Inside 208

Yesterday the House passed nine bills that would utilize $3.1 billion in existing state resources to improve Michigan’s Transportation system. The League’s Board was able to take an official position of support on these bills during CapCon based on the inclusion of our priorities and the protection of local resources.

As Introduced, the transportation funding package would provide over $3 billion annually in transportation funding, removed sales tax currently being charged on motor fuel, and eliminated funding for SOAR ($500M), Revitalization and Placemaking grants ($50M), and the Housing and Community Development Fund ($50M), among other reductions to fund the proposal. By not charging sales tax on motor fuel, the school aid fund would be reduced by approximately $700M, and constitutional revenue sharing would be reduced by approximately $95M (roughly half goes to cities and villages). Schools were set to be held harmless but local were not.

The $3.1 billion in this proposal is derived in two ways. First, a 20-cent increase in fuel tax. This generates approximately $1 billion and results in the price of gas being the same because of the removal of sales tax.  Second, $2.2 billion in revenue from the Corporate Income Tax (CIT) will be dedicated to roads, with corresponding reductions to other areas of the budget. The new fuel tax revenue will flow through Act 51. The CIT revenue would have been distributed in the following manner, 50% to the counties, 40% to cities and villages, and 10% to MDOT. This proposal does not include any new revenue and only reprioritizes existing state revenue.

After negotiations with the Chair, we were able to secure the inclusion of the Neighborhood Roads Fund and money for local bridges that are closed or in critical condition. The bridge money will total $500M over five years and then be sunset. The Neighborhood Roads Fund will total $275M annually and be a permanent distribution. Additionally, in last minute negotiations, we were also able to protect any loss to constitutional revenue sharing by securing $95 million to hold local government harmless from any reduction in constitutional revenue sharing.

The final deal included just over $3.1 billion in funding for roads and bridges and utilized only existing revenue. It included $275 million for our Neighborhood Roads proposal, $100 million for local bridges, dedicates $95 million in sales tax revenue to backfill the reduction in constitutional revenue sharing, and continues to provide $50 million annually to the Housing and Community Development fund which was proposed to be cut in the introduced version.

Overall, this put $1.1 billion more into local roads and will result in an average funding increase of 150% for each city and village local road agency. There are concerns about where some of the cuts in the budget may come from, but we are having ongoing and positive conversations with legislators to ensure those cuts don’t come from statutory revenue sharing and that they continue to prioritize the passage of the Revenue Sharing Trust Fund. This is very much a first step in the process, but it is also a very positive one. Below a statement that was issued by the League Board President after the passage of the proposal.

Michigan Municipal League statement on the House passing a transportation funding plan 

LANSING, Mich. — This statement is issued by League Board President, Mayor, Don Gerrie of Sault St. Marie on behalf of the Michigan Municipal League.

“Today we took a big step towards fixing Michigan’s transportation network. We commend Speaker Hall and Representative Pat Outman for their work to send more money to local roads, create a Neighborhood Roads Fund, and protect Constitutional Revenue Sharing. With bi-partisan support, the passage of this proposal is a significant first step to solving this problem.

“We are committed to finding a long-term solution and are ready to engage in dialogue about the use of existing resources and potentially new resources needed to have a final deal that wins the support of the Senate and is signed by the Governor,” said Mayor Gerrie. 

Here is a quick breakdown of each bill in the package an our position.

Support

• HB 4230, creation of the Neighborhood Roads Fund
• HB 4187, distribution of Corporate Income Tax ($2.2B)
  • $220M MDOT
  • $275M to the Neighborhood Roads Fund
  • $100M Local Bridges (annually for 5 years)
  • $882.7M to Counties
  • $722.3M to Cities and Villages
• HB 4183, fuel tax increase of 20 cents (Approximately $1B)
  • 10% to the Comprehensive Transportation Fund
  • Remaining 90%
    • 39.1% to MDOT
    • 39.1% to Counties
    • 21.8% to Cities and Villages
• HB 4180, Sales tax exemption on motor and aviation fuel sales
• HB 4181, Streamline sales tax exemption on motor and aviation fuel sales
• HB 4182, Use tax exemption on motor and aviation fuel sales
• HB 4185, Sales tax distribution (Backfill to the School Aid Fund and Constitutional Revenue Sharing)

No Position:

• HB 4184, Increase excise tax on aviation fuel
• HB 4186, Increase Michigan Business Tax rate

John LaMacchia is the League’s director of state & federal affairs. He can be reached at jlamacchia@mml.org or 517-908-0303.