How to raise road money without raising taxes

Senator Patrick Colbeck
February 19, 2013

I still recall my orientation session shortly after being elected.  I was treated to a non-partisan symposium on the need to raise taxes as the de facto solution for all of our budgetary ailments.  In fact, the options for transportation funding were not very innovative…raise gasoline taxes, raise sales taxes, create a new tire tax or raise registration fees. 

As an advocate of consumption-driven tax policy, I understand the logic of tying these revenue sources with road funding.  It is worth noting, though, that we already invoke “user fees” to fund our roads to the tune of $.19/gallon ($825 million) and close to $1 billion from transportation-related registration fees, licenses and the like. Our total budget last year for transportation was around $3.3 billion.  The bulk of the difference between our user fees and the transportation budget was made up from federal funding.

Governor Snyder has outlined the need for an additional $1.2 billion in funding to improve our transportation infrastructure.  Some studies indicate that our operations and maintenance funding levels need to be as high as $6 billion to maintain our current road infrastructure, but let’s assume that a yearly budget of $4.5 billion will take care of business for the moment.  Either way, our state has purchased the equivalent of a larger home than we can afford because we forgot that we had to pay for ongoing expenses like utilities and property taxes after the house was built. 

For the sake of simplicity, let’s assume for the moment that there are no opportunities for expense reduction within MDOT.  All indications are that MDOT is one of the most lean state transportation agencies in the nation.  In fact, I requested a lean analysis of a typical highway construction project in the state and it returned no useful information whatsoever.

So, if we take “user fees” off the table, what other revenue opportunities do we have?  For starters, our state economy is improving.  The General Fund (i.e. the money without any strings attached when it comes to appropriations) is forecast to yield a 5.4% increase from the FY12-13 figure.  This corresponds to roughly $500 million.  If we were to freeze spending for all agencies that depend upon the General Fund, that $500 million would be available to fund roads.  When you eliminate the one-time spending in our budget last year, that figure is even larger.  Let’s work with the $500 million for the time being.  We still need to find $700 million. 

Did you know that we pay $833 million in debt payments every year?  If we paid off our state “credit cards”, we would have an additional $833 million per year.  Instead of paying interest to banks, we could even start to earn interest that could help fund our roads.  Perhaps, we should invest our economic growth “dividend” and even our rainy day fund to pay off our debt.  Once the slate is clean in as little as two years, we can ramp up the appropriations for our roads. 

When businesses run into financial trouble, in addition to looking for ways to cut expenses, they look for assets that can be leveraged to earn additional revenue.   What assets do we have in the state of Michigan? 

One of our best assets is our hardworking citizens.  Finding jobs for the 411,000 unemployed citizens in our state would yield over $1 billion in income tax alone.  If we continue to promote pro-growth economic policies as we have over the past two years and the federal government finally stops strangling the growth of the national economy, we will see additional economic growth “dividends”, perhaps even enough to close the $700 million gap.  Let’s not stop there, though.  Let’s keep thinking outside of the standard “taxes are the answer” box.

We have 10,711 bridges, 131 secretary of state offices, 81 rest areas, 97 state parks, 829 boat access sites, 16 harbors and over 15,000 properties in the state “land bank”.  The National Counsel for State Legislators (NCSL) has identified advertising, concessions, naming rights and shared resources as incremental revenue opportunities for states.

What if we were to lease billboard space on our bridges?  Billboard leases range from $250 to $1800 per month depending on location.  We could raise an additional $460 million per year in advertising revenue by simply adding another placard to our overpasses next to our current route signs.  With a little creativity and ingenuity we could integrate these signs onto our highway overpasses without much disruption to the aesthetics of our roadways. One idea would be to sponsor a graphic design contest to make these signs a “feature of,” not a “detraction from,” our Pure Michigan campaign.

As for our other assets, we could lease advertising space at our secretary of state offices.  Our rest areas feature over 50 million visitors per year.  Our state parks feature 24 million visitors.  If we were to privatize the management of these assets, we could free up over $20 million in general fund dollars and generate additional concessions revenue.  All told, there is the potential for over $1.6 billion in new funding for roads, all without raising taxes.

Are there downside risks with these proposals?  Yes.  The key question, though, is do these risks outweigh the very real impacts to our taxpayers when taxes and registration fees go up or the quality of our roads goes down.

Oh… by the way…I have not given up on expense reductions as a solution.  Transparency legislation that I introduced last year will unleash 10,000,000 citizen “accountants” in our state within three months of budget passage.  Everyone will soon have easier access to our state’s budget data.  It may not help with this year’s budget, but it will help with next year’s budget.  A modest 5% reduction in spending rather than the proposed 5% increase would yield an additional $500 million that could be applied to roads.

Bottom line, before I ask our hardworking taxpayers to fork out another dime in transportation taxes, we need to take a hard look at ALL of our options.  We should prioritize those options in a manner that recognizes that many of our citizens are already struggling to make ends meet.  The path to modernizing our transportation infrastructure demands true innovation.

Posted in Editorials, Uncategorized.