Michigan is facing a $3.9 billion annual funding shortfall to fix roads and bridges in the state, according to a new report.
Public Sector Consultants (PSC) released the Michigan Transportation Infrastructure Needs and Funding Solutions report on Tuesday. It found that Michigan needs a sustainable funding plan to dedicate the resources to improve and maintain roads and bridges.
“Michigan faces an annual funding shortfall of $3.9 billion, and that is even with the funding from the governor’s bonding program and the federal infrastructure plan dollars included. There will be a day coming in the not-too-distant future when those funds will dry up, but our need will only continue to grow,” said Rob Coppersmith, Executive Vice President of the Michigan Infrastructure & Transportation Association (MITA)
The report addresses the overall cost of Michigan’s road system, future funding needs, current road funding estimates, revenue sources, options to raise additional revenue and other topics.
The report found that Michigan’s transportation system needs are higher than previous estimates. It also found that spending money to maintain and rehabilitate roads is more cost-effective than waiting until reconstruction is the only option.
According to PSC, MDOT assessments of road conditions in Michigan show that 33% of all federal-aid roads and 45% of all non-federal-aid roads are in poor condition and should be reconstructed in the next two years. Reconstruction is believed to be five to eight times more expensive per lane mile than preventative maintenance.
While steps have been taken to increase revenue, the report found that none of those increased investments have been enough to close the funding gap.
Funding options listed in the report
The report outlines five funding options for closing the funding gap.
- A per-gallon motor fuel tax increase: “Option one would require a motor fuel tax increase between $0.39 to $0.74 per gallon to meet the funding gap. The tax rate increase ranges from $0.39 per gallon, which meets MDOT and CRA estimates, to $0.74 to meet PSC’s modeled estimates for different pavement life cycle maintenance levels.”
- A per-dollar motor fuel tax increase: “Option two would also increase the motor fuel tax and assess the motor fuel tax on a per-dollar (instead of per gallon) basis. This increases revenue during times of higher gas prices, but similarly decreases revenue during price downturns. Other states have moved away from this approach due to its volatility.”
- Sales tax increase of 2 to 3 percentage points: “Option three would increase the sales tax and dedicate the increase to transportation funding. It would require a sales tax increase of 2 to 3 percentage points dedicated to transportation to meet the funding gap. This option would require an amendment to the State of Michigan constitution.”
- Allow local communities to charge their own sales tax: “Option four would allow local communities to pursue sales tax increases. While local communities are currently prohibited from charging their own sales tax, this could be changed through a constitutional amendment and could provide local government units of government a revenue source for local roads. This option is similar to option three.”
- Tax people for miles driven on Michigan roads: “Option five would generate revenue based on the miles traveled on Michigan roads; a tax between$0.03 and $0.05 per mile traveled would be necessary to meet the funding gap. Different states and countries have explored this approach in different ways, and the federal government is currently providing funding to pilot this model.”
Michigan Transportation Infrastructure Needs and Funding Solutions report
A PDF version of PSC’s Michigan Transportation Infrastructure Needs and Funding Solutions report is available below.
(Can’t see the report? Click here.)