Charles Zelle, commissioner of the Minnesota Department of Transportation
State faces $12B roads and
bridges shortfall over next 20 years
A Civic Caucus
Interview January 3, 2014
John Adams, Dave Broden (vice chair), Pat
Davies, Eric Davis, Paul Gilje (coordinator), Randy Johnson, Sallie
Kemper, Ted Kolderie, Dan Loritz (chair), Paul Ostrow, Dana Schroeder,
Clarence Shallbetter, Charles Zelle.
According to Charles Zelle,
commissioner of the Minnesota Department of Transportation (MnDOT),
Minnesota is underinvested in transportation. He says the system of
state highways and bridges faces a $12 billion shortfall in necessary
capital spending over the next 20 years: $5 billion to maintain the
state road and bridge system we have and $7 billion to expand the
system to help meet the needs of the state, its businesses and its
communities. He observes that there is a $50 billion capital-spending
shortfall over the next 20 years in all modes of transportation
Zelle admits that depreciation of the state
roads and bridges is unfunded, i.e., not taken into account in
budgeting. Yet, he says, those roads and bridges represent 80 percent
of the state's assets. He maintains that the state's gas tax is
inadequate, inefficient and diminishing and says a one-cent increase
in the tax would generate $30 million. He notes the need for more
tools to price traffic.
Zelle says there is not a choice between
building transit and building roads, because we need both to
accommodate a projected increase of one million people in the metro
Charles Zelle became
commissioner of the Minnesota Department of Transportation (MnDOT) in
January 2013. He came to MnDOT from Jefferson Lines, an intercity bus
company with routes in 13 heartland states from Minnesota to Texas. He
worked there for more than 20 years and served as president and CEO.
Currently, he is chair of the Jefferson Lines Board of Directors,
although he is no longer an employee with any management authority.
In 2012, Zelle served on the Governor's
Transportation Finance Advisory Committee, which made recommendations
on state transportation funding. His past community and civic
activities include being chair or president of the following
organizations: Minneapolis Club, Guthrie Theater, Meet Minneapolis,
Minneapolis Regional Chamber of Commerce, American Bus Association,
Itasca Project Transportation Initiative and St. Paul Academy.
Born and raised in St. Paul, Zelle has a
B.A. degree from Bates College in Maine and an MBA degree from the
Yale School of Management.
Note. Zelle is the grandson of Edgar
Zelle, who, in 1925, purchased the Jefferson Highway Transportation
Company, a Minnesota intercity and, eventually, interstate bus line
business and forerunner of today's Jefferson Lines. In 1928, Edgar
Zelle expanded into the fledgling airline business by founding
Jefferson Airways, which ran four flights a day between Rochester and
St. Paul. But demand for the service was low and Jefferson Airways
closed within a year.
Issues to address. In advance of the
interview,the Civic Caucus asked Zelle to be ready to address the
following major issues: (1) the impact of no change in state law on
specific transportation needs and the state's economy; (2) the future
of the gas tax and other transportation financing options; (3) the
relative urgency of improving the movement of goods versus improving
the movement of people; (4) whether spending on light rail and
commuter rail is consistent with investments needed to build the
state's economy; and (5) why the state has not kept pace in building
and maintaining its transportation network, so that Minnesota now
needs a $30 billion investment over the next 20 years to keep roads
and bridges from continuing to deteriorate and traffic jams from
Minnesota is underinvested in
transportation. Since becoming commissioner of the Minnesota
Department of Transportation (MnDOT) a year ago, Charles Zelle has
traveled around the state giving people that message and talking about
the condition of our transportation system and MnDOT's vision. He
noted that MnDOT deals with more than just roads and bridges. It
oversees the state's 135 airports, five ports, freight rail, passenger
rail, multimodal transportation and transit in Greater Minnesota.
The state's system of highways and bridges
faces a $12 billion shortfall in necessary capital spending over the
next 20 years. In late December 2013, MnDOT released its newly
updated 20-year Minnesota State Highway Investment Plan (MnSHIP).
Current plans call for $18 billion in spending on transportation
projects over the next 20 years. But the state will actually require
$30 billion in spending during that time to meet the needs identified
in the updated plan for the state's system of highways and bridges,
leaving a $12 billion shortfall.
Zelle said that $5 billion of the $12
billion is needed to maintain the state road and bridge system we
have, while another $7 billion is required to expand the system to
help meet the needs of Minnesota and Minnesota businesses and
communities. "This is what is really required to maintain our
competitiveness," he said.
MnDOT's newly tweaked vision is to
maintain a multimodal transportation system that maximizes the health
of people, the environment and our economy. Zelle said the vision
helps guide the agency to make smart investments.
There is a $50 billion capital-spending
shortfall over the next 20 years in all modes of transportation
statewide. Those modes include Metro Transit, passenger rail,
Greater Minnesota transit, airport upgrades, port upgrades, and every
road in the state. While there is a $12 billion shortfall for the
state system of highways and bridges, the $50 billion shortfall
includes $28.5 billion for the county and municipal road systems.
Zelle observed that traditionally
transportation has been "pretty nonpartisan, pure arithmetic and not
grounded in ideology."
An interviewer pointed out that state and
local governments tend to ignore depreciation and do not take it into
account in their budgeting. The interviewer said that is a special
problem in transportation, which has a huge capital investment in
place. One issue in state and local governments, he continued, is that
they budget by "money in and money out" and don't have balance sheets.
He asked Zelle how the state could deal with depreciation as a real
cost and take it into account in transportation budgeting.
Zelle responded, "We do talk about this. Our
one overriding goal is enhancing our financial effectiveness." He
noted that 80 percent of the state's assets are roads and bridges.
"The challenge is getting people to understand the cost of our
products and our services," he said. "We're a heavy-asset business and
we must have return on those investments." He agreed that depreciation
We're $5 billion short of maintaining the
market value of our assets in the next 20 years. "In looking at
the life-cycle costs of our assets," Zelle said, "we are less
effective financially in doing mill-and-overlays of pavement that only
last five years. That's not a good investment. The right strategy
should be, with our eyes open, looking at hard numbers, over a period
of asset life, to say how would we run this to be financially
(Mill-and-overlay involves removing the top
two inches of asphalt to provide a new wearing surface on asphalt
A recent study by an outside group showed
that the necessary investments that could be made to the state road
and bridge system if the $12 billion shortfall were funded would have
an average return on investment of 2.5 to one. He pointed out that
this is capital investment to refurbish the state system of roads and
bridges and does not include operating costs, such as snowplowing.
"Roads and bridges don't last forever," he said. MnDOT refurbished the
Blatnik Bridge in Duluth for $15 million. "That will extend the life
of that asset for 10 to 20 years, which is better than building a new
Enhancement of the road and bridge system
should be an acceptable alternative to new construction projects.
An interviewer asked how we can change the political conversation, so
that legislators who want to make their mark can understand that
maintenance and enhancement of roads and bridges is good and that they
don't have to come up with a new building project in their legislative
"We must tell the story," Zelle said, "that
to maintain our quality of life, we want to enhance our system,
whether it's an additional lane or passing lanes or an interchange.
Enhancement is exciting."
In the past, when we had earmarks from the
Federal government, there was enough in the system. "It's getting
a lot more transparent, he said. "Everybody in the state is going to
have to hold hands on this. There isn't funding in the system for any
of it. No projects can be funded if we can't even maintain what we
have." He said we must do more to help people understand that our
pavements rank 38th in the country in terms of quality and
they're going to get worse.
One penny on the state's gas tax generates
about $30 million. Zelle said 40 percent of that money goes to
counties and cities, leaving $18 million for the state system out of
each penny of gas tax. He said of the tax, "it's inadequate, it's
diminishing, it's not indexed and it's inefficient, because cars are
getting more fuel-efficient and vehicle miles are not going up." He
said it would have helped if we'd indexed the gas tax 20 years ago.
And he noted that assuming federal transportation funding will be
stable "would be optimistic."
Rail transit will not reduce the $12 billion
shortfall over the next 20 years. An interviewer asked how much
the $12 billion shortfall would be reduced if we are able to build
light-rail transit lines and passenger rail to Duluth. Zelle responded
that those things would not reduce the shortfall. "In the metro area,
we're not planning to add any additional general-purpose highway lanes
if the $7 billion shortfall portion for expanding the state highway
system is funded. It'll be MnPASS lanes and interchanges that
accommodate some of the transit system. There is not enough concrete
or land available for the roads to handle the million more people who
will be coming here."
(MnPASS Express Lanes on metro-area freeways
are designed for solo drivers to use by paying an electronic fee.
Small, two-axle trucks weighing less than 26,000 pounds can also open
an account and use the express lanes. Transit buses, carpools with two
or more people and motorcycles can use the express lanes for free.)
MnDOT's road investments and the
Metropolitan Council's transit investments are completely integrated.
Zelle said it is not a choice between building transit and building
roads. He gave the example of the transit station being developed at
Lake St. and I-35W in Minneapolis, which is a partnership of MnDOT,
the Metropolitan Council, the City of Minneapolis and Hennepin County.
"It can't happen without those four," he said.
He said such partnerships are working on
intermodal connections among cars, pedestrians and transit, not adding
general-purpose highway lanes. "We'll accommodate the extra million
people coming into our area through build-out of our transit system,"
"It's not LRT [light-rail transit] vs. BRT
[bus rapid transit] vs. arterial streets vs. buses vs. streetcars vs.
bikes," he continued. "You need all of them together. In a
high-density corridor, LRT is the proper investment. But it may not be
the solution in another corridor, which might call more for BRT. We
need road investment along with transit investment, not one or the
other. We must plan for growth, because there will be one million more
people in the metro area. If we don't, businesses will move out and
people won't live here. The market will take care of itself."
Freight movement is essential for an urban
An interviewer asked
how we can get the proper balance between moving people and moving
products and resources. The interviewer said we must look at the
intrastate and interstate movement of goods. "We can't forget moving
the product," he said.
"That's absolutely right," Zelle agreed.
"Freight is a really important part of the equation," he said. "It's
essential for urban economies."
"Commercial vehicles are the ones that
actually do affect the roadway the most," he continued. Roads are
built to a standard to accommodate commercial traffic. He said MnDOT
projects a 30 percent increase in truck traffic over the next 20
years. He observed that transit is a way to reduce the number of
single-occupancy cars that take up so much of the space from
He noted the increase in freight train
shipping from North Dakota's oil fields. "Maintaining freight movement
through the entire system is critical to our manufacturing base and to
maintaining our quality of life," he said. "It's not just three trains
a day coming through towns any more. It's 20 trains a day with 100
cars each going through towns, cutting off parts of communities from
each other. We need to expand our investment in creating underpasses
Getting more tools to price traffic is the
wave of the future. An interviewer said Ken Orski,
editor and publisher of an
influential and widely read transportation newsletter
in Washington, thinks federal
transportation funding is at a "dead stop." Orski questions, the
interviewer said, whether federal aid is making any real contribution
to the national transportation system and says it would be better if
states did the taxing, spending and prioritizing without passing the
money through Washington, which brings no value added. Orski believes
we need to move much more heavily to trip pricing on roadways. The
interviewer asked Zelle how we can begin the trip pricing discussion.
Zelle responded, "There is no question that
getting more tools to price traffic is the wave of the future." He
said the MnDOT's highest return on investment is from traffic
management: telling people what's happening on the road ahead; ramp
metering; MnPASS lanes, where we price congestion; and Highway Helper
trucks. "There are astronomical benefits if we can solve breakdowns
quickly," he said. "As we're able to also tie road and car traffic
with transit, we might have most bus ticketing done on smart phones.
We could have a sale on transit for the next hour before rush hour
We can get more utilization of cars by
thinking of them differently. An interviewer noted that in the
1970s, the Citizens League defined transit by vehicle occupancy, that
is, getting drivers to ride. "The automobile system is by far the
largest carrier of passengers," the interviewer said. "It's the
largest transit system. If you load it up, there's no additional
Zelle said he likes to count passenger
miles, not vehicle miles. "Don't think of a car as a huge asset for
each family," he said. "It's a burden paying for insurance, parking, a
garage." He noted there are 250 Smart cars in Minneapolis that people
can pick up wherever they're parked, drive them and leave them at a
convenient place when they're finished. Some people using the service
will be able to get by without a car or with only one car per family.
Broadening transportation financing to
include the state capturing the value of property appreciation near
transit stops and highway interchanges has not been tried. An
interviewer noted that there is a lot of momentum in trying to build
political support for broader transportation financing in general.
"Transportation is built around the premise that the people who use or
benefit from it should pay 100 percent of the cost through the gas
tax, transit fares, motor vehicle licensing and potentially trip
pricing," the interviewer said.
But the interviewer pointed out that the
state's investment in improvements to Highway 610 in the northern
suburbs of Minneapolis is opening up hundreds or thousands of acres of
land for development. "That land appreciates in value tremendously the
minute MnDOT announces it's going to build a four-lane, controlled
access freeway," the interviewer said. "Shouldn't the state say to the
landowners, we would like a return on that appreciation in value?"
Zelle responded, "Value capture around
transit hubs and interchanges of freeways hasn't been done. I like the
idea. I'm not sure the state has really thought about that being our
"Our funding comes from multiple sources,"
he continued. "Fuel taxes provide less than half the funding for the
Trunk Highway Fund. That funding hasn't been keeping pace with
inflation. The county and municipal road systems are largely on the
back of property taxes, so we will find little value captures. But
we're so capital heavy that we must take a 20-year look. We need
dedicated funds to make these investments."
The Civic Caucus
is a non-partisan,
tax-exempt educational organization. The Core participants
include persons of varying political persuasions, reflecting years of leadership in politics and
business. Click here
to see a short personal background of each.
David Broden, Janis Clay, Bill Frenzel, Paul Gilje,
Jan Hively, Dan Loritz (Chair), Marina Lyon, Joe Mansky,
Tim McDonald, John Mooty, Jim Olson, Wayne Popham and