Drivers shouldn’t expect big road gains in a hurry
Lansing — Michigan’s drivers are not expected to see a significant increase in road and bridge repairs during the next few years from the road aid package that is awaiting Gov. Rick Snyder’s signature.
The plan is touted as an infusion of an extra $1.2 billion in annual road spending, but it won’t reach the funding milestone until two years after the governor leaves office at the end of 2018.
Lawmakers chose to phase in the new road money, at least half of which consists of a 7.3-cents-a-gallon gasoline tax increase and a 20 percent vehicle registration fee hike.
The plan starts with a combined $452 million increase in higher annual fuel taxes and vehicle registration fees in 2017 that grows to $608 million in 2018. It is followed by gradually earmarking another $600 million of existing income tax revenue in fiscal years 2019, 2020 and 2021.
Snyder confirmed Wednesday that the $400 million the state is dedicating from its general fund toward road improvements in the current fiscal year will disappear in the next fiscal year when $452 million in fuel tax and vehicle registration fee increases go into effect in 2017. The result is about a $52 million net increase in overall road and bridge repair funding — unless legislators contribute more from the general fund, the state’s main checkbook.
“That money does not reoccur in 2017,” Snyder said Wednesday in a telephone interview.
Critics of the road funding package said the $1.2 billion value of the plan is being overstated because the new taxes will initially backfill existing general fund spending on roads and bridges.
“If that money goes away, the net impact of this proposal is significantly less than what it’s being pitched as,” said John LaMacchia II, a lobbyist for the Michigan Municipal League.
House Speaker Kevin Cotter, R-Mount Pleasant, argued the gradual increase in the money flowing to roads actually is better than having the full $1.2 billion right away.
“I felt passionately that phase-in was important because if we injected the full $1.2 billion we were going to drive inefficiencies because of simple supply and demand,” Cotter said. “It’s going to take time for the road-building industry, in both the public and private sector, to respond. And I think that we’ve done that in a responsible manner by phasing it in over five years.”
Gov explores bonding
As a result of the phased-in funding, Snyder said Wednesday his administration would explore using the new fuel taxes and vehicle registration fees to issue bonds to accelerate road construction projects years before the new revenue trickles in.
“I want to do some analysis of what might be the right amount to accelerate,” Snyder told The News. “I would want to do what I describe as the right amount, not too much. Because, again, I don’t want to create later issues with having too much debt service.”
Snyder wanted a plan that would more quickly raise $1.2 billion extra annually for roads, but compromised because legislators were wary of driver and taxpayer backlash.
Even by fiscal year 2021, there’s no guarantee the state will see a net increase of $1.2 billion a year in transportation infrastructure maintenance and upgrades from the $3.9 billion the state is spending this fiscal year.
By eliminating the general fund contribution to roads for the next two fiscal years, the state would see a net increase of $825 million for transportation spending by 2021, if existing federal and state revenues remain the same, a News analysis shows.
Supplanting the existing general fund contribution toward roads with higher taxes will bring relief to the state’s main checkbook, which is strained by looming budgetary pressures in the Medicaid health care program for the poor, said economist Mitch Bean, former director of the House Fiscal Agency.
“They may be cutting themselves some slack to take care of these problems for the next couple of years and then just pass it on to the next guy,” Bean said of the Snyder administration.
Snyder said the state will see a “big gain” in fuel tax revenues after 2021 when the new law triggers inflationary increases after the gasoline and diesel fuel tax rates are raised to 26.3 cents a gallon tax. The future tax rate increases will be capped at 5 percent annually under the plan.
Senate Majority Leader Arlan Meekhof, R-West Olive, said if the economy continues to grow during the next two years, the Legislature could choose to spend more general fund revenue on roads to address deteriorating conditions.
“I think the little over $1 billion that we invested over the last three budget cycles is a pretty good indication of our commitment to fix the roads,” Meekhof said about the one-time road spending supplements.
Focusing on the positives
Snyder, his transportation director and Republican legislative leaders who negotiated the deal prefer to emphasize the high points in the funding system they squeezed through the House and Senate on Tuesday after four years of opposition to even modest tax or fee increases.
Transportation Director Kirk Steudle said 86 percent of the state’s road and highway miles currently are rated in “good” condition and he hopes to halt the decline in Michigan’s roads by speeding up repairs gradually.
“What we’re going to do is ... figure out: ... How do we sustain the 86 (percent)?” Steudle said. “I can’t give you a number because we’ve got to look at five years and figure out now: Where are the investments, how do they happen, and then can we stabilize it?”
The department has a five-year schedule of repairs and improvements throughout the state that it updates annually.
Steudle said the new money will allow transportation planners to speed up or move forward repairs slated for later on the schedule, if they’re ready to go.
With the exception of Sen. Virgil Smith of Detroit, Democrats resoundingly voted against the GOP-authored road funding plan, decrying the length of time required to generate an extra $1.2 billion annually in road repairs.
“It’s just not a real serious plan,” said Senate Minority Leader Jim Ananich, D-Flint. “It takes a long while before this gets fully implemented; $1.2 billion is what we needed a few years ago.”
For Detroit, the road package contains a provision granting it the right to use up to 20 percent of its annual road money distribution on public transit.
Cotter contended the plan contains first aid for southeast Michigan’s battered roads and bridges as well.
“We’re looking at about a 40-percent increase across the board,” Cotter said. “Whether you’re a very small, rural township or whether you’re the city of Detroit, there’s a huge dollar amount that’s coming in for roads and for infrastructure improvements.”
GOP lawmakers and the governor also tout provisions that call for toughened warranties on road repairs and a forward-looking innovation mandate they say will answer critics of current methods and workmanship.
It sets up a state task force that must issue a report by March 1, 2016, evaluating materials and construction methods that can lead to longer-lasting and lower-maintenance road improvements. The goal is road upgrades that are good for 50 years.
The first $100 million in fuel tax and registration fee revenue each year will go into an innovation “lockbox” the transportation department can open only with legislative permission.
“That was put in by the Senate to make sure that we’re seeing good product and good innovation — making sure that we’re getting the most up-to-date fixes for our roads,” Cotter said. “That’s something we hear about in the district all of the time — people think we’re making roads the same way that we made roads 40 and 50 years ago.”