COUNTY ROAD ASSOCIATION OF MICHIGAN

417 SEYMOUR – SUITE ONE - LANSING, MI 48933

TELEPHONE 517.482.1189 - FAX 517.482.1253

Talking Points- HB 5303 Commercial Corridor Fund

Summary: House Bill 5303, introduced by Rep. Rashida Talabi (R-Wayne), would amend PA 51 of 1951 creating the Commercial Corridor Fund (CCF) and implementing the following changes:

The Commercial Corridor Fund would be used to distribute all new funding in the following manner:

o 10% off -the-top for the Comprehensive Transportation Fund; o Inter-departmental grants would be taken from the CCF according to current rules and

include the additional $20 million per fiscal year for the Department of State; o $40.275 Million for the Transportation Economic Development Fund; o The balance of the CCF would be directed 55% to MDOT and 45% to local road

agencies; o Beginning in FY2013, Snow funds would be allocated to local road agencies from the

CCF according to the same formula; and o The balance of all funding returned to local road agencies from the CCF would be

required to be expended for construction, preservation, acquisition and extension of the road system. No funds are available for administrative expenses.

Funding (the 45% not provided to MDOT) would be distributed based on “federal functional class” to the following types of “local road agencies”: county road agency; city or village that received more than $50,000 in funding in FY 2012; a city or village that received less than $50,000 in funding in FY 2012 but the residents elected to maintain road jurisdiction; a regional road agency made up of 2 or more cities, or 2 or more county road commissions and developed under the urban cooperation act.

Funds to local road agencies would be allocated according to the following formula: o 28% based on vehicle miles traveled (VMT) on principal arterials; o 24% based on vehicle miles traveled (VMT) on minor arterials; o 20% based on vehicle miles traveled (VMT) on major collectors; o 12 % based on centerline miles on minor arterials; rural major collectors, and rural minor

collectors; o 8% based on centerline miles on rural minor collectors; and o 8% based on centerline miles on local roads.

All CCF revenues must be expended in compliance with Asset Management statues. The provision requiring a match to local road funding remains in the CCF language. As with the

MTF, there is nothing specifying where this match is to come from. CCF funds cannot be expended on any road closed to commercial traffic, unless it is a local road. The following should be noted about the funds remaining in the MTF:

o Road commissions would continue to receive $10,000 from the amount returned to counties under the Michigan Transportation Fund for a licensed professional engineer.

o Until FY 2013, road commissions would continue to receive Snow funds through the MTF. In FY2013 these funds would come from the CCF.

o The distribution formula for MTF remains the same in that MTF funds must be used according to the same percentages as allotted in the current distribution (75% for use for construction, preservation, acquisition and extension of the county primary road system; the agreement allowing primary road funds to be transferred to the local road fund remains intact and applies to just the funds directed from the MTF; and so on.)

o All language referring to the distribution of funding for urban routes is repealed. This legislation also transfers the jurisdiction of roads to counties as required under HB 5304-

the system of municipal streets in municipalities receiving less than $50,000 in MTF funds in FY 2012.

CRAM position: CRAM has taken a position of strong opposition to this legislation. Background: In 2007, The Mackinac Center released a report entitled, Road Funding Time for a Change, by John C. Taylor, Ph.D. In this report, Dr. Taylor recommended that new revenues be separated from existing revenues and distributed via a “high priority road network.” According to Taylor, “the high priority network will allow for highway funding to be focused on a new network of key roads that are most important for economic development in the state. Such a network would represent the key commercial network roads as well.” Taylor attributes the concept of the “Commercial Priority Network” to the June 1, 2000 report, “Transportation Funding for the 21st Century,” the Act 51 Transportation Funding Study Committee report. The Act 51 study led to the creation of the Asset Management system in Michigan. Although the report questioned the need to base Act 51 formula distribution on asset management processes, it also recommended that, “any asset management-based formula should take into account the need for a base level of funding for the routine maintenance of all roads.” The CCF proposal, which was modeled after Dr. Taylor’s report, ignores the key premises of asset management and providing a base level of funding to all road agencies. A sufficient level of funding must be made available to provide for routine and preventative maintenance. The asset management model cannot be fully implemented unless agencies have the funds available to implement “the right fix at the right time” to all roads on their primary and local network. In 2010, MDOT completed an analysis of transportation funding and the Act 51 distribution formula and looked at several scenarios including the use of vehicle miles traveled (VMT) data. MDOT estimated in their March 1, 2010, Section 394 Report, that “a handful of mostly urbanized jurisdictions would benefit by the suggested change, while the majority of other road agencies would see a reduction in funding, in some cases by more than 40%.The report further concluded: Michigan’s transportation funding distribution formula, while complicated, is no more or less complicated than those of other states. As indicated by other states and demonstrated by two alternative scenarios, the real problem lies not with how the revenue is distributed, but with how much revenue is available for distribution. Changing the distribution formula would redistribute revenue to a handful of largely urbanized jurisdictions at the expense of others. Doing so would certainly undermine the service and condition of transportation assets in most of the state. The conclusion of the Transportation Funding Task Force remains sound: Michigan needs to double its investment in transportation if it is to maintain the transportation assets it currently has and improve the economy.

MDOT estimated that only 12 counties would receive additional funding, while 71 others would lose revenue.

Loss of funding 40% or greater: Baraga; Cheboygan; Houghton; Menominee; Missaukee; Oscoda; and Sanilac. Loss of funding 20-39%: Alcona; Alger; Alpena; Antrim; Benzie; Branch; Charlevoix; Chippewa; Clare; Crawford; Delta; Dickinson; Emmet; Gogebic; Gratiot; Hillsdale; Huron; Ionia; Iosco; Iron; Isabella; Kalkaska; Keweenaw; Lake; Luce; Mackinac; Manistee; Marquette; Mason; Mecosta; Midland; Montcalm; Newaygo; Oceana; Ogemaw; Ontonagon; Osceola; Otsego; Presque Isle; Roscommon; Schoolcraft; and Wexford. Loss of funding up to 20%: Allegan; Arenac; Barry; Bay; Berrien; Calhoun; Cass; Clinton; Eaton; Gladwin; Grand Traverse; Ingham; Jackson; Lapeer; Leelanau; Lenawee; Montmorency; Muskegon; Shiawassee; St. Joseph; Tuscola; and Van Buren. Increase in funding 1-20%: Kalamazoo; Kent; Monroe; Ottawa; Saginaw; St. Clair; and Washtenaw. Increase in funding 20% or more: Genesee; Livingston; Macomb; Oakland; and Wayne.

The Section 394 Report also addresses what would happen if lane miles were used in the formula in place of route miles (centerline miles). Although some urban areas would receive an increase the swings are not as dramatic and not all urban areas would benefit.

CRAM supports MDOT’s conclusion following this extensive study of the Act 51 distribution system. “The real problem lies not with how the revenue is distributed, but with how much revenue is available for distribution.” A massive shift in the distribution system is not necessary. In 2006, the CRAM Board of Directors took a position that when funding is increased the “internal distribution formula” would be changed by increasing the urban factor and the allotment for county engineers. This change is intended to reflect the need for additional funding in urban areas, but also addresses the crucial importance of maintaining a base level of funding. Talking Points:

It is unclear if there is an error in the legislation or if it is legislative intent, but the formula used for distribution funding to local agencies would fund rural minor collectors twice, once at 12% and again at 8%.

Currently county road agencies are capped at 10% spending on administration, while the average is closer to 7.5%. As the MTF is phased out the available funds for administration will diminish each year. When the CCF is completely in place, no funding will be available for administration. County road commissions have no taxing authority and no other way, other than county millage, to raise revenues to cover administrative expenses.

There is not adequate VMT data available on the county, city and village road networks to allow for the distribution of funds based on this type of formula. Even if accurate data were available, the re-distribution of funding would have a devastating impact on county road agencies.

MDOT’s Section 394 report provides the strongest argument against this legislation. Michigan’s economy demands a strong state and local infrastructure. Although the 8% of roads under

MDOT jurisdiction are crucial to our economy, we cannot ignore the county and municipal road systems. The businesses that drive Michigan’s economic engine are not located on the interstate, and the overwhelming majority of all commerce is not located on state trunklines. For Michigan’s economy to rebound we need both a strong state and local road network.

The Snyder Administration has said that the first priority should be funding state trunklines and commercial corridors, using state resources. This stance is unfortunate and fails to address the real needs. The TF2 recommended at least doubling transportation funding, while Snyder has called for an increase of $1.4 billion. If the Administration and legislature are unwilling to address the real need by seeking the necessary level of funding, the proper funding of the local road and bridge network will fall to local governments and taxpayers, most likely in the form of road millages. Funding a transportation infrastructure that is sufficient to support our economy is one of the fundamental purposes of state government.

Leaving the fate of the local road and bridge network in the hands of voters will yield a disparate patchwork of roads that fails to serve motorists and local commercial traffic. While a one mill county road millage may provide an adequate level of resources to supplement state road funding in some counties, this is not a viable option in rural areas. In Oscoda County for example, one mill equals only $360,000 annually. The tourism industry in Michigan depends on the local roads that feed Oscoda County’s many ORV trails and the sport fishing, canoeing and tubing along the heart of the AuSable River Valley. The local road and bridge network is simply too important to be left to chance!