State leaders navigating a route to new dollars for roads

Finding money to fix our crumbling roads has been by far the biggest (ahem) roadblock in Lansing for many months.

Although nobody's willing to come out and say so publicly, within the last few days a structure has emerged for getting the estimated $1.2 billion needed each year to fund our transportation infrastructure, particularly roads and bridges.

The thought is to repeal the 6 percent retail sales tax on gas and diesel motor fuel and replace it with an as-yet-undetermined percentage tax at the wholesale level. That tax could be adjusted for inflation in years to come.

Most of the revenue from the 6 percent gas sales tax goes to non-transportation purposes, particularly aid to K-12 schools and revenue sharing for local communities. Repealing the gas tax would produce a significant shortfall for both.

To fill the hole, the idea is to put on the statewide ballot a proposal to increase the current state sales tax from 6 percent to 7 percent. My sources in state government tell me this should be enough to plug both budget holes, maybe with a little left over.

Conditions on Michigan roads are poor and getting worse. A Michigan Department of Transportation chart shows the percentage of good roads has dropped from around 24 percent to 19 percent since 2004, while the percentage of poor roads has increased from 12 percent to 34 percent over the same period.

Worse, Michigan invests far less on transportation infrastructure than our neighboring states. We spend $174 per person, while Ohio spends $235, Wisconsin $231 and Minnesota $315. Even Indiana (miserly or economical -- your choice) spends per capita more than we do, $187 versus $174.

According to the Michigan Department of Transportation, 35 percent of total U.S.-Canadian trade goes through Michigan, something like $520 billion via highway, rail and water links. Tourism in Michigan is primarily auto-based, generating nearly $18 billion in business for 2011. MDOT also estimates that the return on $1.2 billion in transportation infrastructure will yield $10 billion in increased personal income for Michigan citizens. (The MDOT presentation of all this data may be downloaded in .ppt format here.)

And the costs of doing nothing are high and getting higher with each passing year.

Obviously, bad roads contribute to auto repairs, accidents and deaths -- although nobody seems to have an exact count. And the Transportation Department says that each $1 spent now to restore or replace pavement eliminates or delays $6 to $14 in spending over the long run.

The last time Michigan raised motor fuel taxes was 1997, when it was raised by four cents per gallon. The Department of Transportation commissioned a study of that move, which concludes: "In 1997, Michigan had among the worst road conditions in the country. Its bridges were ranked 49th out of 50 states. ... Nearly a third of trunkline pavements were in poor condition. The four-cent increase enacted in 1997 was not adequate to pay for both system-expansion projects and preserve existing pavements and bridges."

The conclusion is obvious: We now need to spend a ton to fix our transportation infrastructure because of our penny-pinching back in 1997.

None of this is a big secret. Back on Oct. 26, 2011, Gov. Rick Snyder in a special message called for wholesale revitalization of our transportation infrastructure.  "Michigan's infrastructure is living on borrowed time," he said. "We must reinvest in it if we are to successfully reinvent our economy."

Obviously, the big problem is vastly increased spending to fix roads, which obviously needs to be paid for by the road users, both business and the public. And no politician wants to advocate big tax increases for more than a few seconds before ducking. So over the past couple of years we've seen a variety of non-starters, most centering on increasing car and truck registration fees.

Nothing has stuck ... until the past few days.

I'm not claiming the structure I've outlined here is the last word we're ever going to see on the subject. The obvious concern is that education folks are scared that voters might nix the increased sales tax, leaving schools in a big hole. So it may well be a struggle to get votes for passage, even though it could be marketed as a tax increase for better roads and better schools.

The package that seems to be coming together seems to be the first one that folks can buy into. And for anybody who hopes for a prosperous Michigan should be delighted.

Editor’s note: Former newspaper publisher and University of Michigan Regent Phil Power is a longtime observer of Michigan politics and economics. He is also the founder and chairman of the Center for Michigan, a nonprofit, bipartisan centrist think–and–do tank, designed to cure Michigan’s dysfunctional political culture; the Center also publishes Bridge Magazine. The opinions expressed here are Power’s own and do not represent the official views of the Center. He welcomes your comments via email.

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Comments

Big D
Tue, 05/21/2013 - 8:55am
Wonderful. What we don't need is more taxes. How come no mention of the gasoline excise tax? ...that's supposed to pay for roads...oh, wait, that was redirected. Two big problems with this plan. 1. Making the wholesale gas tax "adjustable for inflation" is a dodge--if its a percentage of gasoline price, it is already automatically adjusted for inflation, leave it alone. Statutorialy. Otherwise this is a scam to add low and then bureaucratically raise another tax. 2. Besides the fact that we will NEVER approve a sales tax increase at the polls, it's time the K-12 and revenue sharees did some (ok, more) belt-tightening too. ...did you notice that local govts are already raising taxes to fix local roads, sans adequate state kickbacks? Anything being done about the COST of highway repairs? Perhaps what we need is a federal program to take over all the construction industry to reform it--Obamarepair.
Hardvark
Tue, 05/21/2013 - 10:53am
Comment #1 The current fuel tax used for roads is a fixed amount per gallon set in 1997. The sales tax, which is a percentage, is variable revenue based on the cost of fuel and is dedicated to school funding and revenue sharing for local governments. When unemployment is high, there is less driving hence less fuel use and even those still employed are pressured to buy more fuel efficient vehicles reducing the revenue stream of road infra-structure maintenance funds. Unfortunately, the cost of fuel & maintenance materials needed to fix our roads is at an all time high which also adds to the inability to keep up our roads. Toll roads and actual payment per mile driven is the most equitable way to have direct user responsible cost sharing but the people out there are too paranoid about our government tracking vehicle use, yet they are OK with On-Star and Lo-Jack locating their vehicles if they get stolen and having their phone let big brother know where they are 24/7. Go figure!
Mike R
Tue, 05/21/2013 - 11:18am
Without commenting on the road fix plan or the (un)likelihood of voters passing a tax increase, I find Big D's cavalier assertion that K-12 needs to do "more belt tightening" offensive, miserly, shortsighted, and irresponsible. Michigan now ranks near the bottom in State K-12 per-pupil expenditures, charter "schools" are raiding what little is left, and pro-business interests miss no opportunity to bash and demonize teachers in order to grease the transfer of money to corporations. Financing roads on the backs of children is just another step in what would have been an unbelieveable "race to the bottom" just a few years ago, but which is now our reality.
Matt
Tue, 05/21/2013 - 3:32pm
Adding to Michigan's already absurd sales tax system is a really dumb idea. We already have a situation where if you play golf, have cosmetic surgery, buy a T-bone steak, a 100lb chocolate bar or have your car detailed - NO TAX! But buy shoes or a coat for your kid, dog food, or a tomato plant - Whack! Further and as a retailer I really love it when my state government likes to help my online competitors become even more competitive! (And the idea of trying to make me tax collector for every other crappy state and local sales tax system is a rubbish one also!) The solution for Michigan is to tax every In- state purchase (yes food and most or all services) at a much lower rate (maybe 4% or less?), set our gas taxes at a comparable level to other surrounding states and let all the taxes raised on on gas go to where they should, the roads!
Bri
Sun, 10/06/2013 - 10:11am
Tolls won't work because tolls only can be placed on freeways so the fees will only apply to our freeways and not the other roads. That covers only 1% of the problem. Why not use toll roads?" Below are seven reasons we do not use toll roads in Michigan. 1.Only freeways can be made toll roads. 2.Typically, tolls collected on toll roads are used to maintain the toll roads, not other roads. 3.Freeways represent 1 percent of Michigan's public road system. If all Michigan freeways became toll roads, 99 percent of Michigan's public road system would remain underfunded. 4.States with toll roads, such as Ohio and Pennsylvania, have a higher gas tax than Michigan to maintain their other roads. 5.Toll roads are especially effective for states with high pass-through traffic. Michigan is a peninsular state, with little pass-through traffic. 6.To avoid tolls, some motorists would drive on local roads, increasing the burden on those roads. 7.Retrofitting existing freeways to be toll roads could be expensive Increase gas tax and especially increase diesel tax. Some counties have road mileages that have improved their roads. This might be an option we might have to consider.
Bri
Sun, 10/06/2013 - 10:18am
Sorry, I meant to post Road Millage.