A multi-layered proposal to raise $1.2 billion for roads was approved by the House and Senate early this morning.
Although MITA was let down not to resolve the transportation funding issue through a pure legislative fix, the proposal is a seismic shift on a number of levels that will ultimately ensure that all taxes paid at the pump will actually go to transportation for the first time in decades. Here’s how the proposal works:
- The Legislature approved bills to change the current 19 cents per gallon state fuel tax to a 14.9 percent wholesale tax on motor fuels (including newer fuels such as compressed natural gas). This will generate $1.2 billion per year for road funding that begins in October of 2015, if the public approves a ballot proposal in May.
- This ballot proposal would eliminate the sales tax on motor fuels, leaving a $900 million hole for schools and locals. To offset this loss, voters will need to approve a 1 percent increase in the general sales/use tax, thus raising it from 6 percent to 7 percent on most purchases. The sales tax increase would raise $1.3 billion, which fills the $900 million hole for schools and locals that was created by eliminating the sales tax on motor fuels. The sales tax increase also provides an additional $300 million for schools and $100 million for local governments.
- The proposal also includes $95 million in registration adjustments and truck fees. It also adds an additional registration fee for electric and hybrid vehicles. In addition, it restores the state’s Earned Income Tax Credit, saving another $260 million for low-income individuals.
- All of these changes add up to huge opportunities for the industry.
o The Governor has committed that over $400 million in projects will be accelerated forward so construction can begin immediately following a “YES” vote on May 5th.
o As construction ramps up in a three-year build-up of projects, a significant portion of the revenues will be used in the first two years to pay off over half of MDOT’s debt, thus allowing for an even greater number of projects to be let in future years.
o The opportunity for growth in revenue is significant in future years as the wholesale tax allows for inflationary increases, while the floor and ceiling that are set in the law protect against wild fluctuations.
o The warranty legislation that was passed only expands that which is already in use at MDOT to be allowed for consideration at the local level.
MITA is ready to go to work and join with others on the package, which ultimately will achieve the goals of fixing Michigan’s roads, putting people to work, and saving lives and money lost due to the deteriorating condition of Michigan’s roads and bridges. This is going to be a significant endeavor, but in the end, if successful, well worth the investment of time and resources.
If you have any questions or concerns, please contact Mike Nystrom, Executive Vice President, at mikenystrom@mi-ita.com or Lance Binoniemi, Vice President of Government Affairs, at lancebinoniemi@mi-ita.com.
