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Original article URL: http://bridgemi.com/2013/02/road-repair-enjoys-bipartisan-support/

Economy & competitive position/Public sector

Road repair enjoys bipartisan support

On Michigan’s Right to Work law, labor activist Mark Schauer and business advocate Rich Studley could not have sought more different results.

But when it comes to working on Michigan’s crumbling roads — an issue that’s arisen in Lansing nearly as frequently as winter potholes — the two have an identical goal.

Schauer, a former Democratic congressman and potential 2014 gubernatorial candidate, and Studley, the head of the Michigan Chamber of Commerce, are together in a broad coalition that is pushing for increased funding for Michigan roads.

“Nobody is happy with the condition of roads and infrastructure, the unemployment rate that lingers in our state,” said Schauer, business development representative with the Michigan Laborers-Employers Cooperation & Education Trust and a member of Michigan Laborers Local 355 in West Michigan. “We’re at the table together, trying to solve it.”

Studley, president of the chamber, said transportation investment in Michigan has historically “been a bipartisan issue and an issue where business and labor have worked together. It’s a new year, it’s a new legislative session … it is a good opportunity for lawmakers on both sides of the aisle, in both houses … to do something positive.”

Whether a message of economic and public benefits helps overcome legislative resistance to raising taxes and the lingering political resentments of last December’s Right to Work battle remains to be seen.

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“You’ve got a lot of the most powerful interest groups in Michigan, coming together and urging a solution, and there really is no organized opposition to it. But politicians will take polls, they will find out at Rotary meetings, that there’s a lot of animosity to any increase in tax,” said Craig Ruff, senior policy fellow at Public Sector Consultants, a nonpartisan public-policy Lansing research firm.

How to get $1 billion-plus for roads?

Gov. Rick Snyder outlined in his January State of the State address a concept for $1.2 billion more annually to fix roads. The administration said this would add up to an average $120 more per vehicle by shifting from Michigan’s per-gallon 19-cent gasoline tax and 15-cent diesel tax to a percentage tax at the wholesale level, and increasing vehicle registration fees. He also called for allowing optional local or regional registration fees.

Snyder told the Detroit News Wednesday that he wants to level the fuel levy between gasoline and diesel and that his call for $1.2 billion in additional road money would be split between $700 million from the shift to a wholesale fuel tax and $500 million from higher registration fees. The governor is expected to give more details at his formal budget presentation in Lansing at 11 a.m. today.

Having $1.2 billion in additional funds for transportation could provide a variety of fixes to about 2,600 additional lane miles each year throughout Michigan, between state and local road systems, the Michigan Department of Transportation says. That’s about 2.7 times the amount of road preservation currently planned in MDOT’s five-year state highway road program. (Lane miles are one mile of one lane of highway, per direction.)

Legislation filed by Sen. Roger Kahn, R-Saginaw Township and chairman of the Senate Appropriations Committee, however, would raise $1.6 billion, though the methods would follow the concept outlined by Snyder: a higher state registration fee and a switch to a wholesale tax on fuel, eliminating the current per-gallon levy. (The legislation does not include a local registration fee option.)

Either way, MDOT says the additional revenue would enable it to do more long-term fixes to roads and pavements would stay in good shape for a longer period of time.

Other benefits: An estimated 12,000 jobs from the additional road spending, safer driving conditions and reduced damage to vehicles. Family cars see an average of nearly $400 in repairs per year attributable to poor roads – the highest among neighboring Great Lakes states, according to data compiled by MDOT.

Kahn’s funding approach has two central aspects. One is an approximate 80 percent increase in vehicle registration fees that would generate about $650 million, coupled with changing the gasoline tax to a percentage tax at the wholesale level and generating from that around $950 million in revenue.

The percentage tax rate would be the same for gasoline and diesel and would initially equate to an 18-cent increase per gallon for gasoline, compared with current levels, and 22-cent increase for diesel. Increases or decreases in the tax rate would be limited to one cent per year.

The Kahn proposal comes with a twist: a choice.

A measure tied to the other changes would put before voters statewide the option of a 2-cent increase in Michigan’s 6-cent sales tax, with resulting revenue dedicated to transportation funding. If voters approved that option, Michigan’s taxes on gasoline and diesel would be eliminated and registration fees would return largely to their current levels, Kahn said.

The Snyder administration hasn’t specified a tax amount it wants out of the Legislature, nor how much new revenue might come from the wholesale tax and how much would come from registration fees.

Stability is goal in tax shift

The idea behind going to a percentage-based tax, rather than a per-gallon tax, is to produce a more stable source of funding. Gas tax revenues have declined as people have driven less and purchased more fuel-efficient vehicles, hybrids and electrics, while at the same time road-construction costs have risen.

State gasoline and diesel taxes produce about $946 million annually and make up about a third of Michigan’s total $2.8 billion road and bridge funding pie. State registration fees produce $876 million, and federal funds provide $1 billion. This year only, there’s an additional $100 million in state funds, to match federal money.

MDOT Director Kirk Steudle couldn’t say how the size of pie slices might change.

“What the governor outlined is that in order to maintain what we have, each vehicle needs a user fee of an additional $120,” he said. “I think when the sausage gets done here, there’s going to be a mix.”

Compared with Great Lakes states Illinois, Indiana, Minnesota, Ohio and Wisconsin, Michigan’s 19 cent gasoline tax is among the lowest. Indiana’s 18-cent levy is at the bottom, followed by 19 cents in Michigan and Illinois, 28 cents in Ohio, 28.5 cents in Minnesota and 30.9 cents in Wisconsin, according to MDOT data.

An analysis by the nonpartisan Citizens Research Council of Michigan last year noted that if Michigan’s current 19-cent levy were adjusted for inflation, it would be about 27 cents per gallon now.

In diesel taxes, Michigan is at the bottom among the six states, with its 15-cent level comparing to 16 cents in Indiana, 21.5 cents in Illinois, 28 cents in Ohio, 28.5 cents in Minnesota and 30.9 cents in Wisconsin.

Michigan’s registration fees are also lower than several of those Great Lakes states, according to an MDOT sampling.

Navigating the political map

But increasing road revenue won’t be an easy sell. And it hasn’t been for years.

“The state has a whole lot of taxpayers who feel they’re overtaxed and that there’s a lot of waste and inefficiency … it’s just not easy to raise a tax for anything,” said Public Sector’s Ruff. “I do think this, that roads are different in the sense that there’s more than likely a keener appetite for a user tax if the public believes that the roads are in such disrepair that they have to have more money” put toward them.

Thus the pitch – “save money, save lives, just fix the roads” – of a $500,000 to $600,000 advertising campaign from the Michigan Transportation Team, said Mike Nystrom, co-chair of the 50-plus-member group of business, labor, government, and other interests that hope to convince lawmakers to act. He is also executive vice president of the Michigan Infrastructure & Transportation Association.

“It’s definitely an uphill battle,” Nystrom said, of resistance to tax increases. “But in the end, doing nothing is not an option. So we’re going to have to plow through the political challenge before us and decide that we’re going to find a solution that helps to move Michigan forward.”

Michigan State University professor of economics Ken Boyer said, “It is not just in Michigan that there is strong opposition to raising the fees for either owning a car or for driving it a mile. The standard explanation is that drivers do not understand how roads are financed or are cynical that increases in revenues for roads will improve their driving experience. But I do think that we should take seriously another possibility – that people are satisfied with roads as they are now and do not see an advantage to making them better.”

The solutions that surfaced in January, found disfavor with House Democrats. House Minority Leader Tim Greimel, D-Auburn Hills, said an increased sales tax “disproportionately affects middle class and working families because they spend a higher portion of their income on purchasing goods” as compared with wealthier individuals, and he said there would be similar impact from higher fuels tax and registration fees.

“Obviously, our roads are in tough shape and it’s important to find a solution to address the problem. But it’s got to be the right solution,” Greimel said. “We should not rush to do something if it doesn’t make sense for Michigan’s families. Any funding solution has to be fair and equitable in terms of who bears the financial burden, and any solution needs to be sustainable.”

Interviewed in late January, Greimel said his caucus is looking at options, but had not yet formulated a position.

Democratic votes are going to be needed to support increased fees or taxes “because there are going to be Republicans from conservative areas who are going to get a lot of pushback from constituents” about raising any taxes, said Ruff. In this Legislature, Republicans control the House 59-51, and dominate the Senate, 26-11.

The chamber’s Studley will be among those messaging in the Capitol.

“I’ll be reminding lawmakers, whether they’re Democrats or Republican, that this is a critically important issue” to economic competitiveness and jobs, including those in lawmakers’ districts, Studley said.

He said on the Republican side of the aisle, the chamber will explain the governor’s “user fee” proposal as a conservative and traditional approach. “There’s a difference between a true user fee … and general taxing,” Studley said.

And, he said, “we’ll be reminding lawmakers on both sides of the aisle, that when transportation funding was increased in 1997, not a single lawmaker who voted to increase transportation funding, lost an election because of that issue.”

Amy Lane is a former reporter for Crain's Detroit Business, where she covered utilities, state government and state business for many years.

8 comments from Bridge readers.Add mine!

  1. CJ1954

    If Michigan wants good roads, perhaps they should start checking out the construction companies that have been hired in the past. I have lived in Grand Rapids since 1978 and it seems that they have been tearing up the same section of I-69 for years. The state/MDOT needs to reconsider things such as early completion bonuses and other incentives. The S-curve project had problems because the “engineers” or the construction crew miscalculated the depth of the road. Part of Grandville Avenue had to be lowered because the overpass was too low. Another botched job was the M6 and it’s overpasses. The builders skimped on the amount of rebar and all the overpasses had to be torn down and rebuilt. It seems that once the road gets “fixed” it’s not more than 2 years and the road crews are at it again, repairing something that should last for 20 years of not more.

    Until Michigan can demonstrate that the newly fixed roads are going to last more than 2 years, perhaps we the tax-payers are wise to look closer at Snyder’s wants and needs.

  2. Jeff

    Reduce the weight trucks are allowed to haul on the roads to the amounts Indiana and Ohio allow. Do not allow the legislators to take money from the roads. At one time, there was enough money in the highway fund to repave every state highway.

  3. Mike

    It is incorrect to compare registration fees and gasoline tax fees to neighboring states and indicating that Michigan is at the low end without also comparing the cost of auto insurance in a no-fault state and the fact that Michigan drivers in addition to higher insurance rates pay an additional $185 per vehicle per year to fund the catastrophic claims fund. If the governor wants to increase road funding, it should be a tradeoff, eliminate the catastrophic claims fund and its incredibly high cost to Michigan drivers.

  4. Paul

    Once again we have encountered evidence that the old fetish for socialistic roads leads to instability and a civilizational dead end. In spite of centuries of experimentation, it’s still true that most people don’t want them enough to pay for them voluntarily, not even when Amy Lane drops hints that BM and its friends know better. This is why governmental intervention, instead, has been used to develop Michigan’s vast network of unsustainability.

    It’s fair to conclude that Michigan’s socialistic roads will never be self-sustaining and will always require intimidation, looting, and fraud to contruct them and to maintain them. This is just what we would have told you 2,000 years ago in the SPQR, too. Nevertheless, a slew of Michigan’s reactionary suspects are agitating for repetition of mistakes.

    Still, let’s move on. Let go of the collectivist past. The sooner that we do so, the sooner we can start cleaning up the mess made by political parties, government, chambers of commerce, and Bridge Michigan. More people will live closer to nature and everyone but troublemakers like Schauer and Studley will be a lot happier afterwards. If, however, you just can’t bear to let go of the past, why not consider moving to China? It’s certain that you deserve Chairman Mao’s nationalistic paradise for the recycling of Fascism.

  5. John B. Czarnecki

    With all this high technology now in existence why don’t we levy a tax on the miles one drives. These fees are not fair to individuals that do not drive a lot of miles. When you go to the Secretary of states office the can check your odometer and see how may miles you drove over the previous year and then access you a fee for the miles driven. What you want to do is charge a little old lady that only drive 2000 miles a year the same fee that the that drives 50,000 miles a year. I though governor Snyder was all about fairness.

  6. Wendy

    CJ makes an excellent point, and John is not far behind regarding the elderly who still drive. $120 per vehicle is completely outragous when some people have more than one vehicle ( can only drive one at a time!). Maybe a much smaller fee per driver, with a senior discount, would be acceptable once it has been decided that better materials shall be used to repair the roads.

  7. dale westrick

    I attended conference a few years ago an still remember a comment a lady made that still holds true today. Quote I want it here I want it now and I don’t want to pay for it!!

  8. jean kozek

    There’s agreement that MI roads are in disrepair. There’s agreement that some private road contractors built poor quality roads. (How do private contractors get road contracts and who oversees those roads built?) In some cases roads need expansion with attention paid to blind spots caused by hills or curves. And, there seems to be agreement that taxpayers will resent tax increases to pay for them.

    Perhaps the voter resentment to pay additional road taxes is related to the observation that in Michigan businesses enjoyed a 83% cut in their tax obligations while Republican officials raised taxes on wage earners. The new road taxes would again take more income out of citizens’ pockets. Republicans, if improved roads are needed to improve business, why not require businesses to pay a larger portion of the costs?

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