation utility could be adopted by individual municipalities. It <br />could also be implemented on a regional or county basis. State enabling legislation should authorize <br />but not mandate the use of this tool. <br /> <br />Another option that would achieve the same result would be to grant the authority to local units of <br />government to levy other local taxes. These tax revenues would' be dedicated to support the <br />construction, reconstruction, and maintenance on roads and bridges within the local government that <br />approves the tax. Other states currently allow cities to levy local fuel taxes or local sales taxes on fuel <br />sold within their borders. <br /> <br />4. Enact legislation authorizing cities to establish "Impact Fees". <br /> <br />In Minnesota - as in all states - new development leads to increasing demands for additional streets, <br />utilities and other public infrastructure and services. Legislature- and voter-initiated limits on <br />municipal budgets have only increased the pressure on local governments to find new ways to finance <br />the infrastructure needed to serve new residential and commercial development. Impact fees are <br />intended to place financial responsibility for new public facilities at least in part on those who create <br />the need for them. <br /> <br />Properly designed impact fees can be one of the most equitable solutions to a problem that may at <br />times be insurmountable to local government. Accordingly, it is recommended that legislation be <br />enacted which authorizes cities to adopt a system of impact fees, if they so choose. <br /> 41 <br /> <br /> <br />