Michigan’s traffic volumes are at an all-time low, something experts say could present even more funding challenges when it comes to fixing roads.
The state saw traffic volumes decline as much as 60 percent during its strict shutdown in mid-March through late May. Fewer people driving meant fewer people buying gas, and fuel taxes are a big component of how road repairs are funded in Michigan.
“At a time when Michigan was already struggling to fund road repairs after decades of under-investment in infrastructure, this will present more challenges,” Michigan’s Department of Transportation Communications Director Jeff Cranson said.
The Department of Treasury’s Office of Revenue and Tax Analysis estimates an 8.5 percent decline in transportation revenues for the current fiscal year. Last fiscal year, Michigan’s Department of Transportation received $2.7 million in fuel tax and vehicle registration revenue. The state gets 39 percent of that, counties get 39 percent and the remaining 22 percent goes to cities and villages.
It’s not clear yet how much revenue the state will generate from fuel taxes this fiscal year, with fewer cars on the road.
MDOT didn’t alter any of its 2020 road projects because of the revenue decline, according to Cranson.
MDOT Director Paul Ajegba reduced the department’s expenses through several initiatives such as choosing not to fill open positions.
“Existing cash flow will sustain the 2020 projects but there could be reductions to those planned next year,” Cranson said.
The funding uncertainty comes at a time when, by some measures, Michigan has the worst roads in the nation. According to a 2019 report from the Michigan Transportation Asset Management Council, 39 percent of the state’s federal-aid roads are in poor condition and 51 percent of non-federal-aid roads are in poor condition.
Gov. Gretchen Whitmer has heavily promoted “fixing the damn roads” but has met resistance from the legislature on raising new revenue, most visibly when she failed to gain traction on a proposal to raise the gas tax by 45 cents last year.
She responded implementing the Rebuilding Michigan plan, which involves the sale of $3.5 billion in bonds over the next four years to rebuild several key state routes.
Now, that money could help keep road fixes on track as fuel tax revenue declines.
The bonds, intended to fund rebuilding state roads, will now also offset expected losses in the state’s transportation revenues, according to a June 3 analysis of Michigan’s bond plan by Moody’s Investor Service. Moody’s independently evaluated Michigan’s road-funding situation.
“Emphasis on rebuild,” Cranson said. “The bond projects will not be resurfacing or repairs, those roads will be rebuilt all the way down to the base and last 30 years or much longer.”
The bond plan doesn’t cover Michigan’s estimated annual road funding needs, about $2.5 billion per year, and only provides additional funding for five years, according to the Moody’s analysis.
About $350 million of the $3.5 billion in bonds will be available to fund Michigan’s major roads in September.
But the bonding plan has shortcomings.
Bob Emerson, a member of the Michigan Consensus Policy Project, said the decline in fuel tax revenues will be a significant hit to funding road work but is unsure how long it will last.
The Michigan Consensus Policy Project floated a proposal to increase Michigan’s gas tax by 47 cents over a nine-year period last year. Like the governor’s 45-cent increase proposal, it failed to gain traction. Emerson said the bonds are a short-term solution to a problem that needs a long-term solution.
“Sooner or later, Michigan is going to have to raise revenues to keep the roads in better condition,” Emerson said. “While the money is going to fix bridges and state roads, you still have significant needs out there to fix local roads.”
The bonding also doesn’t cover projects on local roads.
Denise Donohue, Executive Director of the County Road Association, said the bonding doesn’t cover 92% of Michigan’s roads. The association oversees the maintenance of 90,000 miles of roads, about 75% of the state’s roads. It also manages 52% of the state’s bridges.
About 45% of the roads overseen by the association are in “good” or “fair” condition. MDOT wants that number to 90%. The association estimates it would need $2 billion annually for ten years to meet that goal.
The state is working on about 15,000 miles of road per year, the most it has been able to, according to Donohue.
“We are making progress and people should not lose hope but it’s going to take a significant amount of funding to get our roads to where they need to be,” Donohue said. “The longer we wait to address the situation, the more they continue to fall into disrepair the roads just get worse.”
Michigan can’t afford to hold on repairing or rebuilding its roads and bridges, according to the Moody’s analysis.
The longer the projects are held off, the more expensive they are to fix. The analysis states that unmet infrastructure funding will start competing with other state spending priorities, like pensions, education and healthcare.
The state estimates it needs to invest $1.5 billion a year to rebuild its interstates and major highways. That number grows about 12 percent, or $180 million, each year it’s pushed off, according to the Moody’s analysis.
But as the list of roads that need fixing continues to grow, it’s not clear when the fuel taxes that help fix them will rebound.
Cranson said while many vehicles have returned to the roads, it is difficult to say when the state will get back to pre-pandemic volumes.
“Some forecasts suggest people’s commutes could be forever altered as they found success working remotely,” Cranson said.
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