Whitmer's Whitless Quick Fix Road Bonds

[XLFD]

You could easily have missed Governor Gretchen Whitmer's State of the State Address this last Wednesday night due to all of the news coverage on the Trump impeachment hearings or you otherwise may not have been all that interested in the first place. 

After a year of failing miserably in her campaign pledge to 'fix the damn roads', inspiring both Democrat and Republican state legislators to come together against her proposed 45 cents per gallon gas tax, followed by her vetoing the legislature's plan to increase annual road spending by $375 million without raising taxes, she has came up with her own alternative.  She's going to borrow $3.5 billion over the next four years at a roughly 3% interest rate over 25 years to fix the worst well-traveled highways.  

This latest ploy, unconsidered during her 2018 campaign that focused on fixing the roads, was anticipated earlier this year as an improbable solution that may improve road conditions now at the expense of the long-term.  Prior Governor Rick Snyder realized it wasn't good sense to go into debt to do roadwork, and took steps during his administration to move the state Transportation Fund from $2.3 billion (in 2019 dollars) to $3.6 billion, an increase of 57% in revenue with the adjustment in inflation considered. 

Remember Governor John Engler from the last millennium?  We are still paying off road debts over a billion dollars from his and Governor Granholm's administrations.  Overall, the state paid $161 million on its road debts last year, money which could have been used to pay for current road repairs.  Over $34 million was on interest alone.  

The Michigan Transportation Asset Management Council has declared about state roads:  “The expected increase [from the 2019 budget] in funding will halt the steady decline in pavement condition.”  If we are devoting enough capital into road projects to improve the overall conditions of the roads, why would we go into debt and jeopardize our future solvency?  Consider:

If $3.5 billion was borrowed all at once at 3.0% and paid off gradually over 25 years, the state would incur total interest expenses of around $1.45 billion. If the state used transportation tax revenue to make monthly payments on the debt, borrowing this year would subtract nearly $200 million per year from the amount available for road fixes and other transportation spending over the next quarter-century.

Over 90% of roadways are made of asphalt which has a lifespan of around 15-20 years, probably more towards the low end in Michigan with its ever-changing weather conditions.  Does it really make sense to do non-emergency road construction now and still only be halfway through paying for that same section of road when it needs to be repaired again in 15 years?  

Governor Gretchen seems to think:  Why should we pay for non-essential road repairs now when we can force our children and grandchildren to pay for it later?   The pain this will inflict later will outlast her governorship just like those two other governors who took the political expediency of using the credit card ten and twenty years ago.  Most people and most media forget all that and blame those who eschew borrowing (like Snyder) because they don't (or don't want to) make the connection with the past behaviors.

And if there's even just a small part of you that thinks this plan is a great move and that we will have better roads thanks to the governor and that the tourists who visit our area won't be hindered by road problems when they come visit Ludington and beautiful Mason County, guess again.  For here is a map of the roads (marked in red) that Governor Whitmer has selected to be the beneficiaries of her multi-billion dollar loan:

If you have a hard time reading maps, let it be noted that none of the projects are being performed in Mason County.  Nor is there any project in any of our neighboring counties, and only one in each of those county's neighboring counties (up in Benzie).  

Yes, we may never see any practical use of the $3.5 billion dollars she borrowed for these projects, but she will be guaranteeing that we and our kids-- maybe even our unborn grandkids-- will still be paying tens of millions in interest alone each year for at least the next three governor's terms that follow her.  Quite a legacy.

[Freedom Seeker]

This plan is highway robbery! Not to use what money is left over and take out a $3.5 billion dollar that will create more debt for years. Very much like Ludington's fiscal policy:
We have failing and neglected infrastructure, so take out more and bigger debt, rather than live within budget and cut spending to afford these necessary needs. At least the governor is not using the loan on Legacy Park.

Governor Gretchen is charming and speaks well, but I'll be surprised if she gets a second term after this fiasco, if anyone will run against her.
Maybe meantime there will be challenges against this executive authority.

[XLFD]

Here's the loophole the governor will be exploiting to go around the legislature, perhaps this loophole can be fixed, but probably not in time:

The state constitution allows the State Transportation Commission — over which Whitmer has influence — to authorize the governor's Department of Transportation to issue bonds against its constitutionally restricted funding.
Under the transportation commission's debt-service limitation policy, Whitmer could secure at least $3.1 billion of bond financing today, according to MDOT figures.
Act 51, Michigan's transportation-funding law that dates back to 1951, requires the State Transportation Commission to provide the Legislature's appropriations committees with a list of road projects 30 days before issuing bonds, according to a February 2019 House Fiscal Agency memo on road bonds and debt service.
"Although Act 51 includes these notification provisions, the act does not require legislative authorization for the State Transportation Commission to issue notes or bonds and does not give the appropriations committees or the Legislature as a whole authority to approve or reject the proposed project list," HFA analyst William Hamilton wrote in the 13-page memo.
A $3.1 billion bonding program would raise MDOT's annual bond debt service from $118 million to $301 million, according to MDOT's finance department.

[Willy]

Thanks for the information X. It's hard to believe that Whitmer can put a  $3.1 billion dollar anchor around our necks without legislative approval or approval by the citizens who will be paying the bill. Most of us that know how she and all the other leftists think are not surprised by this move. This won't be the only time she will try this kind of bait and switch scheme. I dread the rest of the time she will be office. However, in all fairness she did not create this mess. It is the lack of leadership by both parties. This should have been taken care of a long time ago. Use gas and road tax to repair the roads.

[Freedom Seeker]

Thanks XLFD for that link. Very informative.

[Du Wright]

https://www.foxnews.com/politics/who-is-gretchen-whitmer-michigan-g...

It could get interesting for Whitmer's career, in that she will give the democratic response to the State of the Union speech.

It's unfortunate that the Flint water crisis and an unpopular-corporate golden boy running against her opened the doors for the democrat governor. Also interesting that she lauds a republican governor which both of her parents had connection to in their careers.

[Willy]

After searching thru Ludingtons DDA files I found a map that proposed how any road funds should be used in the Ludington area.

[XLFD]

Ah, the Tooman-Tykoski Tribute Trail Tunnel, now with a fisherman's market, gas firepit and 16 ft. propeller, all privately-funded with your tax dollars.

[Willy]

Good one X.