Indiana’s northern neighbor to borrow $3.5B to fix roads

Michigan Gov. Gretchen Whitmer announced Wednesday that her state will borrow $3.5 billion to rebuild deteriorating highways and bridges over five years, calling it a fiscally responsible move after the Republican-led Legislature rejected her proposed fuel tax hike.

The Democrat unveiled the bonding plan during her second annual State of the State speech to lawmakers. It will enable the state Department of Transportation to do about twice as much construction on I-, U.S.- and M-numbered routes as it can now, she said. The funds would not be used to repair local roads.

“I’m going to use the power of my office to do what I said I was going to do—because for me, for Michigan, impatience is a virtue. No more waiting around to fix our roads,” Whitmer said during her address at the state capitol in Lansing.

Reconstructing, rather than resurfacing, state roads in high-traffic areas with the greatest need and getting to the projects sooner will save about $365 million in the long term, Whitmer told The Associated Press ahead of the speech, because construction costs will be higher as time passes. Pavement will last 25 to 35 years instead of five to seven years, she said. She pointed to low interest rates and noted that state debt payments for old borrowing will drop significantly in coming years.

“Dollars that are bonded will be going toward rebuilding long-term assets. So it’s not for short fixes. This is for reconstruction,” Whitmer said in the interview.

The second-year governor, who campaigned on fixing the roads, said increasing gasoline and diesel taxes by 45 cents a gallon to raise a net $1.9 billion more annually was “Plan A” and would have solved Michigan’s road-funding problem. But GOP legislators who rejected that idea never countered with a serious alternative and now it is time for “Plan B,” she said.

“It’s worse because another year has passed. Michigan roads are the most beat up and dangerous in the country,” she told legislators.

The plan, dubbed “Rebuilding Michigan,” is not a surprise. During her 2018 campaign, Whitmer said she would ask voters to pass a multibillion-dollar bond if she ran into legislative resistance to “user fees” such as higher gas taxes.

While her predecessor, Gov. Rick Snyder, opposed bonding for roadwork, former Govs. Jennifer Granholm and John Engler used the tactic in the 1990s and 2000s.

House Speaker Lee Chatfield, a Levering Republican, said he was disappointed with the bonding plan.

“What she’s focusing on is a financing tool and, if done right, can be responsible. But it’s not a funding proposal. So this is not a long-term solution for our roads—simply taking out a loan and passing it on to our children,” he said.

The State Transportation Commission can authorize the borrowing without voter approval, which it will do at a meeting Thursday. It also is expected to revise Michigan’s five-year project list then. Whitmer cited Interstate 275 in Detroit as an example of a project that was being bid for resurfacing and will instead become a reconstruction job.

Under state policy, Michigan’s debt service on State Trunkline Fund bonds is limited to $300 million, or a quarter of the revenue collected annually from state fuel taxes and vehicle registration fees. The state can pay up to $182 million more annually toward debt initially and not exceed the cap.

Also, payments on past borrowing—$118 million this fiscal year—will drop gradually and substantially, to $6 million by the 2027-28 budget year, according to the nonpartisan House Fiscal Agency.

The new bonding will not address local roads, unlike under her 2019 proposal, which would have pumped $1.4 billion more into state roads and an additional $400 million into local roads than under current law.

Whitmer put the onus on lawmakers to come forward with permanent road-funding options. She encouraged motorists who hit potholes on their local streets to pressure legislative leaders to act.

“Counties are responsible for 74% of the road miles in our state, yet the proceeds from her bonding proposal would not touch them,” said Stephan Currie, executive director of the Michigan Association of Counties.

Asked if she considered proposing a smaller gas tax hike after the 45-cent plan fell flat, Whitmer said she took seriously Republicans’ public criticism, which she said jibed with what was said in private meetings.

“There’s not a real seriousness about raising the kind of revenue we really need to bend the curve on our infrastructure crisis,” she told AP. “Perhaps I’m wrong. And if that’s the case, fantastic. If the Legislature wants to move forward on some funding, I’m eager to sit down and have that conversation. I think it’s ultimately what has to happen.”

Her shorter-than-normal, 36-minute speech was the start of a busy nine days in which she also will deliver Democrats’ national response to President Donald Trump’s State of the Union address and present her budget proposal.