Governors proposal requires some heavy lifting

October 28, 2011
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Grand Valley Metro Council Executive Director Don Stypula spoke with Michigan Governor Rick Snyder and a few members of his staff after Snyder unveiled his vision last week for key economic issues like transportation and infrastructure, including broadband access.

In general, Stypula walked away with a positive feeling about what the governor said. While he said the governor called for changing the way state government approaches those issues, he also recognized that few in Lansing openly embrace change. So Stypula said lawmakers will have to do some heavy lifting to make those changes.

“But change is going to happen quickly,” Stypula said. “They are proposing a lot of changes, especially on the transportation-funding side. That’s probably the biggest impact that West Michigan is going to feel, at least initially, as this process moves forward. But I think what he is proposing stabilizes funding for the transportation program. I think it provides a better way of funding going into the future. And I think it addresses the issue that we have wrestled with for many years now.”

The issue Stypula is referring to is paying for roads through a per-gallon tax of 19 cents for gasoline and 15 cents for diesel, at a time when vehicles are becoming more fuel efficient and fewer gallons are being pumped, which means less tax revenue. Snyder called for both to be replaced with a tax on the wholesale level. Distributors would pay the tax, which could be passed onto retailers and then to consumers. Former Gov. Jennifer Granholm called for the same measure, but her request was rejected.

“We’re going to see that funding source going down if we stay with the current per-gallon motor fuels tax. Moving it to a wholesale tax is a good idea. But it’s going to be a heavy lift for a lot of folks,” said Stypula.

Snyder also wants lawmakers to hike the annual vehicle registration fee by about $10 per month. He said doing that would raise $1 billion of the total $1.4 billion he felt the state needs to make the changes he wants. But whether either legislative chamber is willing to hit residents with another tax after increasing their income taxes to pay for the business tax cut isn’t a certainty. Both the House and Senate are led by Republicans.

“It’s going to be a very heavy lift for the policymakers in Lansing. The governor will have to work with his caucuses in the House and the Senate to convince them that this is a prudent and wise way to raise funding. It’s a user fee for transportation purposes,” said Stypula.

Stypula added that while he was in Lansing, some told him they didn’t think it would be possible to make the funding changes Snyder wants.

“What is the alternative?” asked Stypula. “Don’t just say ‘no.’ If you have a better, wiser, faster way to provide stable funding for transportation, please do come forward.”

The state chapter of the National Federation of Independent Business generally found the governor’s approach to the issue better than previous attempts. NFIB State Director Charlie Owens said moving to a wholesale gas tax is better than raising the pump tax. But the organization clearly doesn’t favor a third funding mechanism proposed by the governor: letting counties levy a local vehicle registration fee, if voters approve it.

“While we understand that there are limitations on that authority, we feel this will create a patchwork quilt of local taxes. A better approach might be to seek statewide approval for a one-cent increase in the state sales tax dedicated to road funding,” said Owens in a statement.

Owens added that NFIB will survey its small business members to gauge their support for the governor’s plan.

Snyder also wants the state’s current system of county road commissions to come to an end. He said Michigan is the nation’s only state with such a system. He wants county governments to absorb those commissions and have the state be given the authority to audit the new agencies. Snyder said making those moves would ensure greater accountability.

Two bills were introduced in the state House last week that would enable county governments to absorb the commissions and allow for state audits. Stypula said the bills have bipartisan support.

The Kent County Road Commission oversees nearly 2,000 miles of road, with 1,640 miles paved. The commission also maintains 1,139 lane miles of state roads. Absorbing those tasks would result in more responsibilities for county commissioners and administrators.

“The bills were just introduced. We will monitor it closely, and intend to engage in the appropriate dialogue with our stakeholders,” said County Administrator and Controller Daryl Delabbio. “The spirit of the bills makes it optional to absorb the functions of a road commission, and we will perform our due diligence in the coming months to weigh our options.”

Snyder also wants a 1951 state law updated. The statute distributes transportation funding to cities, townships and villages; the governor wants to eliminate the distribution to municipalities that receive less than $50,000 annually from the fund. He prefers to have those dollars given to the larger agencies that maintain roads and bridges in those areas.

Snyder also wants the agencies covered by the 60-year-old law to require that current employees pay for 20 percent of their health insurance premiums and new hires are put under a defined contribution plan.

Stypula told the Business Journal that his agency will take its own look at Snyder’s funding proposal, which came from recommendations made by a task force Granholm created in 2008.

“We are going to do an analysis at the Metro Council on the impact of transportation funding,” he said, “starting right away and then trying to project out into the future, based on a number of metrics, how it’s going to impact funding for critical road- and bridge-repair projects, for public transportation systems, and the other elements of the transportation network.”

At the same time, though, Stypula said he wished the governor had talked more about the state’s water-and-sewer infrastructure. He said something needs to be done to bolster funding for the system, and it could be accomplished by changing some state bonding provisions for local units, which would enable the units to better use those dollars.

As for his broadband proposal, Snyder wants local governments and school districts to “interconnect” to avoid duplication, and he wants the Public Service Commission to make its communications towers available to Internet service providers.

The governor also said the process of granting permits for utility work along state rights-of-way needs to be streamlined. Snyder said the state receives $247 million in federal broadband funds each year.

“Michigan’s infrastructure is living on borrowed time,” said Snyder. “We must reinvest in it if we are to successfully reinvent our economy.”

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