Senate leader opposes bonds to accelerate road fixes

Chad Livengood
Detroit News Lansing Bureau

Lansing — The leader of Michigan’s Senate opposes pledging future increases in fuel taxes and vehicle fees toward bonds to accelerate road construction projects next summer.

Gov. Rick Snyder floated the idea of issuing bonds to infuse more money into road construction projects a day after the Legislature sent him a $1.2 billion road funding plan that doesn’t take full effect until 2021.

“I was surprised he mentioned that. I would hope that’s not where we go,” Senate Majority Leader Arlan Meekhof said Friday during a taping of public television’s “Off The Record.”

Snyder told The Detroit News on Wednesday he is studying the use of bonds to speed up road construction projects because the fuel tax and vehicle registration fees the Legislature approved don’t take effect until Jan. 1, 2017.

The measures will produce $600 million annually, while the remaining $600 million for the road funding package will be phased in from 2019 to 2021 through an earmark of existing individual income tax revenue.

Snyder’s fellow Republicans who control the state Senate also would oppose using the new source of tax revenue to borrow against, said Meekhof, R-West Olive.

“(Bonding) would not be my preference, and my caucus wouldn’t be supportive of that,” he said. “I would prefer pay as you go, raise the money.”

The governor does not need the Legislature’s permission to issue bonds.

The Michigan Department of Transportation has about $1.8 billion in outstanding bond debt, and much of it was incurred after the Legislature last raised the gas tax from 15 cents a gallon to 19 cents in 1997. Under the legislation approved earlier this week, the gas tax and 15-cents-a-gallon diesel tax will be hiked to 26.3 cents a gallon, and that rate can increased to account for inflation starting in 2022.

“It wouldn’t be on the top of my list to go borrow more money,” Meekhof said. “Part of the problem we got into is we borrowed too much money over a couple of administrations. I’m not absolving anybody of blame or credit here.”

MDOT pays $238 million annually in debt service on its $3.89 billion overall budget, department spokesman Jeff Cranson said.

The seven-bill road funding package awaiting Snyder’s signature contains a clause that increases MDOT’s annual debt repayment by $7 million.

Snyder has not said how much money he would like to borrow to accelerate road repairs. But he indicated he’s cautious about adding more long-term debt.

“I would want to do what I describe as the right amount, not too much,” Snyder told The News. “I don’t want to create later issues with having too much debt service.”

Snyder, an accountant, noted interest rates are “relatively low” in the municipal bond market.

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