Arbor Update

Ann Arbor Area Community News

Transportation funding in the hands of lame ducks

16. December 2008 • Murph
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Everyone from getDowntown to the Grand Rapids Press Editorial Board to the Michigan Municipal League are urging action on a package of bills before Michigan’s lame duck legislature. The bills would provide for an increase in State transportation funding, which could in turn leverage increased Federal funding. (Without the bills, we will apparently see a decrease in Federal funding.) One such call to action is as follows:

A three-year effort to increase transportation investment in Michigan all comes down to a single day— this Thursday, the final day of debate for the lame duck session.

Policymakers are considering a transportation investment plan that would provide an additional investment of $1.5 billion per year. In short, the legislation would get rid of the state’s per gallon gas and diesel tax and replace them with a percentage tax based on the wholesale price of fuel. The funding package would also adjust vehicle registration fees and close various loopholes. (The bill numbers are House Bills 4577, 6749, 6750 and 6752.)

Your help is needed!

Legislators often tell us that they never hear from constituents regarding this issue. This is your chance. We strongly urge you and all your employees to call your legislators beginning today through Thursday and ask for their support for the transportation investment plan. Go to: http://mi-ita.com/legislative_contact.asp to find your representative and senator.) Tell them how important jobs and the economy are to our state.

Ask to speak to your elected official directly. If they are not available or you get a voicemail, leave them a message encouraging their support. Feel free to make a follow up call again on Thursday to ask how your legislator is going to vote.

The Legislature must not put off action until next year—they MUST act on Thursday.

Please contact Mike Nystrom at mikenystrom@mi-ita.com or Keith Ledbetter at keithledbetter@mi-ita.com or call the MITA office at 517-347-8336 with any questions or comments.



  1. Looking at the bill status pages linked above, it appears the package of bills was passed by the House and transmitted to the Senate on Thursday of last week; however, I’m just receiving the above e-mail today.


       —Murph    Dec. 16 '08 - 06:30PM    #
  2. Legislation has to “lay over” for 5 days in a chamber before it can be acted upon by the other body, in this case the Senate.


       —John Q.    Dec. 16 '08 - 07:13PM    #
  3. There’s also an update on the Transit Riders United Site:

    The critical Transportation Funding bills passed the House as “shell” bills, without any specific numbers, which means the debate continues for one more week. Negotiations continue between House Speaker Andy Dillon and Senate Leader Mike Bishop. We need to keep the pressure on them to pass this vital transportation funding (including an est. $150 million per year for public transit).

    While I am not policy analyst, the one thing I like about these bills is that they propose some alternative ways to fund transit in Michigan. Right now, about the old tool we have is passing millages, which can get complicated in these economic times.

    But I am happy to see some progress here in Michigan related to transit.

    Also FYI I was at the WALLY North-South rail meeting yesterday and one of Levin’s aides was there. There was much discussion regarding Obama’s stimulus package and what it might mean for transit in Washtenaw County.

    The aide said that while nothing is known for sure, the two rumors afoot are that the money coming to Michigan would be for projects that are ready to go in 190 days and that if there is funding for transit, it would be for the New Starts program, which provides federal funding for transit projects. Michigan is at a disadvantage when it comes to getting New Starts funding because it is based on rider estimates and it is a lot easier to get those estimates in communities that already have rail vs. those trying to get it off the ground.

    Either way, a lot is happening right now. Let’s hope it means some good things for Michigan.


       —Nancy Shore    Dec. 16 '08 - 07:17PM    #
  4. Do we know where the federal transit money would go? It would seem that the priorities are going to be tracks and stations followed by rolling stock. Operational funds would be nice too but for a one-time stimulus, you want to be investing that into the infrastructure. The rail line between Ann Arbor and Howell would really benefit from the upgrades and it would be nice to have a place for people to wait for the train that’s better than a bus stop.


       —John Q.    Dec. 16 '08 - 07:52PM    #
  5. John Q — as I understand it, there is some question about whether you want stimulus funds going into long-time-horizon infrastructure — many big public construction projects have considerable lead times for various types of studies, etc. — which can mean that the money gets to the “pointy end of the stick” too late to help the recession. So there may be an argument for a mix of operational funds and infrastructure funds.


       —Fred Zimmerman    Dec. 16 '08 - 08:42PM    #
  6. Here’s another call to action that the Michigan Municipal League has put together. This format will give you a direct connection to State Legislators: http://getmichiganmoving.com/action.html

    One other thing to keep in mind, typically federal “stimulus” dollars still require some form of matching dollars to be generated at either the state or local level – typically a 80(fed)/20 match. MDOT has said time and time again this year that beginning in February of ’09, Michigan won’t have the ability to match federal dollars anymore.

    It would seem that if we’re going to use dollars from President-Elect Obama’s plan for projects like WALLY or TRAIL (Woodward Light Rail) or the ITP project in Grand Rapids (bus rapid transit) – we need a new transportation funding packaage now!


       —David Worthams (of MML)    Dec. 16 '08 - 08:51PM    #
  7. In short, the legislation would get rid of the state’s per gallon gas and diesel tax and replace them with a percentage tax based on the wholesale price of fuel.

    Hmmm—that sounds like a bad idea. Any percentage-based rate that matched the revenue of the current per per-gallon tax would then result in a more than 250% tax increase if gas prices returned to levels above $4. Or is the potential for a huge stealth gas tax increase in the future to be considered a feature rather than a bug?

    A per-gallon rate is at least fairly stable and tied to demand (e.g. number of miles driven). A percentage based rate would be highly variable with fuel prices and, so, not related to miles driven. Smart tolls would be better still than a per-gallon tax, but it seems to me that a per-gallon tax is more sound than a percentage-based tax.


       —mw    Dec. 17 '08 - 02:01PM    #
  8. “Any percentage-based rate that matched the revenue of the current per per-gallon tax would then result in a more than 250% tax increase if gas prices returned to levels above $4.”

    It’s a graduated scale such that as gas prices go up, the percentage goes down, to avoid the kind of windfall that you mentioned. As I see it, that creates a more stable funding mechanism than the current gas tax. The various players in the transportation world are looking for certainty over the long-term. It’s hard to make major investments in transportation, including transit, when your main funding source is subject to so much fluctuation, as we’ve seen in the past year.


       —John Q.    Dec. 17 '08 - 03:38PM    #
  9. More details here:

    http://www.freep.com/article/20081120/NEWS05/811200375


       —John Q.    Dec. 17 '08 - 03:39PM    #
  10. It’s a graduated scale such that as gas prices go up, the percentage goes down…

    But not as fast as the prices go up — so the tax would be 27 cents/gal now but 35 cents/gal when gas goes back to $4. So when we get back to $4 gas, we’ll have almost doubled the gas tax from 19 cents now to 35 cents.

    It’s hard to make major investments in transportation, including transit, when your main funding source is subject to so much fluctuation, as we’ve seen in the past year.

    C’mon. What’s on tap here is a ~50% increase in the gas tax likely rising to a ~100% increase. The ‘stability’ argument is a ruse. In fact, had we had such a system in place already, the drop in gas prices would have cut the per gallon revenue from the tax from 35 cents to 27 cents, whereas a per-gallon tax would have remained constant. The new system would be a much higher, but more volatile, less stable tax.

    And keep in mind, there’s already a state gas tax component that varies with the price of gas — namely, the 6% sales tax.


       —mw    Dec. 17 '08 - 04:09PM    #
  11. Ahh, but the question is how elastic is the demand for gas? If the price tops $4 a gallon, how much less will people drive, and how much will that drive down revenue? The per gallon tax may give constant revenue per gallon, but the gallons may go down.


       —Chuck Warpehoski    Dec. 17 '08 - 04:40PM    #
  12. The gallons DO go down.


       —Larry Kestenbaum    Dec. 17 '08 - 07:25PM    #
  13. The gallons DO go down.

    Sure, but I suspect not nearly as much as the sales taxes on gasoline goes up. Sales tax on $1.50 gallon is 9 cents vs 24 cents at $4 gallon. So the overall difference between taxes at $1.50 and $4.00 under the current system is 28 cents (19+9) vs 43 cents (24+19). Is the percentage decline in fuel consumption greater than that difference? Was the state really seeing lower overall tax revenues on gas sales when gas was over $4? I doubt it.

    So, sure, increase the gas tax enough to make up for inflation that’s occurred since it was last raised, and let’s put in an annual inflation adjustment as well, but let’s not try to sneak in a big stealth tax and call it ‘stability’.


       —mw    Dec. 17 '08 - 07:49PM    #
  14. Of course it’s a funding increase, no one promoting it is denying that fact. “mw”, I’m not sure why you think usage stays constant as gas prices go up.


       —John Q.    Dec. 17 '08 - 07:56PM    #
  15. Sorry, I missed your last comment. This isn’t a “stealth” tax. Everyone who’s been discussing it has realized that more funding is going to require more tax revenue. Even the promoters of this claim that a majority of people would support an increase. I’m not sure I buy that but it’s an example of the fact that they are not hiding it’s an increase.


       —John Q.    Dec. 17 '08 - 07:58PM    #
  16. One more data point – gas tax revenue peaked in 2004 and has been going down since then.

    http://www.crcmich.org/Almanac/Taxes/transrev.html


       —John Q.    Dec. 17 '08 - 08:12PM    #
  17. Looking at the top-level post here, this is being promoted as “an additional investment of $1.5 billion a year.” It doesn’t specifically say “x% of that will come from increased gas taxes”, but that seemed pretty clear to me on first read.

    As far as mw’s sales tax argument, it’s my understanding that the sales tax doesn’t go to anything related to transportation. I, personally, would be cool with changing that, so that sales tax collected on fuels went into the transportation funding system. (I’ll wait for John Q. or Larry to remind me whether that’s possible to do statutorily or would require a constitutional amendment…)

    Nancy mentions the issue of “ready to go” projects when taking advantage of stimulus money (or the plain vanilla Federal money already available), and David Worthams points out that this includes a local/State match component. The other part of “ready to go” is having plans in hand. Most Federal bucks don’t pay for the design costs of having the surveyors and engineers do their thing. In order to take advantage of Federal money, we the local communities need to make sure we’ve done our homework – invested in the engineering work – so that we can actually accept the cash.


       —Murph    Dec. 17 '08 - 08:17PM    #
  18. I’ll wait for John Q. or Larry to remind me

    My off-the-cuff guess is that it could be done by statute, but it won’t. Reallocating the sales tax on gasoline from the general state budget to transportation projects would further damage the state’s overall revenue situation.


       —Larry Kestenbaum    Dec. 17 '08 - 08:38PM    #
  19. Very little of the revenue could be touched without a constitutional amendment.

    The breakdown of the Sales Tax revenue is:

    - 73.3% to School Aid Fund – 23.7% to units of local government – 1.7% to General Fund – 1.3% to Comprehensive Transportation Fund.

    Most the funding is constitutionally dedicated to the School Aid Fund. From CRC Mich:

    The 6% Sales Tax rate consists of a 4% rate, which took effect in 1960, and an additional rate of 2%. Sixty percent of the revenue from the 4% rate, together with 100% of the revenue from the additional rate of 2% (60% of 4% + 100% of 2% = 73.3%) is constitutionally dedicated to the School Aid Fund. Another 35.6% (15% constitutionally, 20.6% statutorily (21.3% when lag in payment schedule is accounted for)) of the revenue from the 4% rate only (35.6% of 4% + 0% of 2% = 23.7%) is dedicated to cities, villages, and townships for revenue sharing.


       —John Q.    Dec. 17 '08 - 09:24PM    #
  20. Looks like nothings going to happen with this this year:

    There will be no transportation funding reform this year. The possibility of Senate and House action today on the final session day of 2008 began unraveling immediately this morning when it became apparent that Senate Republican Leader Mike Bishop was not interested in running transportation funding reform. The shell bills to accomplish this, as you will recall, were sent from the House to the Senate last week. Shortly before Noon today Leader Bishop told Capitol news reporter Tim Skubick that, “I am not interested in running it.” This in reference to a direct question from Mr. Skubick.

    Shortly thereafter MDOT Director Kirk Steudle and other key negotiators emerged from a meeting of the Senate leadership, Governor and MDOT and told those of us present that Governor Granholm had “pulled the plug” and the “issue is dead for this year.” Mr. Steudle told me personally that the Governor felt the concessions that Senate Republicans wanted reduced the amount of new revenue that would have been raised below the amount the Governor felt was necessary to give transportation the added revenue needed. By ending the talks for this year, it keeps pressure on the new Legislature in 2009 to still come back and deal with the Transportation Funding Task Force recommendations of a minimum of $1.5 Billion new money. When talks broke off today, the amount of new revenue being discussed was reportedly at an amount somewhere around one half of that recommendation or less.

    So, all is not lost, as we will definitely gear up to fight for this package next year.

    Also, we continue to have strong partnerships with the road advocacy groups that will remain in place for the coming discussions.

    I, personally, want to extend my appreciation to all of you who I know made phone calls, sent e-mails and, generally, did everything in your power to bring this issue to the attention of your own legislators. I also wish to thank the transit personnel who traveled to Lansing today to personally lobby for the plan. These individuals include: Chuck Moser, Maureen Daugherty and Sylvester Payne who were all en route to the Capitol when the negotiations fell apart. Also, Ed Benning, Debbie Alexander and Sandy Draggoo, Jerry Hutchison, Carol Wegher, Larry Alpert, Jennifer Kalczuk and Beth Dryden.

    Also very helpful to us over the past few days have been Bob Morris of SEMCOG, Jackie Shinn of MDOT, David Worthams of the Michigan Municipal League, Representatives Marie Donigan and Lee Gonzales, Todd Tennis of the Amalgamated Transit Union, Megan Owens of Transportation Riders United, Tim Fischer and Rory Neuner of the Michigan Environmental Council and, last but certainly not the least…Bill Zaagman, our own MPTA lobbyist of GCSI. I apologize if I have missed anyone who was instrumental in the process; you all know who you are and please know that public transportation in Michigan is collectively grateful to you.

    Along with the other advocacy groups, we brought this issue from not even being on the radar screen to front and center. We will live to fight another day!

    I want to wish everyone a Merry Christmas and Happy Holidays, depending on your own persuasion. Take care and be safe all. See you in 2009!!

    Clark Harder
    MPTA Executive Director
    Co-Chair, Let’s Get Moving public transportation coalition


       —Nancy Shore    Dec. 19 '08 - 04:26PM    #