Opinion | Michigan, let’s make a road finance movie

Eric Lupher is president of the Citizens Research Council of Michigan

Another Groundhog Day has come and gone. 

Which is apt, because Michigan finds itself in a situation reminiscent of the movie of the same name. In the movie, Bill Murray relives the same day over and over, everything resetting when his alarm clock goes off. In Michigan, we have been cursed to relive discussions about the inadequacies of our current highway maintenance efforts year after year. 

Every few years, we hear the same stories about truck weights and funding formulas. The new funding solutions are always the same: fuel tax increases and changes to the sales tax levy and distribution. In the movie, Bill Murray eventually learns from the experience, using it to improve the lives of everyone around him. But with term limits, we get a new cast of characters every two years, so many of the same ideas that have been dismissed in the past resurface. 

Unfortunately, our Groundhog Day scenario has once again landed on the use of bond financing to improve Michigan’s roads. This would cause a number of issues for taxpayers and local governments. Let me make clear why this policy idea is bad for local governments and taxpayers. 

There is a legitimate role for bond financing in road construction and maintenance, but that is to accelerate construction, not as a source of funding. Without a new revenue stream to finance the debt, the state would only be borrowing against future revenue.

This is exactly what happened 20 years ago with the Build Michigan financing. Money was borrowed to build shiny, smooth roads and sturdy bridges. Without any new funding to pay them off, the already inadequate revenue stream was stretched even thinner to make the notes. Because there was not enough money for maintenance, those smooth roads are now pothole-filled and those sturdy bridges are now suspect. 

Let me state it bluntly: Bond financing without new revenue is insufficient to solve the problem on its own, and steals from future generations. So, new funding would be needed to finance the debt. If we are going to develop new revenue streams, let’s just do that. We could use the money to fix our road system and not finance bonds, which requires sending a portion of our tax dollars to Wall Street. 

For a service rated among the highest needs by voters, further delaying an influx of dollars does not make sense. The governor’s plan will have the State Highway Commission issue revenue bonds without the need for legislative approval or a referendum. Because the amount that can be borrowed is dependent upon the prior year’s transportation tax receipts, we are already hamstrung. The amounts contemplated will address a limited number of roads, leaving much of the system untouched. 

Additionally, all bond funding would be for MDOT roads; nothing for county roads or municipal streets. The County Road Association estimates unmet county road needs nearly comparable to the estimated funding needs for state roads. The municipal road funding needs have not been estimated. Yes, we might enjoy better drives on the interstates and state roads, but eventually we have to exit those roads and drive on county and municipal streets to get to our homes, work places, stores, etc. Still, we’ll be asking Lansing to fix the damn roads.

MDOT roads constitute only 8 percent of the state’s road miles, but are a much bigger proportion of the system when accounting for lane miles. They are a key part of the system for moving people and products between population centers. Nevertheless, when vehicles exit the interstates and other major highways, they need county and municipal roads to get them to their homes, places of business, and commercial centers.

County road agencies and municipal governments may issue their own debt for road projects. Like the state, these agencies must have funding to finance the borrowing. Again, without a new revenue stream, they would only be straining future revenues and leaving fewer resources for ongoing maintenance. Local governments do not have the authority to unilaterally create those new revenue streams. There must be an authorizing state law.

Many of our state policymakers understand the importance of the county and municipal road systems, but some may need to be reminded. 

Bill Murray had to learn how to really love another person to make it to Feb. 3. Michigan must find a sustainable long-term solution to road funding. That does not diminish the opportunities to make better use of existing resources. Like “Groundhog Day,” we revisit our revenue possibilities over and over without accomplishing any real change. It took Murray’s cynical weatherman many replays to find his way out.  We have a chance to edit our scenario. Maybe then we, too, can wake up to a new day, and smoother travel. 

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Comments

Michael Craine
Thu, 02/13/2020 - 9:22am

Well-stated. Eric could have added toll roads to the list of "what about-isms" too. In a period of spiraling costs and no clear funding policy to address them, agencies are forced to consider short-term fixes that don't address the long-term asset management problem. Local roads are what get Michigan citizens from their driveways to the highway. And, yet, this failure to reach a comprehensive policy has endured since the largely ineffective funding discussions that surrounded the 1997 tax package. It only adds more expense to be borne in the future.

Matt
Thu, 02/13/2020 - 9:47am

Why not allow counties to enact their own gas taxes? You've already stated county roads are greater in milage than state roads.

Jerry D
Thu, 02/13/2020 - 12:05pm

Oh yes, Now we can burn more fuel to run across the county line to save a penny a gallon and clog the roads of the county with the lower tax.

Matt
Fri, 02/14/2020 - 6:59pm

How's this any different than the situation today or is every gas station priced exactly the same where you live? Or would you rather have the Gov just stick the .45 on each gallon across the whole state?

abe bubush
Thu, 02/13/2020 - 11:40am

This article says NOTHING. The Republican house and senate's refusal to raise the gas tax leaves the governor no choice except bond funding in order to fulfill the desires of the electorate. The gas tax requirement was obvious before the election.

It's very simple.

Penny
Thu, 02/13/2020 - 12:26pm

Eric, I agree. Why can't the State entertain amending Headlee? The locals could see in increase of revenue and pay to fix their own damn roads!

Jim
Thu, 02/13/2020 - 5:38pm

The governor is using the tools at her disposal by bonding and using long term money for long term fixes to the major highways. It’s a brilliant solution to a portion of the problem. By accelerating the reconstruction of major roads and bridges it will actually save money in two ways. Continuing neglecting major repairs only costs more money down the road and accelerating the work now prevents the inflation of future costs. As far as county and local roads the governor and legislators have to work together to raise revenue.

LH
Thu, 02/13/2020 - 10:59pm

So the same governor who expressed such indignance about the actions of the lame duck governor and legislators before she took office now continues to use every tool she can find to circumvent the legislature when it suits her needs. When she didn't like the budget that was sent to her, she engaged in unprecedented use of line item vetoes to admittedly punish parts of the state who traditionally vote Republican. Now she has found a way to fund road construction on the backs of the next generation without finding any new revenue sources to pay this money back, with interest. I was no fan of the extreme 45 cents per gallon gas tax increase she proposed, and I blame both sides for not being able to reach some sort of compromise that would begin to "fix the damn roads." But borrowing this huge amount of money without new revenue to pay it back is insane. If I went to my bank and told them that every dollar I earn is already budgeted towards my housing, utilities, food, school for my kids, transportation, etc., but that I still wanted to borrow thousands of dollars, they would laugh in my face and suggest I find a personal finance class.
In addition, as the writer points out, bonding does nothing to address anything other than state trunklines, and the vast majority of the funding is directed to Southeast Michigan.
Another facet to the problem of fixing our roads is that contractors already have plenty of work to do. When that happens, there is no incentive to bid low, any often contractors don't even bid. A project that I have been involved with that was bid last year received only three bids, all of which were at least 25 percent over engineering estimates. This was one of the largest projects out for bids in the area, and should have received at least twice as many bids. When contractors have plenty of work, costs go up, meaning that our scarce dollars are used up even faster. The bottom line, folks, is that it took a long time to dig ourselves into this hole, and there is no easy solution or quick fix. And as if this wasn't enough, our water and wastewater systems are in no better shape, and high water levels are causing additional impacts on infrastructure in coastal areas.
While we are at it, I remember well the Build Michigan program. Many of those nice smooth roads that resulted from that program were nice and smooth because of a thin pavement overlay that looked nice, and held up great until winter hit. By the next summer many of those same roads were in worse shape than before because the overlay was already breaking up. Not only do we needs to fix our roads, but we need to do it right.

John S.
Fri, 02/14/2020 - 10:31am

The author should save this op-ed so that it can be published again next year. Yes, there are no new policy options for road funding to be discovered--they have all been floating in the "solution soup" for years and years. The failure to take action on generating new revenue is plainly political--the myopia of elected public officials who can focus only on the next election or if term limited on where they will find their next job, and posturing to public attention where elected public officials reframe the issue of road funding in ways that appeal to uninformed voters (e.g., there's huge amounts of wasteful spending in state government).