In conclusion, $375.0 million in annual priority state system highway needs were identified. Of this total, $81.8 million can be funded through cost savings on existing expenditures, leaving a net new revenue need of $293.2 million. On the local county and city system an estimated $281.8 million in priority annual needs were identified. $89.8 million per year of this need should be funded through cost savings that were identified, leaving $192.0 million to be funded from revenue increases. The cost savings relate to privatization of maintenance and reorganization of state and local operations, changes in design and value analysis, tort reform, changes in prevailing wage laws, and reforms in some environmental requirements.

There are pluses and minuses associated with a tax increase. For those who believe an increase has benefits that outweigh the economic costs, a funding proposal was offered. For the state system, one approach to raising the $293.2 million in new revenues would be to obtain $60.0 million per year from bonding, $33.6 million from the trucking industry with a net 6 cents per gallon (9.4 cents per gallon overall including replacement of fees) increase in diesel taxes, and $199.6 million from a gasoline tax increase of 4.4 cents per gallon. For the local system the $192.0 million in tax needs could be raised through a state-local matching program with a 1:2 ratio. The state revenues could be raised through a 1.4 cents per gallon statewide gasoline tax which would raise $64.0 million. The result would be a 5.8 cents per gallon increase in the state gas tax. This money would be made available to locals under current per-jurisdiction formulas if they generated their share of $128.0 million in local matching requirements. Locals could raise their 2:1 match for this money by raising new dedicated sources of revenue for highways. Counties would be given the option of raising their share through a local option for up to a $25 registration fee per auto. Specific steps the legislature would have to take include:

  • Raising the gas tax 5.8 cents per gallon with 4.4 cents dedicated to the state trunkline system and 1.4 cents placed in a fund for local use.

  • Raising the diesel tax 6 cents per gallon by eliminating the diesel discount for commercial users, and an additional 3.4 cents to replace fees collected on trucks for diesel discount stickers and MPSC registration.

  • Establishment of a matching contribution program for locals to obtain access to the 1.4 cents per gallon in gas tax dedicated for local use. Such a program should require $2 of new local revenue dedicated for roads for every $1 available from the state fund, should specify the formula to be used in apportioning state money by county/city, and should specify the disposition of state local fund monies not used each local government.

  • Reinstating the $25 local option auto registration fee for counties.

As part of any tax program, legislators should pass or at least begin considering all programs and reforms outlined below. In addition, tax reduction offsets equal to any increased transportation taxes should be identified, and all new transportation tax revenues in the package should be dedicated to highways. New tax revenues raised for state system roads would also have to be exempted from the current Act 51 distribution formula for the Michigan Transportation Fund.

As part and parcel of any possible tax increase, the Legislature should include several specific reforms. Specifically, the Legislature should:

  • Pass a law eliminating the state's remaining economic regulation of trucking and house-hold/office moving and eliminating the authority registration process at MPSC.

  • Require "one-stop shopping" and single agency administration and processing for truck permits at the Secretary of States' office instead of the existing five departments.

  • Replacing the current diesel discount and MPSC registration fee structure with increases in the diesel tax as outlined above.

  • Pass a law prohibiting local economic regulation restrictions on "jitney" private passenger transportation services.

  • Repeal state and local prevailing wage laws

  • Reform liability laws relating to highways, separately from any broader tort reform package.

  • Change right-of-way acquisition laws to lower costs.

  • Pass a resolution requiring increased committee scrutiny of MDOT expenditures.

  • Require MDOT to report annually on the costs of collecting Michigan Transportation Fund monies, and steps being taken to reduce such costs within the various departments.

  • Require MDOT to produce an annual report on the cost of annual compliance with all major federal and state environmental regulations.

  • Require annual cost-benefit analyses and legislative review of regulations not achieving specified ratios, with legislative votes to retain programs with below specified ratios, and;

  • Eliminate Michigan's state owned railroad program.

The Governor's Office and the Legislature should also commit themselves to obtaining several concessions from Washington. These concessions should include:

  • A reduction in the share of highway user fuel taxes going to deficit reduction instead of the Highway Trust Fund. Currently, 6.8 cents per gallon, or $54.2 million per penny of Michigan fuel taxes are going to deficit reduction instead of the originally intended purpose of highway infrastructure.

  • A requirement that authorized ISTEA spending levels be implemented. The Clinton Administration's proposed fiscal year 1996 budget calls for a $2.5 billion per year reduction in spending in order to build Highway Trust Fund balances and mask the size of the deficit.

  • A requirement that fuel taxes collected for the Highway Trust Fund and deposited in the Trust Fund be spent on highway infrastructure purposes and not freed up for non-highway Amtrak and mass transit spending as states wish via the Clinton Administration's proposed block grant program in the 1996 fiscal year budget.

  • A strong effort to renegotiate the ISTEA funding formula to reduce the percentage of Michigan federal gas tax collections being donated to other states to no less than the national average. Michigan received 90% of its contributions since 1957, while the average state received 114% during this time period, and Massachusetts received 362% in 1993.

  • Elimination of the Clinton Administration's "environmental justice" regulations.

  • Modification to the Coastal Zone Reauthorization Act (CZARA) to reduce Michigan's estimated $90 million first year costs related to treatment of stormwater runoff from roads.

  • Modification of the Davis-Bacon Act to reduce costs of road construction and maintenance.

Finally, the Governor's Office and MDOT should commit to implementing the cost reduction programs identified in this report. Specific actions should include:

  • Formation of the Executive Commission on Highway Infrastructure Reform and implementation of potential Commission recommendations related to MDOT/County/City duplication, reforms to county road commissions, and privatization cost saving opportunities.

  • Cost benefit analysis of existing state environmental laws and regulations affecting roadbuilding costs and modification of laws and regulations imposing costs which are not justified by the benefits.

  • An order prohibiting MDOT from making the potential $90 million per year expenditures related to CZARA required stormwater runoff procedures until requirements can be negotiated or changed.

  • An Executive Order implementing "one-stop" shopping and economic deregulation for the trucking industry.

  • A review of current high speed rail expenditures to determine whether such expenditures are justified given the economic feasibility and the future federal funding probabilities.

  • A review of planned new major highway corridor planning and designs to determine whether designs can be justified given realistic traffic projections.

  • A review of MDOT and other agency administrative and collection costs paid for out of the Michigan Transportation Fund and implementation of identified cost saving opportunities.

  • A review of design standards and implementation of value engineering processes.