Michigan has an annual funding gap of roughly $3.9 billion when it comes to money to maintain the state’s crumbling roads and bridges — even after record federal aid and state bonding is taken into account, according to a new study of the state’s infrastructure costs.
And the options for filling that gap are less than savory, with one option exceeding a tax increase proposal from Gov. Gretchen Whitmer that was soundly rejected four years ago.
The funding gap is based on new assessments that put Michigan’s transportation network costs higher than previously believed — between $9 billion and $16.7 billion annually to operate and maintain, with the upper end depending on the amount of deferred maintenance. The estimates are higher than those prepared by the Michigan Department of Transportation because the plan looked at road rebuilds that would last 50 years instead of a 20-year design life.
The study conducted by Lansing-based Public Sector Consultants was commissioned by the Michigan Infrastructure and Transportation Association, a trade group that represents road construction companies.
“I recognize that our model puts forward a number that is a much larger investment than previous reports but that shouldn’t surprise you,” said Maggie Pallone, vice president for Public Sector Consultants. “Our road system is aging and it needs work.”
Potholes on Oakland Avenue along the border of Detroit and Highland Park on Mar. 6, 2023.
Closing the revenue gap would cost between $285 and $535 annually for every adult in Michigan, the report said.
Groups present at a Tuesday press conference detailing the PSC report’s fidning — including MITA, the Michigan Chamber of Commerce, the County Road Association of Michigan, the Detroit Regional Chamber and the Michigan Municipal League — said they would be working with state leaders to develop a solution.
The press conference occured at the Michigan Chamber of Commerce’s Lansing headquarters, five blocks from the state Capitol where Whitmer was signing legislation with $1 billion in annual tax relief at the same time.
“The depth of the problem is large, but the cost of doing nothing is even higher,” said Jim Holcomb, president and CEO for the Michigan Chamber of Commerce. “We have to take action now.”
The policy analysts at PSC floated several possible solutions to close Michigan’s annual road-funding gap, one of which would go beyond Whitmer’s unpopular 45-cent per gallon gas tax increase proposal from 2019.
To eliminate the existing road funding deficit, Michigan’s motor fuel tax of 28.6 cents per gallon would need to be 39 cents to 74 cents per gallon higher, the report said.
Other options include a shift and increase of the motor fuel tax from per gallon to per dollar — which would increase tax revenue during periods of high gas prices — or a constitutional amendment to hike the state’s 6% sales tax to 8% or 9% and earmark the additional revenue for roads. In a May 2015 special election, Michigan voters resoundingly rejected a two-cent increase in the sales tax for roads at the ballot box.
A separate constitutional amendment could allow local communities to levy their own sales tax for local roads, or drivers could be taxed between 3 cents and 5 cents per mile traveled ― switching to a mileage-based mechanism, the report said.
The proposal for a larger dedicated funding stream comes as Michigan is juggling record high tax revenue and federal aid. Michigan in January had a roughly $9 billion surplus and, on Tuesday, Whitmer signed into law increases to the Earned Income Tax Credit and decreases in tax bills for retired Michiganians with pension income. Additionally, the state has awarded billions of dollars in incentives to corporations in recent months in order to lure big battery and electric vehicle developments to Michigan.
The group backing Tuesday’s report argued those priorities largely represented one-time revenue and couldn’t have been relied up on as a long-term funding stream for roads.
Michigan’s gas tax increased by seven cents per gallon in 2017 to roughly 26 cents per gallon under a 2015 road funding plan. But the added funds still fell far short of what experts have long said is needed to get a majority of roads in good condition. The motor fuel tax rose from 27.2 cents per gallon to 28.6 cents on Jan. 1 through an inflationary increase built into the 2015 road-funding law.
In 2019, newly elected Whitmer proposed a 45-cent gas tax increase that was eventually abandoned in favor of a $3.5 billion bonding model that would be repaid over the next 25 years. The Michigan Department of Transportation has said the 25-year cost of the bonds will be $6 billion when interest is factored in.
A vehicle drives through potholes Monday on Brush Street in Detroit past a mural called “A Portrait of Corey Teamer” by Ijania Cortez.
The proposed gas tax increase was widely unpopular and was eventually called an “extreme that won’t happen” by then-House Democratic Leader Christine Grieg of Farmington Hills.
Michigan is likely past the point where a single “silver bullet” funding solution will address all of the state’s road funding needs, said Brad Williams, vice president of government affairs at the Detroit Regional Chamber.
“If a 45-cent gas tax increase four years ago wasn’t palatable I can’t imagine a 74-cent gas tax increase is going to be anymore palatable,” Williams said. “We’re probably at the point where we have to find a mix of solutions to actually solve this problem.”
Even with the continued disbursement of that $3.5 billion in bonds and roughly $7.3 billion from the federal Infrastructure Investment and Jobs Act, Michigan falls short about $3.9 billion, according to the report.
The longer that gap goes unaddressed the more maintenance will be deferred and the more money, in the long run, will need to be spent to bring infrastructure back up to par.
“Michigan is faced with a funding crisis,” said Ed Noyola, chief deputy and legislative director for the County Road Association of Michigan. “We have discussed this for decades, literally decades in Lansing.
“If the situation isn’t addressed, it’s only going to get worse.”
This article originally appeared in The Detroit News. To read more, click here.