State transportation panel members expecting bond plan for road improvements

Craig Mauger
The Detroit News

Lansing — Members of the State Transportation Commission say they're expecting to consider a proposal to sell bonds to fund infrastructure projects on Thursday, a day after Gov. Gretchen Whitmer's second State of the State address.

Whitmer is widely anticipated to use her address Wednesday night to outline a new plan to improve the state's roadways. In 2019, she proposed increasing the 26.3-cents-a-gallon gas tax by 45 cents, which met strong opposition in the GOP-controlled Legislature.

Whitmer is widely anticipated to use her address Wednesday night to outline a new plan to improve the state's roadways.

In the last month, the Democratic governor has been considering ways around the Legislature to make good on her 2018 campaign promise to "fix the damn roads." Under state law, the transportation commission, appointed by the governor, can issue bonds without the Legislature's approval, essentially allowing the state to take on debt to create an influx of funding for specific infrastructure projects.

If lawmakers aren't going to raise taxes substantially to improve the roads, the path of "least resistance" is bonding, said Stephen Adamini, a Democrat from Marquette whom Whitmer appointed to the commission in December.

"What else has she got?" Adamini said of bonding. "For me, it would make sense. That’s the next easiest way to go."

But Adamini, a former member of the Michigan House, said he hadn't seen the specifics of what Whitmer would be proposing as of Tuesday afternoon. And it's unclear how much debt she would be willing to take on.

The State Transportation Commission is scheduled to meet 8 a.m. Thursday. Whitmer's State of the State address will take place at 7 p.m. Wednesday.

Todd Wyett, chairman of the State Transportation Commission, said he had heard no details of a potential bond sale plan earlier this month when asked by The Detroit News.

On Tuesday, Wyett was more opaque, saying commission members had received their information packets for their Thursday meeting and were awaiting further instruction from the administration.

Tiffany Brown, spokeswoman for Whitmer, declined to comment on expectations for the transportation commissioners.

But earlier this month, she said, "Given that the Legislature is not serious about fixing the roads and bridges, the responsible thing to do is examine other options to protect Michiganders."

A large, deep pothole, 3 feet wide, is seen on  the westbound I-696 service drive at Belanger in Warren, Michigan on February 21, 2018.

Of the six members on the transportation commission, three are listed as independents, two are listed as Republicans and one, Adamini, is listed as a Democrat. Former Gov. Rick Snyder, a Republican, originally appointed five of the commission members.

The process for the commission to issue bonds involves two steps, according to the House Fiscal Agency. Initially, the commission authorizes the Michigan Department of Transportation to circulate a bond statement, including a list of projects. In a later resolution, the commission authorizes the department to issue bonds.

Michael Hayes, a former state House member from Midland, is one of the two Republican members of the commission. Hayes said this week he expects the commission will consider a bond proposal when it meets Thursday.

While some Republican lawmakers have opposed the idea of taking on debt to improve the roads, Hayes said bonding isn't a novel concept. He also said the commission isn't a partisan group.

"Various governors have used bonding for the roads because it’s allowed under the Constitution," Hayes said. "It’s always seemed to me a reasonable approach."

Former Govs. John Engler, a Republican, and Jennifer Granholm, a Democrat, used their administrative powers to authorize the sale of bonds to fund road improvements.

Twenty years ago this month, Engler used his 2000 State of the State address to announce a $1 billion investment plan that included $900 million in bond revenue, according to a Senate Fiscal Agency document. The State Transportation Commission authorized $900 million in borrowing, but only $308 million in bonds were actually issued, according to the House Fiscal Agency.

During Snyder's administration, the state paid down the amount of outstanding debt from past bonds. It has freed up more money to go to road improvements, but it could also free up more money to go to debt service on new bonds.

The state could issue new bonds against State Trunkline Fund revenues, mainly registration fees and gasoline taxes, and projects are expected to focus on state highways.

The state's debt service payment for bonds against revenue for state highways for 2020 will be about $118 million, the lowest debt service total in about a decade.

This House Fiscal Agency graph shows the declining amount of outstanding debt from State Trunkline Fund bonds and federal grant anticipation notes. Some are arguing that the declining amount of debt could provide an opportunity for new bonds to boost Michigan's roads.

While there are limits on how much debt the state can take on for road improvements, the limits along with interest rates and the ability to stack bonds provide much wiggle room. The commission policy currently requires a ratio of restricted revenue to annual debt service of at least four to one.

A 2018 Michigan Department of Transportation document showed at that point, the state had a ratio of available revenue to debt service of about seven to one.

The state's outstanding debt against State Trunkline Fund revenue and anticipated federal aid peaked at about $2.3 billion in Fiscal Year 2009, according to the House Fiscal Agency. It was down to $1.2 billion by 2018. That alone is a debt drop of about $1.1 billion.

But many Republican lawmakers have said they would rather see the state continue to pay down its current debts to free up more money to go to roads instead of taking on new debt the state will have to pay back later. Sen. Roger Victory, R-Hudsonville, has introduced a largely symbolic bill that would allow the Legislature to disapprove bond sales over $100 million.

Senate Appropriations Chairman Jim Stamas, R-Midland, said he would prefer a long-term and sustainable fix for the roads instead of bonding, which he described as short-term fix.

Likewise, Sen. Tom Barrett, R-Charlotte, chairman of the Senate's Transportation Committee, said he's unlikely to support the magnitude of bonding that he's hearing the Whitmer administration may pursue. Bonding shouldn't be the main way the state funds its transportation system, he said.

"We have to look at what the fiscal implications would be," Barrett said.