Michigan Passes Long-Awaited Road Funding Bills
By Paul Egan and Kathleen Gray
Michigan motorists would typically pay about $20 more for their vehicle registration fees and spend about $1.17 more for a 15-gallon fill-up under fee and tax increases passed by the Michigan Senate and House of Representatives Tuesday, as part of a $1.2-billion road-funding plan.
Gov. Rick Snyder is expected to sign the bills into law.
"If you look back in history, this is the largest investment in transportation over the last 50 years in terms of revenues coming in for roads. This will lead to safer and better roads in our state and it does it in a fiscally responsible way," Snyder said. "There is some time that it takes to review all bills but I'm ready, So as soon as they're prepared, I'm ready to sign them."
Both chambers passed the bills by the closest of margins -- 20-18 in the Senate and 55-52 in the House on the fuel tax. The increase in vehicle fee registrations passed the House by the bare minimum 54-53.
"It's time to put this to bed and allow the roadwork to begin," said Speaker of the House Kevin Cotter, R-Mt. Pleasant, right before the House voted at 10:25 p.m.
Republicans in the Michigan Senate passed a plan earlier in the day that would raise $400 million from increased fuel taxes, $200 million from higher registration fees, and take $600 million from the state's general fund.
The plan also includes a sweetened Homestead Property Tax Credit and an income tax rollback that would start in 2023 if growth in Michigan's general fund exceeds the rate of inflation multiplied by 1.425. Some Michigan residents could see their homestead credits increase by $300 a year.
The tax increases that are part of the package don't take effect until Jan. 1, 2017, after the next election.
Democrats were almost unanimous in their opposition, saying the plan was not only fiscally irresponsible for shifting $600 million in general fund dollars to the roads without identifying where those cuts would come from, but also that it doesn't get fully phased in until 2021.
"The majority party is saying it's okay to kick that fiscal plan down the road," said House Minority Leader Tim Greimel. "The worst part of this entire package, it won't even be phased in till 2021. This is a sham, it's a joke, it's a pretense.".
The Senate moved with near-lightning speed on a package of substitute road bills early Tuesday afternoon after months of legislative talks had previously failed to reach a deal. Key bills passed by 20-18 votes, with only Sen. Virgil Smith, D-Detroit, voting with the Republicans. It took the House nine hours before taking a vote with only Democrat Rep. Harvey Santana, D-Detroit, joining most of the Republicans in approving the package.
"It's going to help our economy," Senate Majority Leader Arlan Meekhof told reporters after the bills cleared the Senate. "Not everything that we send out is perfect," and there could be some follow-up bills to improve the plan, he said.
Sen. Wayne Schmidt, R-Traverse City, said the action was long overdue "after years of neglect," and "it will cost more each year that we don't take action; our roads will get worse."
But Senate Democrats denounced the plan as one that is fiscally irresponsible and raises certain taxes without fixing the road problem.
Senate Minority Leader Jim Ananich, D-Flint, said the delayed tax and fee increases mean it will take too long to get significant dollars to work on the roads. "I'm going to encourage the governor to veto this plan," Ananich said.
Sen. Curtis Hertel Jr., D-Meridian Township, in a floor speech, said, "The people are tired of paying more and getting less from government," and "that's exactly what this plan does."
An analysis Tuesday by the Senate Fiscal Agency said the plan would increase transportation funding by $452 million in the 2017 fiscal year, $608 million in 2018, $763 million in 2019, $944 million in 2020, and $1.2 billion in 2021. The analysis said the plan would also cut the state general fund by $356 million in 2019, $531 million in 2020, and $806 million in 2021.
The extra registration fee and gas tax revenue would go through a state formula that includes a share for rail and transit. The general fund money would not go through that formula and would all go toward roads.
The first bill up, which would hike registration fees by 20%, passed in a 20-18 vote, with Smith the only Democrat voting with the Republicans. That bill would increase a typical $100 registration fee for a car to $120. There are also increased fees of between $30 and $200 for hybrid and electric vehicles.
Fuel taxes, which are now 19 cents a gallon for regular fuel and 15 cents a gallon for diesel fuel, would be equalized at 19 cents per gallon for both and increase by 7.3 cents per gallon, bringing the tax to 26.3 cents, on Jan. 1, 2017. After that, the tax would go up annually by 5% or the rate of inflation, whichever is less.
On a 15-gallon fill-up, the increase would cost a motorist about $1.10. Michigan's 6% sales tax, which is applied on top of the fuel tax, would add about another 7 cents to the cost.
Two Republican senators who earlier voted no on a large gas tax hike -- Sens. Mike Green of Mayville and David Robertson of Grand Blanc -- voted yes on the current package. One Republican senator who earlier voted yes -- Sen. Tonya
Schuitmaker of Lawton -- switched her vote to no. This time, a tie-breaking vote was not required from Lt. Gov. Brian Calley, who earlier cast the deciding vote on a large fuel tax increase that never got approval from the state House.
In all, eight Republican senators voted against the registration fee hike: Schuitmaker; Jack Brandenburg, R-Harrison Township; Patrick Colbeck, R-Canton; Judy Emmons, R-Sheridan; Joe Hune, R-Hamburg; Phil Pavlov, R-St. Clair; John Proos, R-St. Joseph; and Tory Rocca, R-Sterling Heights.
Emmons voted yes on the gas tax increase, while Green, who supported the registration fee hike, voted no on the gas tax hike. Otherwise, that vote came down the same as the registration fee hike.
The plan includes several elements to sweeten the Homestead Property Tax Credit, including increasing the maximum credit to $1,500, from $1,200 currently, in 2018. The plan also gradually increases the maximum household income for claiming the credit, which is now set at between $41,000 to $50,000, to between $51,000 to $60,000. The cap to qualify based on total value of household resources, now set at $135,000, would also increase.
For renters, the plan increases the percentage of gross rent that can be used in calculating the credit to 23% for 2017 and subsequent tax years, up from 20%. The plan also calls for inflationary adjustments to the percentage of household resources used as the threshold for calculating the credit, which is now set at 3.5%.
The package creates a "Road Innovation Task Force" that will examine road materials and processes that could help the Michigan Department of Transportation build better roads that would last 50 years. The plan puts the first $100 million in new revenue captured annually by the plan into a "lockbox" intended to be used to build 50-year roads.
Among the follow-up bills is one that is still being drafted that would move responsibility for most road project design work away from the Michigan Department of Transportation to the contractors who build the roads, said Senate Majority Floor Leader Mike Kowall, R-White Lake Township, who believes the move will improve enforcement of road project warranties and result in longer-lasting roads.
Lobbyists were reserved in their comments while they waited to see if the House would concur in the Senate plan.
"At the end of the day, it's $1.2 billion," said Lance Binoniemi, vice president of government affairs for the Michigan Infrastructure & Transportation Association, representing road builders. "We need that much investment, if not more, to improve our roads," and "we'd like to see it ramped up a little bit quicker."
The tax and fee hikes don't start until 2017. From the general fund, the plan dedicates to road funding $150 million in 2019, $325 million in 2020, and $600 million in the 2021 fiscal year and beyond.
The plan allows the City of Detroit to spend up to 20% of its new road dollars on public transit, something Detroit Mayor Mike Duggan has pushed for.
Before the plan was passed, the Senate had convened in the morning and went into recess until 2 p.m. as talks among lawmakers continued.
The GOP-controlled Senate passed what was primarily a Republican-only plan after bipartisan talks with Democrat legislative leaders broke down last month.
The House passed a plan that would raise $400 million from a 40% hike in registration fees and $200 million from increased fuel taxes, while taking the remaining $600 million from the state's general fund. The plan would also provide $200 million in tax relief through a sweetened Homestead Property Tax Credit.
Michigan Democrats oppose the registration fee hike and say an income tax cut that is also part of the House deal is a fiscal time bomb that will rob Michigan of money for priorities such as education and public safety in future years.
Rich Studley, president and CEO of the Michigan Chamber of Commerce, the state's most powerful business lobby, told the Free Press today it's time for lawmakers to do their jobs and pass a plan. Using $600 million from the state's general fund is tough but doable, Studley said.
"I think House Republicans and Senate Republicans are very close at this point," Studley said. "Although the details and specifics are very important, it's really more a question of leadership and political willpower."
Lawmakers who think the condition of Michigan's roads can be improved with "fairy dust or wishful thinking or Monopoly money," rather than through raising new revenues, should be held accountable for taking that position, Studley said.
The Business Leaders of Michigan didn't like the plan that shifted so much general fund money to roads, but said late Tuesday that the package as passed would help provide badly needed improvements to the state's roads.
"This road funding package provides substantial funding toward fixing our roads. While it doesn't meet all of our objectives for funding transportation -- it meets many of them," said Doug Rothwell, BLM President and CEO. "Moving forward, we will monitor the state's finances to ensure the goals of this multi-year funding plan are met and continue to encourage the state to prioritize investments to make college more affordable and to support job training and economic development as these are also critical priorities that are important to growing jobs and our economy."
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