Lansing — Gov. Rick Snyder may have to sell a May 5 sales tax increase proposal, tied to boosting road funding by $1.2 billion, without the full support of a powerful business ally.
The Michigan Chamber of Commerce's members are deeply divided about whether to help bankroll the multimillion-dollar campaign to raise the sales tax from 6 percent to 7 percent to fund road repairs as well as increase education and local government funding, president and CEO Rich Studley said.
"The feedback we've received from our member firms has been quite mixed, which is a challenging position to be in if you're a chamber of commerce," Studley said.
It is one sign of mixed responses from a business community that the governor acknowledges he needs to contribute an estimated $12 million to $15 million for a "yes" campaign for Proposal 1 to pair with speeches he and Lt. Gov. Brian Calley plan to make across Michigan this winter and spring.
"We will be traveling all over the state to tell people why this makes sense," Calley told contractors and government officials attending a Thursday meeting of the Michigan Infrastructure and Transportation Association in Mount Pleasant. "It's our top priority between now and May."
Studley said it could take a month to two months before his board decides whether to endorse, oppose or remain neutral in the campaign for statewide voter approval. And the group won't be pressured to make a hasty decision, he said.
"I know Lansing insiders want everybody to make a decision yesterday," Studley said. "But in the real world … the business people we represent have businesses to run."
Wholesale distributors, retailers and hospitality business owners are concerned an additional penny on the sales tax for every dollar spent could hurt sales, especially of big-ticket items such as vehicles, appliances and jewelry, he said.
While most business owners want better roads to travel on, Studley said, "it's shaping up as a proposal that would hurt some segments of our membership while helping others."
Snyder sought to downplay the Michigan chamber's concerns last week.
"I think we could see some retailers supporting the measure, understanding that it's important to have good roads," Snyder said in an interview with The Detroit News Editorial Board.
The Michigan Manufacturers Association, another big business ally of Snyder's, doesn't have any money to contribute to the ballot campaign after its members spent $10 million in August successfully convincing voters to repeal the personal property tax on industrial equipment.
"We are tapped out right now," said Chuck Hadden, president and CEO of the manufacturers trade group.
Hadden said his members have reservations with the road funding package because it includes a $1,500 hike in a commercial truck's registration fees and higher sales taxes on raw materials.
Fuel tax hike backed
The Michigan chamber, which traditionally opposes tax increases, was a big supporter of Snyder's effort for a large gasoline and diesel fuel tax increase as the way to increase Michigan's road and bridge repair budget by $1.2 billion extra per year.
But a Senate-passed gas tax increase stalled in the House last year, prompting Snyder and legislative leaders from both parties to hatch a road funding plan that requires voter approval of the sales tax increase in order for several components related to funding for education, cities and tax credits for the poor to become law.
To get Democratic votes for the sales tax proposal, Republican leaders backed $261 million in tax credits for low-income families, $300 million in new funds for public education and $70 million more in revenue sharing for cities.
The Small Business Association of Michigan has not yet taken a position on the proposal, while the Michigan chapter of the National Federation of Independent Businesses is opposed to a sales tax increase.
"The side deals made to get it passed I think leave an unpleasant taste in our members' mouths," said Charlie Owens, state director of the federation.
In December, Business Leaders for Michigan became the first business group to back the ballot plan. The group of corporate chief executives and university leaders plan to contribute some money to the campaign, said spokeswoman Kelly Chesney.
"The proposal will fix our roads and represents a big step toward a broader long-term solution to expand the capacity of our roads to grow the economy," Business Leaders for Michigan President and CEO Doug Rothwell said in a statement. "While there is some risk in relying on a ballot measure that requires a strong public awareness campaign, this proposal offers some very positive benefits for citizens, schools, communities and businesses alike."
Almost two weeks ago, the Detroit Regional Chamber reluctantly endorsed the ballot proposal as chamber CEO Sandy Baruah chastised the Legislature for punting the issue to voters instead of sending Snyder a long-sought gas tax increase.
"We cannot let a failure in legislative leadership undermine Michigan's economy and future," Baruah said in a statement.
Michigan State University economist Charles Ballard said he's urging people to vote for the ballot proposal, even if the multifaceted road-funding scheme is not the kind of straightforward plan an economist normally would endorse.
Based on the conditions of Michigan's roads, Ballard said, it's clear the state, counties and cities need the extra money. By law, the state receives 39 percent of all state money dedicated to roads and bridges, while counties receive 39 percent and townships and cities get 22 percent.
"I don't think the Tooth Fairy is going to pave our roads," Ballard said.
The road building industry, construction unions and other affiliates can be expected to contribute about one-third of the $12 million to $15 million needed for the ballot issue approval campaign, said Mike Nystrom, executive vice president of the Michigan infrastructure association.
Nystrom's 500-member industry group has partnered with the Michigan chamber to advocate for more money to repair roads.
"We're going to be all-in; it's our shot to get a real solution" to the state's road-repair funding shortfall, Nystrom said. He said a coalition of more than 100 groups, Michigan Citizens for Better Roads Schools, has been formed to campaign for the ballot proposition, although it's uncertain how many of them will commit substantial funding.
Don Wotruba, deputy director of the Michigan Association of School Boards, said his group doesn't have the "deep pockets" to finance a TV campaign like business groups do, but it does have a network of 600 elected school boards across the state.
"You're going to need the grassroots people to explain what this really is," Wotruba said.
The Michigan Education Association's board is expected to endorse the measure at its Jan. 30 meeting because of the direct benefit to public schools, spokeswoman Nancy Knight said.
"It's not only good for roads, it's good for education," Knight said.
Snyder said he wants the Michigan chamber's support and plans on making a direct appeal to its board of directors.
"It's important to have business support ... but we understand that they have got to go through the process of vetting it with their membership," Nystrom said.