Legislature Completes Road Funding Deal

The House and Senate passed legislation last night that aims to eventually provide $1. 2 billion in new funding for Michigan’s crumbling roads and bridges.

Under the proposal, the gas tax  increases to 26.3 cents per gallon on January 1, 2017, a 7.3 cents per gallon increase. The amount, paired with bringing the current 15-cent per gallon diesel fuel tax to the same level, is intended to generate $400 million in revenue. Inflationary increases would begin January 1, 2022. And where the original Senate plan had a gas/diesel fuel sunset, the final proposal has no sunset.

The registration fee increases, previously scheduled to be 40 percent across the board in the House plan, decreased to 20 percent for passenger vehicles and trucks, which would generate an estimated $200 million. Those take effect January 1, 2017, one year after what the House had originally proposed. And hybrid vehicle registration fees are the same as passed by both the House and the Senate.

Both the main gasoline tax increase bill (HB 4738) and the vehicle registration fee increase bill (HB 4736) passed on votes of 20-18.

The income tax rollback would occur when General Fund growth exceeds the rate of inflation, then multiplied by 1.425. The rollback was scheduled to begin in 2018 under the Senate and 2019 under the House, but now the first rollback could occur on January 1, 2023.

The lock box included in the Senate proposal is back in the final deal. Under the original Senate plan, the legislation would have locked up the last 7-cent increase on the gas tax annually until the lock box is opened via passage of a concurrent resolution. Under the new proposal, it would lock up the first $100 million of gas/diesel fuel tax increase until unlocked via the passage of a concurrent resolution.

The General Fund dedication in fiscal year 2019 is $150 million, then $325 million in fiscal year 2020. In fiscal year 2021, the GF dedication would be $600 million.

The proposal keeps the House provision to expand the Homestead Property Tax Credit largely as outlined by the House: The income multiplier is 3.2 percent in tax year 2018 and the maximum credit $1,500 that same year. It also increases the renter credit.

There is also an MDOT administrative cap of 8 percent (1 percent more than both the House and the Senate had proposed); competitive bidding and warranty assurances and public transit flexibility.

Now the bill will be brought to Governor Snyders desk, where he has indicated he intends to sign it.

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