Road improvement in Snyder's sights
Tuesday, January 15, 2013
From The Detroit News:
Lansing — As Gov. Rick Snyder prepares to unveil a plan to fix Michigan's crumbling roads in his State of the State address Wednesday, a multibillion dollar question looms: How to pay for it?
The state gasoline tax hasn't gone up in 15 years and the revenues it generated have been on a 10-year decline.
Some experts said Snyder could latch onto a handful of revenue-generating proposals floating around Lansing that could help plug a $1.6 billion annual shortfall needed to keep state, county and local roads in good shape. An estimated $3 billion in total is needed annually for roads.
Among the proposals is a lawmaker-approved plan to raise money; putting a sales tax increase to the voters; raising the per-vehicle registration fee; converting to a percentage gasoline tax instead of a per-gallon tax, or cutting spending in state government and earmarking the savings for road repair.
The Legislature could raise new gas taxes and user fees and then place an alternative plan on a statewide ballot for voters to choose. That's how lawmakers implemented property tax relief in 1993-94 before voters approved Proposal A, shifting public school funding from local property taxes to a combination of state-administered property and sales taxes.
"The idea of a ballot proposal is only acceptable if the Legislature has (first) done its job and taken action," said Rich Studley, president and CEO of the Michigan Chamber of Commerce, which supports charging users to fund road improvements.
But getting the tax-adverse Republican-controlled Legislature, or even Democrats upset by the recent passage of right-to-work legislation, to raise taxes could prove difficult.
"We can't go to our taxpayers and ask them to pay more until they're comfortable, and they know that we have exhausted all other options," said House Speaker Jase Bolger, R-Marshall.
State Sen. Roger Kahn, R-Saginaw, is drafting legislation that would ask voters to approve in May a 1-cent sales tax increase and earmark the new money for roads and add a modest increase to vehicle registration fees.
Business groups and the transportation industry have long supported replacing the 19-cents-a-gallon gasoline tax and 15-cents tax on diesel fuel, with a percentage tax of up to 12 percent of the wholesale price. The gas tax was last increased 4 cents in 1997.
Snyder previously supported an unspecified wholesale percentage tax on gas. He also has supported increasing motor vehicle registration fees. If the 19-cents excise tax was eliminated, a 12-percent gas tax would generate 37 cents per gallon at the $3.28 average rate this week statewide, according to AAA Michigan.
Snyder also suggested allowing counties or municipal authorities to levy up to $40 more per vehicle to generate another $300 million for local roads.
"We need something that's allowed to grow," said Mike Nystrom, executive vice president of the Michigan Infrastructure Transportation Association.
Another option, Kahn said, is to ask voters to add 2 cents to the 6-cents sales tax and earmark the money for roads and eliminate the gas and diesel taxes.
But transportation and business leaders are wary of Kahn's proposal since sales taxes are a major source of operating revenue for public schools, municipalities and counties.
"If you start relying so heavily on one more source of tax to fund so much government, that can be a risk, too," said John Niemela, director of the County Road Association of Michigan, which represents road commissions.
Michigan would not be alone in pursuing a dedicated sales tax for roads. Last Tuesday, Republican Virginia Gov. Bob McDonnell proposed eliminating his state's gasoline tax in favor of a higher sales tax and user fees to generate $3.1 billion in revenue.
Transportation industry and business leaders say Snyder and the Legislature should not punt the issue to voters in a future election where passage of a constitutional amendment or tax hike is less than certain.
"The longer we put off the solution, the bigger the problem grows," Nystrom said.
Not enough revenue
Three state transportation task forces have studied road funding over the past five years and basically arrived at the same conclusion: The state isn't collecting enough to keep up with repairs.
Kahn's group and a House task force determined the cost balloons by $100 million annually as maintenance on state highways, county roads and city streets is further delayed.
Snyder has said in Wednesday's address he will revisit transportation funding plans shelved last year, but it's unclear whether he'll endorse a tax hike, higher vehicle registration fees or some combination.
"We believe (Kahn's) reached the same conclusion as the governor and his administration, which is that we can no longer wait and must address and fix this problem now to save money, build for the future and help continue our state's economic comeback," Snyder spokeswoman Sara Wurfel said.
She said the governor's office is not commenting on any transportation proposals that Snyder will detail in his State of the State address, Wurfel said.
In October 2011, Snyder suggested increasing motor vehicle fees $120 per year to raise $1 billion annually for roads, but Kahn said that price tag was steep for low-income motorists. Snyder later backed a plan to increase vehicle fees an average of $60 per year, but the proposed fee hike went nowhere in the Legislature during the 2012 election year.
The state's 6 percent sales tax is already added to the cost of gasoline, but the constitution requires the money be earmarked almost entirely for schools and municipal revenue-sharing.
Kahn said the governor's office has shown interest in his bills, which could be introduced as early as Thursday.
Overhaul may be tough sell
Selling a transportation funding overhaul to a term-limited Legislature could prove difficult for Snyder, who has enjoyed legislative successes with the GOP majority.
Studley said Snyder needs to emphasize the economic benefits of better roads and that Ohio, Indiana and Illinois have all taken steps in recent years to shore up their road funding sources.
The governor also is likely to focus on cutting administrative costs from the hundreds of independent road and transit agencies in the state, Kahn said.
Bolger said lawmakers must ensure transportation dollars are being spent wisely and determine whether other areas of state government could be cut to redirect funding to roads.
But Kahn and others doubt there's much waste left to be cut at the Michigan Department of Transportation or county road commissions after a decade of cutbacks.
Fuel taxes were down $137 million in 2012 from their peak level of $1.08 billion in 2002, according to MDOT.
"If you wave the magic wand and had every 't' crossed and 'i' dotted, you still need $1.5 billion more a year," Kahn said.