Transportation Funding Findings and Conclusions                    Contact Info      Ourmiroads.com Home

 

We have talked much about needing more money for our roads and bridges. For those not intimately involved in those discussions, here is a summary of the findings of various studies done in recent years:

 

1. TF2 Report. In 2008, the Transportation Funding Task Force (TF2) recommended that the state increase investment (and accompanying revenue) $3 billion to achieve its “good” option for transportation (considering all transportation needs, including roads, bridges, addressing safety issues, increasing capacity, rail, transit and aviation).

 

2. House Transportation Committee Work Group. The September, 2011 report “Michigan’s Road Crisis: What Will It Take to Maintain Our Roads and Bridges?” reported on what it would take to just preserve our existing road surfaces and bridges and achieve over a 12 year period 95% of the freeways and 85% of all other paved roads in the state at a “good” or “fair” condition. It found that it would take an investment of at least $1.4 billion more per year than current spending. The study used the asset management approach of what would be the least cost long-term combination of “fixes” and timing of fixes to maintaining the value of the state’s assets of roads and bridges – a business approach. This approach emphasizes doing the capital preventive maintenance to avoid the much higher cost “fixes” of rehabilitation or reconstruction necessary much sooner in the road life than if the capital preventive maintenance is not done.


3. House Transportation Committee Work Group Update. The “Michigan’s Road Crisis: What Will It Take to Maintain Our Roads and Bridges? 2012 Update” released in March, 2012 indicated that the shortfall to achieve the 95%/85% goals had risen to $1.542 billion per year and rising over the 12 years studied. This study was updated to reflect the year delay from 2012 that the first additional moneys were assumed to be available in the initial study due to the failure to achieve any funding increases in 2011. The study also utilized additional road condition data unavailable in 2011. The study also found that the year’s delay will cost the hardworking taxpayers in the state an additional $1.8 billion over the next 12 years compared to the costs had the legislature acted in 2011.


4. Former Representative Rick Olson’s Transportation Funding Update, 2013. "Michigan’s Roads Crisis: What Will It Cost to Maintain Our Roads and Bridges? 2013 Update" The amount of additional funding the State of Michigan needs to just preserve our existing road surfaces and bridges and achieve over a 12 year period 95% of the freeways and 85% of all other paved roads in the state at a “good” or “fair” condition has risen to $1.754 billion, up from $1.542 billion just a year earlier. The cost of delay from the legislature taking no action in 2012 to 2013 has been $2.219 billion.


5.
Former Representative Rick Olson’s Transportation Funding Update, 2014. "Michigan’s Roads Crisis: How Much Will It Cost to Maintain Our Roads and Bridges? 2014 Update" The additional money needed to maintain our roads and bridges over the course of 12 years to reach the goals of 95% and 85% good or fair rose to $2.183 billion, after factoring in increases in construction costs and changes in road condition. Note that this is the first year estimate, which rises to an additional $3.207 billion in 2025.

The total 12 year cost rose from $21.965 billion in the 2011 study, to $25,151 billion in the 2012 study, to $28,912 in the 2013 study, to this year’s study 12 year total of $30,279. In three years, the cost of delay has grown $8.314 billion or an average of $2.771 billion per year.


6.
Michigan Transportation Asset Management Council’s “Michigan’s Roads and Bridges 2013 Annual Report”, Spring, 2014. “In 2004, the Council projected it would have cost approximately $3.7 billion to bring all federal-aid eligible roads rated poor and fair up to a good rating. In 2013, the Council projects it would have cost $14.1 billion, more than triple what it would have cost in 2004. This represents $10.4 billion in lost value of our road assets.”

Note that the Council’s estimate deals only with the federal-aid eligible roads. Previously, I recall the Council saying that all Michigan roads value was depreciating at $3 billion per year.

 

7. TRIP Report.Where Are We Going? Current and Future Pavement and Bridge Conditions, Safety, and Congestion Levels of Michigan’s Roadways and the Impact on Michigan Households, Based on Investment Levels over the Next Decade was issued by TRIP, a Washington, DC, based national transportation research organization in late March, 2012. The report concluded: “Increased transportation investment is critical to Michigan's economic recovery and to lower costs for state's residents; each Michigan household could save nearly $2,000 annually by 2022 if funding is increased to allow for significant improvements.”

 

8. TRIP Report, January 2014. "Future Mobility in Michigan: The Cost of Meeting the State’s Need for Safe and Efficient Mobility" TRIP estimates that Michigan roadways that lack some desirable safety features, have inadequate capacity to meet travel demands or have poor pavement conditions cost the state’s residents approximately $7.7 billion annually in the form of additional vehicle operating costs ($2.3 billion), lost time and wasted fuel due to traffic congestion ($3.1 billion)   and traffic crashes ($2.3 billion).

 

Put on a per motorist basis for the 7,059,509 licensed drivers in Michigan, that is a total of $1091 per motorist, comprised of $330 each for additional vehicle operating costs and losses due to congestion and $439 for losses due to traffic crashes.


9. Phase In? Another run of the funding model was run to see what the result would be if the legislature were to phase in funding increases of $200 million the first year, then $400 million, then $600 million, then $800 million and finally $1 billion, rather than do a $1.4 billion increase all at once. The result was that, although these amounts of money are far better than no additional money, we would actually see a decrease in the average quality of our roads in the future from the current condition. That is, the roads would still be deteriorating faster than the capital improvements to them.


10. Just Maintain Our Current Poor Quality? The House Transportation Committee Work Group set the 95%/85% goals and then sought to see what the lowest cost combination of “fixes” and timing of “fixes” was to derive the additional funding needed. A follow up question was asked, “What would it take to just maintain the road conditions with no average road system improvement?” The funding model was again used and the following was the result (i.e., we would still need over $1 billion more per year, and rising):

Year

Total Funds Needed to Maintain Roads in 2011 Condition

Total Additional Funding Above Current Investment Needed to Maintain 2011 Condition

(millions)

(millions)

2013

$2,796.95

$1,104.53

2014

$2,796.42

$1,104.00

2015

$2,700.99

$1,008.57

2016

$2,276.56

$584.09

2017

$2,567.96

$875.14

2018

$2,734.69

$1,042.25

2019

$2,916.46

$1,224.16

2020

$3,062.21

$1,369.87

2021

$3,035.90

$1,342.37

2022

$3,012.37

$1,320.52

2023

$3,122.45

$1,429.25

2024

$3,315.41

$1,623.00

2025

$3,485.79

$1,793.37

Total

$37,824.16

$15,821.15

Avg

$2,909.55

$1,217.01

  1. Note that these calculations were made with 2011 construction costs and road conditions. We have not rerun the model with this perspective, but we can extrapolate 2014 costs using the information in the 2014 update. The first year cost calculated in 2011 of $1.377 billion rose to $2.183 billion in 2014, or a 1.58533 multiplier. If that multiplier is applied to the $1,104 billion first year cost to simply maintain our current poor quality, one derives $1.751 billion in 2014 dollars and road conditions.

    This number may also be looked upon as an estimate of the amount of depreciation in our road system over and above the current level of investment maintaining the roads.

  2. 11. Anderson Economic Group/Michigan Chamber Foundation. The economic report entitled “Economic Impact and Policy Analysis of Four Michigan Transportation Investment Proposals” (June, 2012), which was commissioned by the Michigan Chamber Foundation and prepared by Anderson Economic Group (AEG), concludes that:

 

12. "Fringe Benefit Costs Paid by MDOT for Contract Work on State Trunkline Highways: Are They Out of Line?” (October 19, 2012, by Rick Olson). The fringe benefits paid by MDOT to county road commissions for contract work done by the road commissions on state trunkline highways on behalf of MDOT, although very high for some road commissions, appear to have reasonable explanations. Significant efforts to control these costs have been expended by the road commissions in question.

Conclusions Reached:

 

1. We need at least $2.183 additional funding or savings to maintain our roads and bridges and achieve the 95%/85% good or fair condition in the next 12 years. The model assumed the least cost way of maintaining the roads’ asset value, that being the asset management approach of pavement preservation, whereas in reality, some “worst first” construction will be necessary.

Any additional revenue source should have the capability of growing, otherwise the state will be in a similar position within just a few years as inflation eats up the additional revenue.

The $2.183 billion calculated with the model is just the additional amount needed to maintain our existing pavements and bridges, and does not consider additional (i.e., none in addition to what is currently being allocated out of current funding) funding for relieving congestion, addressing safety issues, increased attention to our gravel roads, meeting deferred state and local road agency equipment needs, or providing increased funding for transit, rail, air or water transportation. If we consider just the current 10% of the Michigan Transportation Fund going to transit, the $2.183 billion would need to be increased by 10/9 = 1.11, or $2.426 billion.

 

2. To avoid an average additional cost of $2.771 billion per year to the taxpayers caused by delay, action needs to be taken ASAP to avoid missing yet another construction year. Time is not on our side. Delays in solving Michigan’s road funding shortfall is analogous to the tremendous national debt because of the burden on future taxpayers.

 

3. We need to be bold in filling the funding gap in one fell swoop, as incrementalism does not achieve the goals. Gradual increases in additional revenue, while beneficial, will not help us that much in reaching the 95%/85% quality goals.

 

4. Doing less than the total need would expend considerable political capital and end up disappointing the taxpayers with higher costs, but no better roads. That is, if we are to take action, we might as well achieve the goals, rather than take the potential political heat for the higher costs AND still have poor roads.

Note also that even with $2.183 billion of additional funding per year, improvement would not be instantaneous and even with the goals of 95%/85% good or fair in 12 years, the roads would be far from pristine, as fair is not good.

 

5. While it will cost motorists money in terms of higher gas taxes and vehicle registration fees, there will be offsetting savings in vehicle repairs, longer life vehicles, safety, etc. of an estimated $330 per year, not counting savings in less congestion or traffic crashes. This compares with $309 per motorist if an additional $2.183 billion of revenue were raised.

 

6. There are both short term job benefits and long-term benefits of creating an environment for businesses to flourish from maintaining our roads and bridges.

 

7. There is not enough fraud, waste and abuse in the system to eliminate which would fill the funding gap calculated in other studies. Nonetheless, control of these costs remains important and continued efforts are warranted.