Michigan’s highway system is at a critical juncture. According to the Michigan Department of Transportation, road condition is scheduled to begin deteriorating following several years of improvements. Congestion is forecast to increase, and Michigan is in need of several major reconstruction projects on southeast Michigan interstates. Funding for new projects is in short supply. In fact, the overall five-year plan for work on state-owned roads is going down from recent spending levels, and there is almost no new money for expansion of capacity. State transportation bonding is also at an all time high and debt service on those bonds is scheduled to take up a very significant share of available money. The local road system owned by counties, cities and villages is also in poor shape and in need of additional funding.

An efficient transportation system has played an important role in Michigan’s economic development over the years, and government has had an important role in assuring that appropriate transportation infrastructure is in place. However, the organizations and methods for planning, funding, constructing and maintaining our transportation infrastructure need to be reevaluated to ensure we are getting the most effective system for the money invested. We must figure out the best way to obtain infrastructure investment in the most efficient and effective manner. Other key issues that need to be addressed include the role of the public and private sectors, the costs of obtaining a given level of infrastructure and the costs of maintaining that system.

There has also been considerable press coverage in recent months about the potential need for a fuel tax increase. Will Michigan’s road taxes go up in the near future? If so, which specific taxes should be raised and by how much? One answer is simply to raise taxes by the amount various interests suggest is needed. A more creative approach is to study the real level of needs, and to tie any funding increases to reforms in how the money is spent. A responsible approach also demands that other spending and tax cuts should be identified to offset any transportation tax increases. A business as usual approach to the way we develop and maintain highway infrastructure simply won’t work any longer.

A strong highway network is critical to economic development and quality of life. For individual travelers the benefits of a well performing highway system relate to fast and delay-free travel, safety and comfortable, damage-free experiences. For business, an effective highway system allows for specialist employees to commute, and travel back and forth to suppliers and customers in a fast and reliable way. It also allows for freight to be moved back and forth between suppliers and customers in a way that keeps distribution costs to a minimum while allowing for just-in-time oriented operations that provide maximum service levels.

This report first seeks to provide an understanding of how Michigan’s highway system is structured and funded. Ownership of the system, funding of state and local roads, and the disposition of money on those roads is discussed. Following these initial sections, the report examines the various revenue sources and specific taxes Michigan uses to fund highways, and how our existing taxes compare to neighboring states and the U.S. average. The next section tries to identify the level of need for additional investment in the Michigan highway system. This section examines what various organizations are saying about that need. It also looks at specific information about road surface condition, congestion levels, levels of auto damage, existing funding level trends, the impact of construction cost inflation, etc. The following section studies an age-old question in Michigan: the role of “heavy” trucks in damaging the roads, and the degree to which trucks pay their fair share of costs for highways nationally and in Michigan. The report then examines the role that the highway system plays in providing a climate receptive to economic development, and the role that the road system plays in assuring individual mobility and quality of life. Finally, the report concludes with a series of recommendations on specific taxes, the way highway money should be spent, and a variety of needed reforms in the system.

None of the individual recommendations herein is a “silver bullet,” nor is the sum of them one. The recommendations should be considered in their totality and not in isolation from one another.

No one should interpret this report to mean that the author is recommending more spending on roads without spending less on other items both inside and outside of the state transportation budget. Although this report focuses on the transportation and related budgets, the author’s colleagues at the Mackinac Center have recommended hundreds of millions of dollars in cost savings from elsewhere in the state budget. Those ideas are a good place to start when determining how the state should raise the priority of its road system without increasing the size of the state budget, or piling new burdens on our already troubled state economy.