Fight over road funds brewing in Lansing
Lansing — Road builders and lawmakers are at odds over whether the industry can handle an annual $1 billion-plus infusion of cash that would result from the Snyder administration's effort to hike taxes dedicated to rebuilding the state's transportation infrastructure.
Gov. Rick Snyder and his transportation department director, Kirk Steudle, plan to increase pressure on the Legislature to pass such a tax increase by touring a section of the Lodge Freeway on Detroit's northwest side Monday morning to draw attention to deteriorating pavement conditions that are especially pervasive in southeast Michigan. The Legislature is scheduled to return Tuesday from Thanksgiving recess.
After surveying the freeway's pavement, Snyder and Steudle will discuss their "comprehensive plan to fix our crumbling infrastructure" with local elected officials and business leaders at Lawrence Technological University's engineering college, which trains road-designing civil engineers, according to the governor's office.
As Snyder increases political pressure for action on road funding, some lawmakers say they fear a large gas tax increase will create a pot of money that will drive up the cost of building roads and fatten the profits of paving companies, concrete mixing plants and engineering firms.
"The concern is we're going to spend an extra $1 billion and get $200 million in roads," said Rep. Pete Lund, R-Shelby Township.
"I wouldn't want to flip a switch and inject $1.2 billion into that system," added Rep. Kevin Cotter, the Mount Pleasant Republican who will be speaker of the House next year. "I think we would drive inefficiency if we did that."
Industry leaders say the concerns are unfounded.
"It's more of an excuse not to do something than it is a legitimate reason," said Daniel DeGraaf, executive director of the Michigan Concrete Association. "The industry has demonstrated the ability to adapt and produce high quality (roads) at reasonable costs for that kind of work."
There's recent experience with having an influx of tax dollars pumped into the system. In 2009-10, Michigan received $847.2 million in one-time federal aid through the American Recovery and Reinvestment Act or the federal stimulus bill for so-called "shovel ready" highway and bridge construction projects.
The state didn't find the cash infusion overwhelmed builders. That's why Steudle said he is dumbfounded by suggestions from lawmakers that the road-building industry can't tackle more projects resurfacing roads and replacing nearly 250 structurally deficient bridges, a third of which are in southeast Michigan.
"I've heard that a lot of times and I don't know whom they're talking to," Steudle said in an interview. "I've yet to find a contractor who says, 'Hey I've got enough work. I can't do anymore.' "
Gradual schedule possible
Prior to the 2008 recession, the Edward C. Levy Co. was churning out sand and gravel for the construction of buildings and roads from 13 quarries across southeast Michigan.
But the slow economic recovery coupled with declining or stagnant state-funded road construction has left eight quarries operating below capacity, said Evan Weiner, CEO of the Dearborn-based asphalt and cement conglomerate.
"There was a time we were making twice as much sand and gravel," Weiner said. "The capacity to fill the asphalt plants, the concrete plants, the aggregates is not a problem."
Weiner said the industry will need about three years to gradually ramp up operations that mirror the workforce from the late 1990s and early 2000s, when gas tax revenues were still meeting road repair demands.
"What will take some time is to hire the people to do the work safely," Weiner said. "It's a human issue. It's not a capacity (matter)."
Steudle said the road construction industry needs "stability" in state funding before companies invest in new equipment and hire more workers.
"Who's going to invest in a brand new $300,000 piece of equipment because you have one project?" Steudle said. "Nobody's going to do that on a year-to-year basis hoping the Legislature will give them more funds and throw more projects on the streets."
House Speaker Jase Bolger, R-Marshall, favors a gradual multiyear increase in road spending instead of the large-scale investment Snyder has been pushing for this entire two-year legislative session. "You can't dump a billion dollars into the system immediately," Bolger said.
Cotter also favors gradually increasing spending to give county road agencies and private contractors time to hire more workers and invest in heavy equipment.
"To no fault of their own, they've been forced to scale back just due to the waning investment that's been occurring, due to our underinvestment," Cotter said.
Plan to move forward
Most lawmakers appear resolved to approve some form of increased road funding during the lame duck session that begins Tuesday and is scheduled to end Dec. 18.
"It's important that we get something done because what ends up happening is we lose another construction season," said Rep. Marilyn Lane, D-Fraser, minority vice chairwoman of the House transportation committee.
But the Republican-controlled Legislature remains at odds over how to pay for the $1.2 billion to $2.5 billion annually that experts say is needed to maintain roads in good or fair condition.
The Senate passed legislation last month that would effectively double the 19-cents-per-gallon gasoline tax and impose a larger increase on the owners of diesel-consuming trucks and cars. The 15-cents-per gallon diesel tax hasn't been increased in 30 years.
Under the Senate plan, the current motor fuels tax would be repealed and replaced with a new percentage-based levy that can allow revenues to grow with the rising cost of gas and be adjusted for inflation.
Bolger has proposed repealing the gas tax and converting the sales tax on fuel into the new percentage-based tax at the wholesale level. Bolger said his plan would generate another $1 billion for roads after six years of phasing out the sales tax and replacing it with the new tax dedicated to roads.
For two years, the Snyder administration has implored lawmakers to add at least $1.2 billion annually to the $1.4 billion distributed each year to local agencies and the Michigan Department of Transportation for road construction and maintenance.
"Our toes are on the edge of this cliff and if we don't advance some projects soon in the next couple of years, we're going over the cliff and this cost is going to be exponentially worse," Steudle told The Detroit News.