Michigan’s trunkline road system is largely in satisfactory condition right now, but is projected to substantially worsen over the next five years. Nearly half of all county and city and village roads in Michigan are in poor condition, which will take billions of dollars and many years to remedy. Below are 10 recommendations policymakers should consider for both the short and long run.
Michigan road agencies at all levels of government should collect PASER data for all roads — both federal-aid-eligible and non-federal-aid-eligible. The data should be provided to TAMC, which can then make it available publicly. Townships should report PASER ratings as well, and that information should be separated from countywide PASER data. Having better data about the conditions of roads in Michigan will help policymakers make better decisions about how to allocate scarce resources. Local governments would also benefit, as they could better identify the most pressing needs among their local roads.
The Legislature should eliminate the registration discounts for commercial trucks. Commercial trucks cause almost all of the pavement damage to roads and even without the discounts, the roads are substantially underpriced for trucks. These discounts cost the Michigan Transportation Fund millions in lost revenue each year without a clear economic justification.
The state distributes money from the Michigan Transportation Fund to cities with more than 25,000 people based on how many trunkline miles they have. The Legislature should stop allocating money to cities in this fashion and instead use this money for the state trunkline fund. MDOT is responsible for maintaining these roads, and there is no reason for cities to get a special distribution for roads they are not responsible for maintaining. The requirement that cities contribute to trunkline projects can be eliminated, since their contribution is already small. Adopting this recommendation would have added approximately $61.5 million to the trunkline fund in 2017.
MDOT estimates that the trunkline fund needs an additional $1.13 billion annually to prevent future road deterioration and to get 90 percent of state trunkline roads into fair or good condition.[*] Since these roads carry the vast majority of all Michigan traffic, maintaining them is critical to the state’s economy. Additional funding increases or reprioritization of current funding levels should first be used to improve trunkline maintenance before being dedicated to other purposes. Such spending is likely to provide the most bang for the buck, since these are Michigan’s most used roads.
The Michigan Constitution prohibits sales tax revenue from fuel purchases being used for transportation funding. A constitutional amendment to allow sales tax proceeds from gasoline and diesel sales to be added to the MTF should be considered. This would have added approximately $800 million in road funding in 2017.[†]
[Editor's note: The original estimate printed in this study was $270 million, but this was later determined to be in error and this text was modified.]
A vehicle-miles-traveled tax would charge drives a fee per mile driven, similar to a toll.[‡] Technology now makes it feasible to toll all roads by recording the number of miles a car or truck drives and to then charge the diver a certain fee per mile. Oregon recently launched the “OReGO” program, which is a VMT tax. A device plugged into a car uses either GPS or the odometer to record the number of miles driven. The vehicle owners is then charged 1.7 cents per mile.[§] Drivers in this program receive a credit to offset the amount of fuel taxes they still paid at the pump. The Oregon program works for both passenger and commercial vehicles.
A VMT tax does raise concerns about privacy. The Oregon program recognizes this issue and uses a private vendor to handle administering the VMT tax.
Once fully implemented, a VMT tax could fully replace state fuel taxes. As it can accurately measure how many miles a person traveled on a public road, it is a more pure form of a user fee than fuel taxes and more economically efficient. Several factors suggest that a VMT tax or something similar will be the future of road funding. Vehicles are becoming more fuel efficient, electric vehicles are becoming more widely used, and the transaction costs of tracking and calculating driving data continue to decline. Michigan would be well-served in implementing a VMT pilot program under the Oregon model.
Heavier vehicles cause more pavement damage. Basing a vehicle’s registration fee on its weight, rather than its base value, would create a more efficient user fee for the roads. Since the amount of pavement damage a vehicle inflicts on a road is chiefly determined by its weight, it makes economic sense for drivers of heavier vehicles to pay more in registration fees than drivers of lighter ones. This approach gives drivers an incentive to drive lighter vehicles that cause less pavement damage.
It would also help deal with the fact that electric and hybrid vehicles pay significantly fewer fuel taxes, or even none, despite using the roads. As these vehicles tend to be heavier than gasoline-powered ones, they would, under such a system, automatically pay more in registration fees. The current surcharge might be then rendered unnecessary.
It is unclear why the state needs to devote some transportation funds for economic development. There are several reasons why policymakers should consider eliminating this funding and dedicating it instead to maintaining trunkline roads.
First, the state already spends hundreds of millions of dollars on economic development and operates an entire department focused on it. If the projects supported by the Transportation Economic Development Fund are worth subsidizing, their advocates could apply for funding through one of the many subsidy programs administered by the Michigan Economic Development Corporation or Michigan Strategic Fund.
Second, as pointed out in the discussion about the costs of pavement damage, commercial vehicles do not appear to pay in registration fees and fuel taxes an amount that matches the cost of the pavement damage they cause. Drivers of passenger vehicles pay more than their fair share, thus subsidizing commercial trucks. Some type of industrial trucks also benefit from substantially reduced registration fees. Already the beneficiaries of some subsidization, businesses do not have a strong case for why they need additional targeted subsidies from the MTF.
Counties, townships, and cities and villages without road millages should be encouraged to consider them. The state could even create an incentive of some kind to promote local governments investigating the feasibility of enacting a millage in their jurisdiction. Local governments should not expect the state to completely bridge the road-funding gap.
In addition, the state might consider helping local governments fund road projects through loan guarantees and or other method to assist their financing of road improvements. Such as system could resemble how school facilities are funded. The state generally does not provide direct assistance for these buildings, and funds for them are raised locally. The state does, however, provide loan assistance to improve the school districts’ credit rating and thus lower their borrowing costs.
The Comprehensive Transportation Fund is likely the least efficient way for the state to pay for transportation needs. Funding local public transit authorities through statewide fuel taxes and vehicle registration fees is far removed from a user-fee model, which is the most economically efficient form of funding public goods. The costs of these transit systems should be paid by local taxpayers who benefit from these services being available and directly by the users of these services themselves.
[*] This is MDOT’s own goal and was reached in 2010. “2018-2022 Five-Year Transportation Program” (Michigan Department of Transportation), https://perma.cc/67RY-DET6.
[†] This assumes an average price of $2.44 per gallon for gasoline and $2.65 per gallon for diesel, in 2017, which are the average prices reported by the U.S. Energy Information Administration. “Weekly Retail Gasoline and Diesel Prices” (U.S. Energy Information Administration, Sept. 10, 2018), https://perma.cc/L6GX-YKAS.
[‡] For more discussion of VMTs, please see: “Alternative Approaches to Funding Highways” (Congressional Budget Office, March 2011), 14–20, https://perma.cc/H4FV-HDDQ.
[§] For more information, see http://www.myorego.org/about.