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Original article URL: http://bridgemi.com/2016/12/report-michigan-must-spend-billions-more-a-year-to-modernize-infrastructure/

Business Bridge

Report: Michigan must spend billions more a year to modernize infrastructure

Michigan devotes a smaller percentage of its spending to infrastructure needs than many other states, a state report says.

Michigan devotes a smaller percentage of its spending to infrastructure needs than many other states, a state report says.

LANSING — Michigan needs to come up with at least $4 billion more per year if the state is to close a gap in spending on its infrastructure needs, according to a report to be released today by a commission formed to study the issue.

The 21st Century Infrastructure Commission, appointed by Gov. Rick Snyder, concluded that the state would need to spend in excess of $60 billion more over 20 years just to fix existing infrastructure systems. (That would come to something over $3 billion a year, not $4 billion; a spokesman for the commission said $4 million more is needed in the first years but the amount might fluctuate in later years).

The commission and Snyder plan to release the full report at an event this morning in Dearborn.
In addition to the price tag, the report’s executive summary is also notable for what is not mentioned. Through seven pages of recommendations on updating roads, bridges and water systems, including three mentions of the need to modernize the Soo Locks, there is not a single reference to Flint. That city’s drinking water was poisoned as a result of government failures, and the resulting uproar was the impetus for evaluating the state’s overall infrastructure needs. The summary does make references to replacing aging water systems, however.

Among the state’s critical shortcomings related to infrastructure — including roads, drinking water, sewers and storm systems, energy transmission and broadband Internet — is the fact that it doesn’t have a statewide database that can keep track of numerous systems, nor does it coordinate planning well among various governmental agencies, according to an executive summary of the report released to Bridge and Crain’s.

There are infrastructure systems in the state that are essentially unknown, said S. Evan Weiner, the commission’s chairman and chief operating officer and executive vice president of Detroit-based Edw. C. Levy Co., a construction materials conglomerate that specializes in such areas as steel mill services and road construction.

Before infrastructure managers can develop solutions, he said, they need to have data at their fingertips — where infrastructure systems are located, what condition they’re in, how old they are.
“We put the facts out there,” said Weiner, who added that the commission developed more than 100 recommendations. “We went right to it and we said, ‘Here’s the problem. Here’s what it’ll cost to fix it.’

“We can’t be scared of a big number,” he added. “We’ve got to prioritize what we need.”

Snyder tasked the 27-member commission, which was announced in his State of the State address in January, with recommending policy solutions to fix Michigan’s crumbling infrastructure. Michigan ranked last in the nation for its infrastructure — a grade of D — on the American Society of Civil Engineers’ last state infrastructure report card in 2009.

This isn’t solely a Michigan problem, either. The Reston, Va.-based engineering group estimated that only 57 percent of the $3.3 trillion in infrastructure repairs needed nationwide by 2025 are funded.

Still, the report noted, Michigan devotes a smaller percentage of its overall spending on infrastructure needs than other states. Citing U.S. Census data, the report summary said Michigan spends 6.4 percent of total expenditures on state and local capital spending. The U.S. average is 10.2 percent, the report said.

The commission’s report suggests the need is large, though Weiner said it’s not insurmountable. Many of the state’s 1,390 community water systems are at least 50 years old, according to the report; it said 11 million jobs would be lost across the U.S. if the Soo Locks went down for six months, 1,200 bridges are structurally deficient and nearly 500,000 households don’t have broadband Internet access.

The group recommended:

  • Creating an asset management pilot database in a region of the state to collect and report data on the condition of infrastructure systems.
  • Forming a Michigan Infrastructure Council, a statewide clearinghouse for data on infrastructure systems. It would be responsible for maintaining the asset management database, coming up with a long-term strategy and priorities and finding funding.
  • Finding a sustainable funding model that could rely on a mix of user fees, private-sector investment and government dollars to pay for repairs.
  • Using updated technology to create efficient infrastructure systems and aid planning.
  • Replacing aging water systems, from drinking water to sewers, while investing in environmentally sustainable ways to manage storm water.
  • Building a new lock in Sault Ste. Marie within the Soo Locks system.
  • Investing in cybersecurity and intelligent vehicle systems.

“Our state’s infrastructure challenges are serious and wide-ranging, and we need to act with urgency to improve our infrastructure systems and make Michigan an even better place to live,” Gov. Rick Snyder said in a statement.

“Safe and reliable infrastructure is critically important to the health and wellbeing of the people of Michigan and will help support our growing economy in the future. Our state is poised to be a global leader in emerging technologies as we move forward in the 21st century, so it is essential that we have the infrastructure to match our goals.”

Snyder proposed depositing $165 million into a new state infrastructure fund this year; the Legislature opted to contribute $5 million during this year’s budget process.

Michigan’s general fund will continue to face competing spending pressures, especially once a road-funding package adopted last year is fully funded in 2021, Weiner said. That plan requires half of its $1.2 billion price tag to come from existing spending.

As the economy improves, it makes sense to use some general fund money as seed funding for an infrastructure bank or to secure matching funds if the state can afford to do so, Weiner said. The commission did not try to suggest how much money would be needed or how it should be spent, he added, preferring to leave that decision to policymakers.

“We really need to have user-pay principles, and we really need to have leverage with the low-interest environment that we have,” Weiner said. “We really need to find federal (and) other mechanisms and means to reach the people that are willing to pay for these additional services.”

Lindsay VanHulle covers business and Lansing for both Bridge and Crain's Detroit Business.

24 comments from Bridge readers.Add mine!

  1. sammelvin

    from the Michigan lottery, they gasoline tax .the unemployment fund,bottle returnfund . the tourist fund.salestax etc etcThe fund from the Census tax coming in 2020..registertion fee from citizen moving into the State of michigan.Student from out of State fund, etc etc and from pie backing contest .from apple pie to cream pie contest in each legislators country board.etcetc a charge to have your picture taken with your State rep. contest for the older tree, church, county house, hotel .street, well buy now you get the picture..Or the best idea since the Citizen Voted Legalize mairhjuana and collect the tax like coloradan does, millions a months just waiting..

  2. Lois

    How about if we start by having the lawmakers involved in lawsuits about the Flint water crisis pay their own legal fees, instead of Michigan taxpayers? Lawmakers tried to hide the truth, and when they got caught expect state to pay their legal fees….just saying….

    1. Bernadette

      Thank you Lois, my thoughts precisely. Bridge Magazine and NPR did a great investigative report on the Flint Water Crisis, which points to all of the corruption and lying that has occurred with this administration that made a bad problem worse. The State of MI government is being investigated at all levels of government, shows up in university classes on how not to handle this type of crisis and has been the topic of several documentaries.

      The whole problem started with a penny wise, pound foolish decision made by an emergency manager to save money in the short term, supported by the State of MI personnel who were not only inexperienced but were also arrogant liars. The initial problem was the lack of corrosion control in the water system(lack of knowledge, inexperienced people?), but the coverup and lack of accountability by senior administration is the real issue.

      \Every lead water line must be replaced in Flint before the problem will be solved, and every time it comes to funding this initiative, there is push back by state legislators. This administration has famously denied, ignored, scapegoated, and blamed others for their incompetence and have still not been held accountable.

      A competent pediatrician, a concerned mom whose son was poisoned by lead, an Virginia professor and his students gave all the proof anyone needed and they were denigrated by this administration, when they were telling the truth.

      One of the most vulnerable cities in Michigan has been allowed to be treated this way and still no accountability. This is pathetic.

      1. Barry Visel

        I believe I just read the WVa prof said Flint may not have to replace all those lines.

      2. Keith

        The problem in Michigan began when term limits were voted in by Michigan residents . No representative in Lansing serving their second term cares what the voters in Michigan think about their actions . There is no incentive for them to fix the problems they create . The attitude of those lame duck state representatives is , Let the next guy worry about that problem . I need to curry favor with big business so I can get a big payday when I leave office . We will not see responsible government in Lansing as long as term limits is is place . The election to office in Lansing has turned into a way to increase one’s future income not represent the citizens of Michigan .

        1. Bernadette

          I am beginning to agree with that. Like any other profession, experience gives you perspective.

        2. Kevin Grand

          Go look at Washington DC as “Exhibit A” on the problem with that line of reasoning.

          Exactly how many problems have they fixed with family political dynasties at the helm (i.e. Levin, Dingell, etc.)?

          1. William C Plumpe

            The real issue is that neither term limits nor unfettered representation offer a perfect solution.
            Term limits make long careers in government very difficult but also make it that the Legislature
            becomes a revolving door and there are always rookies coming in who need to learn the ropes
            and a lot of insight and experience is lost and needs to be rebuilt.
            Term limits do ensure that the office will not be abused or suffer an entrenched Legislator
            but that is only a bad thing if the Legislator is corrupt and not all are.
            Besides I think term limits is the lazy person’s solution—if they’re going to be in office
            a limited time I don’t have to worry so much about what they do and so there is
            less need for me to get involved. Do you really think that is a good attitude?

      3. Matt

        Sorry Bernadette, but the Flint water problem didn’t start with the emergency manager pinching pennies, quite the opposite. The job of the EM was to balance revenues and expenses through increases and decreases and leave after this is accomplished. No where in this job description is pushing through and over seeing large capital improvement projects.

        1. William C Plumpe

          True Matt but the EM did fail in the fact that he got too “bottom line” and pinched pennies too tight and cut corners too close to save money and caused one of the greatest public health disasters in Michigan history. The bottom line is important but always must be balanced against the needs of people. That is why government is radically different than business and why a government can’t be run exactly like a business because the needs of the citizens always take precedence over the bottom line. Or at least in my world they do.

          1. Matt

            William and Bernadette, Again if the problem was all about bottom line penny pinching why did the EM agree to make the huge investment to get Flint away from the Detroit water system? Fear of spending money? Now granted the execution was botched after the investment was made but none the less Flint was a case study of mission creep by the EM

        2. Bernadette

          Sorry Matt, it always comes down to the bottom line and the EM was where the buck stopped at that time.

  3. Jack

    If state and federal governments were to actually spend real money to maintain our infrastructure, then there wouldn’t be any money to give back to one-percenters in tax cuts. People gotta pay for the privilege of being owned.

  4. BobP

    Do not forget Livingston County where massive sewer construction stands empty.

    About 15 years ago, during the dot.com boom and easy money, huge capacity was built that is sitting idle.

    Guess who is paying for all that idle capacity?

  5. Reed

    If people were held personally liable for actions taken while executing their office, a person that couldn’t afford the legal fees would have to back down whenever they were threatened with legal action. In this case it would be a gracious gesture because Snyder can in fact afford it, but the precedent is there for a reason. Also $ 3 million in legal fees in a single year is a drop in the bucket when compared to $3 Billion a year every year. This is going to take bold leadership and some tough reprioritization. Where is that going to come from? Haven’t seen that in Lansing since Bill Milliken and Soapy Williams.

  6. Barry Visel

    Is there a link to the commissions report?

    From this article I gather the commission simply restated/updated numbers regarding the apparent severity of the problem…something we’ve already been told in various reporting. Was there no attempt to assign responsibility (private, local, state, Feds)? What did this commission accomplish that we already didn’t know?

    And what, for crying out loud, will an “Infrastructure Council” cost us? Don’t we already pay legislators and bureaucrats to do this?

    Finally. If we really do need more money, simply start collecting what we don’t collect now…over $30 Billion each year in tax expenditures.

    Maybe we do need to hire a rocket scientist!…(paid for by eliminating MDOT, MDEQ, and any other State agency involved with infrastructure that this report apparently says haven’t done their jobs).

    PS, I’m glad the report didn’t mention Flint, because then it would have to mention every other specific problem, just to be fair.

    PSS, OK, my comments sound somewhat like a rant, but consider when it comes to the bottom line I, and all the other Michiganders who pay taxes and user fees, will end up paying for this. I want more for my money than it appears this report produced.

    Go Broncos!

    1. Kevin Grand

      Mr. Visel,

      Ask and ye shall receive.

      Although, I am a little surprised that Ms. VanHulle or anyone from The Bridge had not done this yet.

    2. Jim H

      Exactly! Just what we need – another commission/committee/whatever which will have to staff up, and then issue another report! Certain infrastructure elements are specifically state responsibilities. The state should deal with those. Other elements are county, city or township. They should deal with those! The states role in this is to help with financing (revenue sharing) – not micro-managing.

  7. Mary Peterson

    Here come the toll roads. This is what happens when people do not want to pay taxes. There are some things that government must do.
    If we have toll roads no free passes legislators; pay your way like the rest of us .

  8. William C Plumpe

    I just returned from a press conference the Governor gave in regards to the 21st Century Infrastructure Commission report.
    The report is simply an outline and needs a lot of fleshing out particularly in regards to where the money will come from.
    In general the report says infrastructure problems in Michigan and around the United States are immense—$4 billion a year over the next twenty years for Michigan alone—a total of $80 billion—and that funding sources include the State of Michigan, Federal government, local funding, user fees and private investment.
    The positive and innovative things the report does is it tries to set up a Statewide asset management system that would track the useful life and condition of infrastructure assets like roads, bridges, water delivery systems and broadband access and create engineering schedules over the next 20—30 years to help identify infrastructure assets that need replacement. The report also wants to do more coordination between the State and local government entities to develop and ongoing strategy to repair and replace infrastructure assets on a regular basis while working to help provide funding to local units to pay for infrastructure improvements and upgrades.
    The beginning of a very ambitious plan but being a retired finance person I first and foremost want to know where the money is going to come from and I want the funding dedicated to nothing but infrastructure improvement as defined above while current levels of funding for infrastructure improvement that the State has control over are not in any way redirected, reduced or used other than for specific program infrastructure improvements. In other words all the program funding would be in addition to current funding and program funding would be legally restricted to infrastructure improvement as defined by the Commission.
    In a nutshell my plan is to design and put into operation a Statewide long term funding vehicle that raises money for no other legal purpose other than specific infrastructure improvements as defined by the Commission.
    I am not adverse to paying more for infrastructure improvements because I’m a firm believer that you get what you pay for and the need is great. What I want to be legally required is that current infrastructure improvement funds are not reduced and that any funding raised for infrastructure improvements is spent solely on infrastructure improvements and nothing else. And that Michigan gets a long term infrastructure repair/replacement schedule that is put into operation and monitored on a regular basis for the next 20-30 years.
    Are you listening Governor? I commented at the press conference and noted I was a retired finance person and you noted you were a finance person too—a CPA in fact. If you’d like to hear more of my ideas e mail me at: charleyzencat@hotmail.com and I’ll share more ideas.

    1. Keih

      I am all for paying more strictly for infrastructure . My problem with most of the plans is that it leaves out those people who do not drive or own cars and shifts the cost from business’s to working tax payer . Businesses mad the decision decades ago to switch their shipping from rail roads to over the trucking to speed up shipping and reduce warehousing needs . This means instead of their product sitting in a warehouse at their cost their product is scattered across America’s roads in heavily laden trucks that damage the roads . I believe if these businesses are saving so much money by switching to trucking over railroads then they should pay a larger portion of the road and bridge upkeep . Abandoning railroads was a wrong headed idea just like the cities abandoning trolley service in favor of the personal automobile .
      I also disagree that those who own and drive cares should carry the brunt of the costs . Every person living in Michigan depends in some way on the state and local roads . All people living and working in Michigan should contribute to their upkeep in some form . I understand that the services these people use pay some form of road up keep tax or fee . I also pay those taxes and fees but I pay a much higher cost for the maintenance of federal highways that I use only on average of 20% of my yearly driving . Businesses should not be exempt from their responsibility for highway maintenance .

  9. Michaelpat

    Hmmm…I seen to remember a two billion $ cut to big business and a tax added to pensions by this current administration. What happened to that trickle down money that was projected to result from the business tax cut?

  10. Jim Fuscaldo

    Regrettably the “brain trust”in Lansing is long on rhetoric but short on problem solving ideas.That being said consider the following. In the financial world leveraging of assets is a common practice to raise capital. Capital is what the state needs to fix the roads and other infrastructure renovations such as water and waste water treatment facilities. Let’s focus on roads as a problem solving exercise.

    The state has several significant assets in Interstates 94 and 69 that are part of the NAFTA superhighway. This is a planned project for MDOT. Interstate 96 is another significant asset. The legislature must evaluate leasing these assets to a Public Private Partnership (PPP) to raise capital to fund a permanent and protected “capital fund” for necessary road repairs throughout the state. We need leaders in Lansing with experience in creating complex financial partnerships to propose legislation permitting the use of PPP’s in Michigan.

    Twenty-eight states and Puerto Rico have enacted legislation to allow PPP’s. Michigan has not. In 2009 House Bill 4961 was introduced to authorize MDOT to enter into PPP’s. It failed for good reason. It was built on the old model of pledging future toll revenue against debt secured by bonds. Lansing must divorce itself from the outmoded model that taxation and bond debt are the only way to fund government transportation responsibilities and other infrastructure costs.

    There should be legislative efforts to call for a thorough unbiased financial and economic evaluation conducted by independent analysts of road PPP’s implemented in other states and foreign countries. This analysis should include a comparative review of all current models of PPP’s. The Pew Center on the States has identified ten different models.

    The analysts should not be an extension of MDOT or the Governor’s administration. Why? This leads to administrative bias and “sealed container thinking.” A reason why Pennsylvania’s proposed PPP failed. The National Conference of State Legislatures has prepared a toolkit for state legislatures on PPP’s for Transportation. The Pew Center on the States has prepared an excellent “Do’s and Don’t’s” analysis for PPP’s based on a critical analysis of Pennsylvania’s failed efforts for a transportation PPP.

    The newly elected legislators and their staffs should review this material to understand the substantive benefits of PPP’s. They should validate their perceived negative aspects of PPP’s with facts based on analysis, not perceptions, rumors or heresay. If a legislator, or a member of the administration or media can’t explain the legal and financial framework of the various PPP models, their criticism is “per se” illegitimate.

    Michigan should look to Indiana that raised 3.8 billion dollars with a PPP that covers 156.9 miles. Michigan’s road funding will not be resolved until we have creative financial leadership in Lansing. It will not be resolved by raising and / or shifting tax revenue or by dealing for votes to increase taxes by sharing the tax bounty with special interest groups that are unrelated to transportation or infrastructure needs, such as more money to fund failing schools in Michigan’s metro areas.

    The use of creative financing based on private investment alleviates the need for federal funding. As a result “prevailing wage laws” required by the Davis Bacon Act can be avoided. Tolls and fees collected by a PPP is taxable income to the private investors thereby generating available tax revenue to the state. Repeal of Michigan’s “prevailing wage law” would be beneficial in reducing the cost of road construction. Michigan’s neighbors, Wisconsin, Illinois and Indiana, have implemented PPP legislation effectively.

    A number of cities such as Chicago Heights, Illinois; the District of Columbia; Edson and Bayonne, New Jersey, and Seattle, Washington have use PPP’s for Water-Waste Water treatment facilities (A possible solution to the Flint water crisis). Progressive modernists are proselytizing and campaigning for rail service to connect Northern Michigan with key down state cities. The use of PPP’s is a means to facilitate that service. Compel them to place substance behind their rhetoric for rail service by seeking private capital investment based on economic parameters.

    It is time to engage in creative thinking. Outside the box of the usual legislative and administrative comfort zones. The difference between government and private enterprise is this. Government always looks for reasons why a project can’t be done without raising taxes. Private enterprise always looks for solutions on how a project can be done to generate income and growth. Other states and cities have documented success utilizing PPP’s for roads and other infrastructure needs. What’s Michigan’s problem? Where are the wizards of smart? Just asking.

    1. William C Plumpe

      Wonderful in theory but very difficult to achieve in reality.
      And success in business DOES NOT necessarily translate to success in government
      because business and government ARE NOT the same and in fact are
      very different in some key respects.
      Since Trump will soon be President he’ll probably buy all
      the Federal interstates, turn them into toll roads run by a company
      he or one of his cronies secretly owns and make billions.
      Chris Christie could advise Trump on toll roads and bridges.
      Vladimir Putin will be a silent partner—very silent.
      That’s how business operates—only caring for the bottom line
      and profit with no concept of public service.
      Is that the “change” you really want?
      If so you can count me out.

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