State road repair funds take big hit

Highways in bad shape as tax revenues, federal funding decline

Karen Bouffard / Detroit News Lansing Bureau

USA — Americans can expect bumpier rides and fewer construction jobs over the next five years as declining state revenues jeopardizes federal funds for road maintenance and repair.

With a hefty boost from federal stimulus funds this year, the biggest effects of the crunch will come in 2011 when the recovery cash is gone and BILLIONS of dollars in shortfalls in the DOT road program will translate to huge losses in federal funding.

Gary Timco, 62, of Lyon Township says rides feel rougher, and Michigan can’t expect to attract businesses and job growth if the infrastructure falls apart.

“They’ve been doing a lot of repairs on I-75, but some of our roads are in really tough shape,” Timco said. “These roads only last so many years and in Michigan, with the snow, they’re in sad shape.

“If Michigan were to get its fiscal house in order and make cuts where necessary, there could be money for the road program and to make the match for federal grants.”

The MDOT road and bridge program for 2009 totals roughly $1.8 billion, including about $470 million in federal stimulus cash. With about $148 million in stimulus money carried over, the 2010 MDOT road program will total roughly $1.4 billion. With the loss of federal stimulus cash, the total will drop to about $1.14 billion in 2011.

But that would be a best-case scenario, and the state could have only about half of that available for maintenance. It’s anticipated the state will be $84 million short in money for roads, which could lead to a loss of $475 million in federal money.

Michigan’s road program is funded by gas tax collections and vehicle registration fees, sources that have slid with the economic downturn. According to data from a House Fiscal Agency report, about $130 million less went into the Michigan Transportation Fund in fiscal year 2009 than in fiscal year 2006.

Michigan contractors say they already feel the effect of the decline as a growing shortfall of money has forced MDOT to postpone or eliminate projects. MDOT in June postponed more than 137 road and bridge projects in the department’s five-year plan.

Fewer projects mean less work. Michigan stands to lose 25,000 jobs by 2014 because of a dramatic decline in spending for the state’s road and bridge program, according to a study by the University of Michigan Institute for Research on Labor, Employment and the Economy, commissioned by MDOT.

“As far as volume, our figures are basically cut in half from four years ago,” said Virgil Klebba, vice president of Dan’s Excavating of Shelby Township, one of MDOT’s biggest contractors. The company employed 120 fewer workers this past summer than in 2008, he said.

“We had four $80 million contracts going at one time in 2006. This year the largest we had was a $50 million contract we just started; everything else is half that size or smaller.”

In the U-M study, researchers looked at how road investment affects the economy, from the money spent in stores by road workers to the impact of road conditions on tourist-related industries and economic development, and the costs associated with increased driving time if roads deteriorate.

Including jobs created across all sectors — from construction to retail and manufacturing — the study estimates MDOT’s five-year highway program will result in 4,763 jobs in 2009. That number will decline each year through 2013, when just 3,661 jobs will be created.

Dan’s Excavating hires union employees for jobs that can range from $23.50 per hour for a general laborer to $28 for an operator or $31 for a carpenter, Klebba said, not including benefits.

“These guys make a very good living,” he said. “Typically in the summer, they’re getting 10-20 hours of overtime. They’re being hurt tremendously.”

The increased cost of building roads means Michigan will have to spend more just to stay even, MDOT spokesman Bill Shreck said.

“Because of the increasing cost of materials and fuel, we need an extra $320 million a year just to keep highways in their current condition,” Shreck said.

The Michigan Infrastructure and Transportation Association, a group that represents the road building industry, thinks Michigan needs to change the way it funds roads. Since the Michigan Transportation Fund contributes to county and municipal road programs, declining revenues affect every street and road, Keith Ledbetter, director of legislative affairs for the group, said.

“We’re down almost $200 million in the last seven years,” he said.

While road funding has slipped, so have road conditions, Ledbetter said. He cited a 2008 report from the Michigan Asset Management Council that found 25 percent of Michigan roads were in poor condition in 2007, a number that increased to 32 percent in 2008.

“Once you allow a road to get in poor condition, it costs four to five times as much to fix it,” he said.

Ledbetter said even if the economy improves, gas tax revenue will decline with the trend toward more fuel efficient vehicles.

“We need a structural change,” Ledbetter said. “Since we’re based on a per gallon gas tax, we get less tax (revenue) for roads. What happens when we get these cars on the road that are getting 100 mpg or that are running on electricity?

“It’s absolutely critical that we make some change that accounts for how people now are driving.” (517) 371-3660

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