Posted tagged ‘transportation’

The Transportation Issue

March 27, 2014

What do potholes have to do with a local transit millage?  More than you might have thought.

snyderholesUnderlying the discussion of a new millage to expand our local transit system is the general frustration of the public at large with Michigan’s transportation system, most specifically the condition of the roads. Almost every political discussion now ends with a public cry: What about the potholes?  The liberal political group MoveOn.Org, usually concerned with social issues, has a petition asking state lawmakers to fix the potholes. The Michigan Democratic Party is even trying to make this a campaign issue with a Snyderholes website.  This political message encapsulates the transportation issue:  everyone agrees that it is a huge problem, and also that someone else ought to pay for it.  Note that the suggestion is that business taxes, rather than gas taxes, should be fixing our crumbling infrastructure.

Transportation funding is complex and always contentious. But it is important to understand it if one wishes to make any prescriptions for change.  See our posts on Transit, Transportation and the Money Question (all available from the Transportation Page).  See especially the post on the Comprehensive Transportation Fund as it pertains to transit, and the post explaining Act 51.  Understanding these two pillars of transportation funding in Michigan is key to understanding the fix we find ourselves in.  Transportation has become a zero sum game in that multiple constituencies are chasing fewer and fewer dollars for deeply felt needs.  A central problem in Michigan is that the main source of transportation funding (the state gas tax) is less and less adequate to pay for the increasing needs in infrastructure and service.

Federal funds a problem

Highway Trust Fund ticker. Goes into deficit before end of FY2014.

Highway Trust Fund ticker. Goes into deficit before end of FY2014.

A tax on gasoline is intended to be a user tax in which users of roads pay for them.  It has been the principal means of paying for most forms of transportation.  In the Federal Government, the (Federal) gas tax is the basis of what is called the Highway Trust Fund.    That fund is regulated by the transportation act, currently MAP-21 (expires in September 2014).  Here is SEMCOG’s summary of MAP-21.  MAP-21 is the source of most highway and transit funds that come through to Michigan communities via the Michigan Department of Transportation.  An important thing to know about the Highway Trust Fund is that it essentially funds an entitlement, since funds are distributed according to the formula set up by the current transportation bill.  For example, Federal support for transit projects is distributed by formula rather than by earmarks or other special treatment. But since this revenue source is actually trending toward zero, transportation needs nationally look rather desperate.  Here is an analysis by Transportation for America, a nonprofit interest group. Certainly there is no room there for helping Michigan solve its problems.

Michigan impasse

So, returning to Michigan: a logical solution to insufficient funds would be to raise the gas tax rate, or to add some other form of tax to it.  Last year, Governor Snyder’s budget message proposed an ambitious program of a new way of computing gasoline and diesel taxes plus new registration taxes.  He also proposed a local option that would allow counties to have a separate registration fee to help pay for local transportation.  In our tax-aversive state, this was (as we say in government circles) dead on arrival.  Instead, the Legislature allocated modest sums from the general fund in a supplemental appropriation to patch up a couple of major problems (one of which was the money needed to keep Amtrak’s Wolverine line running).

This year, it has been much the same story, though the Governor dropped the special fixes and simply made budgetary recommendations.  Here is the final version of the supplemental bill (SB 608), as summarized by the Senate Fiscal Agency.  A very rough-and-ready approach assigned $100 million from the General Fund to pay for “special winter road maintenance” and $115 million for “priority road projects” (to be determined by politicians, natch).  Here’s what they said about the special winter road maintenance:

Sec. 702. Transportation. Requires the funds appropriated for special winter road maintenance to be distributed to the State Trunkline Fund, county road commissions, and cities and villages, in the same percentages described in Public Act 51 of 1951, and requires distribution to each entity in amounts proportional to the current year amounts distributed from the Michigan Transportation Fund. Also requires that special winter road maintenance funds be used only for road maintenance, excluding administrative, overhead, and other indirect costs.

So that may help with the potholes in the short run.  (Note the reference to the percentages in P.A. 51.  This is practically the stone tablets of transportation funding in Michigan.  That was P.A. 51 of 1951, and heaven help those who wish to change those allocations.  See more information on those percentages here.) But we haven’t even begun to address generally bad road conditions, including more rural roads that have degraded far beyond potholes.  There are bridges that are unsafe.  (The Legislature advised some warning signs.)

County efforts

The Washtenaw County Board of Commissioners, which includes several commissioners representing rural townships, have been wrestling with the lack of adequate funding for the Washtenaw County Road Commission (WCRC) for many months.  While Ann Arbor and other cities and villages in the County have their own allocation (21.8%)  from Act 51 funds, the rural roads are entrusted to the Road Commission, an appointed body.  They use their own allocation (39.1%) to address all maintenance problems and some of the improvements for rural roads. The news is not good.  As the Ann Arbor News reported, county (i.e., rural) roads are in really bad shape, both from years of “deferred maintenance” and because of the rough winter.  The Ann Arbor Chronicle has reported substantively on the efforts of the BOC to address a problem for which they do not really have jurisdiction (the WCRC has a completely separate administration and governing board; the commission members are appointed by the BOC, but it has no influence over day-to-day decisions).  The BOC has kicked around ideas about absorbing the Road Commission into their own body (in essence, becoming the WCRC) and appointed a subcommittee to look into that possibility, as well as expanding the size of the WCRC and making it an elective body.  According to a report by the Ann Arbor Chronicle of their March 1, 2014 meeting, it appears that none of those options will be exercised.

A possibility that appears still to be alive is that the BOC would use a pre-Headlee Act 283 (P.A. 283 of 1909) to levy a millage on all the county for roads.  The discussion, as reported by the Chronicle, seemed to veer between the idea that Ann Arbor and other cities would be allocated parts of this and that use of the funds would be decided by the WCRC.  Unlike post-Headlee legislation, this tax could be enacted without a vote of the public.  Township representatives at the BOC meeting were enthusiastic about this, given support by Conan Smith (an Ann Arbor Commissioner).  But Commissioner Dan Smith was instead suggesting a county-wide road millage to be approved by the voters.

The problem is that most cities and villages already levy special taxes on their residents to pay for their own road maintenance. For example, Ann Arbor voters have consistently renewed a local road millage.  For 2013, it was 2.125 mills. 

We come back to the issues of governance and equity.  Who should pay and who benefits? The discussion at the BOC elucidated those nicely. Commissioner Conan Smith explained the political problems entailed. He is a regionalist and favors having Ann Arbor taxpayers help to pay for rural Washtenaw County roads.  But should Ann Arbor residents help to pay for roads in areas outside the city, especially if they have no say in how those additional funds are spent?

Interestingly, Conan Smith (a city commissioner) and Dan Smith (a rural commissioner) had different solutions, where Dan Smith would allow Ann Arbor voters to make this decision for themselves (a countywide millage is unlikely to pass without a majority vote in Ann Arbor), while Conan Smith would prefer to impose a solution (using Act 283 ) that would bypass the voters.  Conan Smith, who recently announced that he would be running again for his seat on the BOC, acknowledged that he would be moving against the desires of many of his constituents and that this would cause some political problems.  As quoted by the Chronicle,

The road commission doesn’t have control over streets in Ann Arbor. So if he advocates for a tax to fund roads outside the city, and his constituents are looking at the poor condition of city streets, “I’m going to get hammered, right?”… (and later)… “He said he’s cast many votes that were counter to the direct, immediate financial interests of his constituents. For example, he cited the fact that he was in the majority in voting to fund the sheriff’s road patrols. It was a heavily-divided city-versus-township issue, and at least one Ann Arbor commissioner needed to support it in order to pass. He said he was a “different kind of politician than others, because I take that countywide perspective.”

Apparently much of Conan Smith’s interest in this was in bringing the function of the WCRC into the BOC.  In the end, he was the only vote in favor of that option.

There was evidently no discussion of when a countywide roads millage would either be imposed or voted on, or the rate of that millage.  Presumably the commissioners are aware of potential overlap with the urban core transit millage.

One pothole away from transit

The Ann Arbor Area Transportation Authority brought up potholes in their March 20 meeting.  The Ann Arbor Chronicle’s report of the meeting included some moments of perhaps unintentional hilarity as board members sought to incorporate information about transportation funding into their own concerns.  Lobbyists Clark Harder and Dusty Fancher were there to brief the board on events in Lansing.  It was pointed out that the public is very concerned about the condition of the roads, which board members evidently took as a bit of challenge to their own priorities.  Eli Cooper stressed the importance of continuing to improve funding for transit. From the Chronicle’s account:

There’s an opportunity right now because the potholes are creating focus. “We should never let a crisis go unused,” he quipped. Harder agreed with Cooper, but said that some of the MPTA members get a little antsy and concerned when everything they read in the newspaper is about potholes. But that is what drives the message statewide. And if that is what they have to use to get more funding for public transportation, then Harder was OK with that –as long as they don’t lose sight of the big picture.

 This moved Larry Krieg to suggest a slogan for the AAATA, “You are one pothole away from public transit”.  Presumably this was meant to say that your auto might be disabled so that you would be dependent on transit.

A reason to vote for the transit millage?

A reason to vote for the transit millage?

CEO Michael Ford, who receives a comfortable automobile allowance from the AAATA, supported this concept by sharing that “he’d had an incident with a pothole this week and found himself taking the bus. “It’s nice to have that option,” he said.

 UPDATE:  Evidently the transit-charm-against-misfortune theme is not restricted to AAATA.  Suburban Detroit’s SMART bus system is coming up for an increased transit millage vote.  Megan Owens of Transit Riders United says  “Any one of us is one broken leg or one bad pothole away from public transit.”   Ouch.  That happened to me. But my own bus route 13 wouldn’t take me to evening meetings – it quits too early.

SECOND UPDATE: MDOT has announced the amounts awarded to each municipality from the special appropriation.

“The Michigan Department of Transportation (MDOT) allocated the one-time appropriation of $100 million according to the Public Act 51 of 1951 road funding formula, meaning MDOT received $39.1 million, counties $39.1 million, and cities and villages $21.8 million.”

“The Act 51 formula is complex. How much a county, city or village receives in funding through Act 51 depends on several factors, including road mileage and population. Counties, cities and villages receiving portions of the $60.9 million must use the money for winter maintenance costs, and not for things such as administration, overhead or other indirect costs.”

Here is the list of awards to counties, cities and villages the list of Michigan counties, cities and villages with their award amounts. Washtenaw County (i.e., the Road Commission) will receive $1,091,502.29 and Ann Arbor will have $461,171.49.  I suspect that the potholes will consume those funds rather handily.

THIRD UPDATE: A proposal has surfaced to rework Michigan’s fuel taxes. Whether it would actually increase money going to roads is questionable, and it is also not clear what effect it would have on transit funding.  Here are a few details as reported by MLive.

 FOURTH UPDATE: A commenter on a recent Ann Arbor News report about transit millage supporters and opponents seems to suggest that I am the source of the anonymous flyer linked to in the report.  While that flyer does reference potholes, it is a rather crude and questionable statement that buses cause potholes.  I don’t support that thesis (haven’t bothered to do their math), am not in the habit of putting out anonymous flyers (I sign my own blog and Twitter account), and emphatically reject any part in preparing or distributing that flyer.

In making some inquiries, I have been told that the flyer was distributed by email among a group of friends.  It is too bad that the Ann Arbor News chose to publish it.

FIFTH UPDATE: The Legislature is moving to assign the $115 million in “priority road projects”.  Expectations (as reported in the Detroit Free Press) are that the assignments will mirror the process from last year, in which almost all projects were assigned to districts represented by Republicans.   Here is the list of such projects from 2013.  Washtenaw County is noticeably missing from the list.  We are completely represented by Democrats.

Trans4M's diagram of effect on transit and other sections of CTF with Bolger's proposal

Trans4M’s diagram of effect on transit and other sections of CTF with Bolger’s proposal

SIXTH UPDATE: Trans4M (Transportation for Michigan) has a post discussing House Speaker Bolger’s proposal for altering the transportation formula.    It is a concern because it would bypass the Comprehensive Transportation Fund. The CTF is the source of much transit funding in Michigan.  The obvious intent is to emphasize roads even more.

SEVENTH UPDATE: Board of Commissioners chair Yousef Rabhi has confirmed that the May 7 BOC agenda will include discussion of road funding and setting of a public hearing.  The agenda will not be available until May 2.  Informal communications indicate that the BOC would set a public hearing for May 21, either for the option to place a millage on the ballot, or for the option to impose a countywide millage via Act 283.  The attractive thing about the Act 283 option is that the money could be available immediately, with the July tax bill, assuming that this item passes on May 21 and the subsequent meeting.  (The BOC customarily votes on such items at Ways & Means after a public hearing, then at the Board meeting two weeks later.) Cmr. Rabhi has informed us that this use of Act 283 is likely not feasible, on the advice of counsel.  May 7 agenda merely lists a discussion of  “options for road funding”. Depending on that discussion, a future public hearing could be set for a ballot measure.

EIGHTH UPDATE: Federal funding could take a real hit if the MAP-21 Federal Transportation Bill is not renewed by Congress.  It expires at the end of this fiscal year (October 1).  Here is an overview from Transportation for America.  The Ann Arbor urbanized area alone could lose $11.8 million in transportation (including transit) funding.

NINTH UPDATE: Here is an excellent, if belated, report of the April 17 Board of Commissioners working session on road funding from the Ann Arbor Chronicle.

TENTH UPDATE: The AAATA transit millage ballot issue was a resounding success.  Here are the numbers from the Ann Arbor Chronicle.

ELEVENTH UPDATE: Regardless of the information about legality of using Act 283 for a countywide road funding millage (see the SEVENTH UPDATE), the BOC has set a public hearing for May 21, 2014 on possible use of Act 283 for this purpose.  The brief report by the Ann Arbor Chronicle makes it clear that the BOC is not settled among themselves on this issue.

TWELFTH UPDATE: A new report pushes the idea of a mileage-based road funding tax. A report in the Detroit Free Press describes it. The actual SMART Mileage Fee Study is here.  In my opinion, this “road user fee” is a really bad idea from the viewpoint of global warming (it would penalize users of low gas mileage cars).  My guess as to why the Michigan Environmental Council is pushing it is that they are hoping for increased funding of transit.

 THIRTEENTH UPDATE: It looks as though attempts to find new revenue for transportation funding in the Michigan Legislature are dead for the current session. According to Mlive, putting a sales tax increase on the ballot was rejected, as was an increase in fuel taxes.  Senate Democrats attempted to link the fuel tax increase to a low-income tax break, which probably didn’t help.  Here is an additional update from Crain’s.

FOURTEENTH UPDATE:  MDOT has now released the list of special “ priority projects” to be funded by the supplemental legislation. Looks as though the major Washtenaw County allocation was to Prospect Road in Ypsilanti.  That beats last year, when our county got none of the special money (we are represented by Democrats).

FIFTEENTH UPDATE: The Washtenaw County Board of Commissioners has now appointed a road funding committee. Here is the report from the Ann Arbor Chronicle.

SIXTEENTH UPDATE: On July 31, 2014, the U.S. Senate did a last-minute save on the Highway Trust Fund, passing a House bill that barely extends the funding till next spring.  It is a very short-time fix for several reasons, including the means of funding, which were a temporary adjustment in the way pension payments are shown in tax filings (“pension smoothing”). There is no long-term solution to HTF underfunding.  The main transportation bill, MAP-21, expires at the end of September.

SEVENTEENTH UPDATE: President Obama has now signed the temporary HTF save bill.  (Maybe that syntax is ugly, but so was the bill.)  Here is an overview from Transportation for America.

EIGHTEENTH UPDATE: The Washtenaw County Board of Commissioners is moving toward a one-year tax under Act 283 after all. A public hearing is scheduled for October 1, 2014, after which the BOC will likely vote on the tax.

 

 

 

New Transportation Page

May 30, 2009

Transportation, including transit (public transportation), nonmotorized alternatives (especially bicycles and walking), roads, and parking, is where the most changes, angst, and money spent are to be found in Ann Arbor, possibly even surpassing development.  The new Transportation Page will include links and articles to draw some of the threads of this huge topic together.

UPDATE: The Ann Arbor Chronicle has an article that not only explains some of the issues surrounding a move to a county-wide transportation system, but links to its earlier articles on the subject.  A good review and starting place to watch what is happening.

Google, Parking, and the Wealth of the City

May 28, 2009

In his recent talk at a recent UM sustainability conference, Michael Shuman made a point of saying that most local economic development programs focus on efforts to “attract and retain” non-local businesses—and that by doing so, they are striking a bad bargain.  Non-local businesses, he says, often move on, after accepting generous subsidies from localities.  Pfizer comes to mind as one example (they are even asking for more money back after getting plenty from both Ann Arbor and Michigan in tax abatements).  Now let’s look at another high-profile capture – Google.

In July 2006, Governor Granholm announced that the Michigan Economic Growth Authority (MEGA) was granting Google up to $38 million in tax benefits to bring 1000 jobs to Ann Arbor (that’s a cost of $38,000 per each job paying $47,000).  This set off a competition among area municipalities and real-estate venues.  But there was a strong wish to bring Google into Ann Arbor’s downtown, and they finally leased space in McKinley’s Towne Centre on Liberty.  The Google operation at this location is an office of their AdWords advertising sales.

In order to lure them downtown, the City Council promised Google free employee parking (up to 400 spaces)  for four years.  This was estimated by the city’s chief financial officer to cost about $2 million till December 2010.   (That’s $5,000 per space.)   The council also amended the agreement with McKinley so that some of the 252 parking spaces it has been allotted in the Liberty Square parking structure can be used by Google.

The decision put Google at the head of the line for parking permits. There is a waiting list for monthly permits, and a limited capacity in the system. Obviously, for every monthly parking permit the DDA sells, there will be one less space for short-term visitors (retail and restaurant customers).  So the city has both set aside a major part of its General Fund dollars (even more critical now that major service cuts are being made) and allocated a scarce resource (parking), one that many local businesses would have enjoyed.

(According to a policy adopted by the council in 2007 and based on the Nelson-Nygaard study, the objective is to have no more than a 30-day wait for parking permits.  But that will be expensive and difficult, especially since the council  is simultaneously asking the DDA to host all downtown parking within its system and to pay the city $2 million a year for the privilege of this service. As explained in a recent Ann Arbor Chronicle article, the DDA has two revenue funds, the TIF fund (property taxes) and the parking fund.  Up till now, the TIF fund has not been used to pay for constructing parking structures, but that might have to change if the city keeps on draining the parking fund for its own general fund.  As reported by the Chronicle elsewhere, the DDA is making the payments on the bonds for a $55 million parking structure under the “Library Lot” on Fifth Avenue – and also paying the city a service fee of $1.4 million.  Yet the council is asking the DDA for the $2 million a year as “rent” for the parking system. Meanwhile there is scarcity of parking and rates are going up, possibly affecting retail customers.)

But according to a March Business Review story, Google/Ann Arbor is believed to have about 250 employees currently and recent trends are not favorable to AdWords’ business; online advertising is said to be failing to support web-based businesses in this economy.   It appears unlikely that they will make their 5-year goal of 1000 employees, and they may be hard-pressed to make the 500 jobs needed for a partial MEGA grant.

So what is the value of having Google in our downtown?  One is, of course, the jobs.  It’s nice that some relatively low-paid jobs are there.  These are not high-tech or high-paying jobs though, and I doubt that the employees are serving as much of a customer base for downtown businesses. Presumably McKinley is receiving rental payments from the lease, all good.  But it seems that much of Google’s value is in the bragging rights. Certainly the visible glamour of  those cute little primary-color letters and the cachet of merely being able to claim its presence adds to the “sizzle”.  For example, the Wall Street Journal recently cited Google’s presence as evidence of Ann Arbor’s vibrancy, with a statement that Google “opened an Ann Arbor campus in 2006”.    But is the city’s investment really paying off in jobs, new investment, and growth?  In other words, does it add to the wealth of our civic enterprise?

A page on the city website exclaims, “Today, while the university remains a significant contributor to the city’s workforce and driver of economic success, many industries and businesses are located in Ann Arbor, one of Michigan’s largest cities. Fortune 500 companies Borders Books and Domino’s Pizza have headquarters in Ann Arbor, and Google is in the process of relocating to the city, bringing more than 1,000 jobs.”

Ah. Back to Shuman and his argument that local businesses have more “leakage” – that is, more of the wealth generated stays in the local community, and also that they tend to stay in the community.  Note that Borders and Domino’s  both originated here, though they have since become nationally distributed.  Even with all its troubles, Borders has been a downtown anchor and a continual source of jobs. Domino’s seems secure in its Ann Arbor township headquarters.       The Google jobs site does not even list Ann Arbor as a location.

We’ll be hearing more and more about the need for economic development in the Ann Arbor region.  It would be nice to see some strategic thinking about how best to use the increasingly limited dollars we have at both the City of Ann Arbor and Washtenaw County government, both of which are undergoing some extreme budget cuts. What local business startups might do with a little assist from the city, according to Shuman’s recommendations,  isn’t easy to predict – not every one will be the next Zingerman’s.  But we should also consider what is a good price to pay for glamour, especially since wealth is in such short supply these days.

UPDATE: Not all the 400 parking spaces promised Google by the city are actually being used.  The amendment of the McKinley agreement with the city for Liberty Square spots only includes 235 spaces total.  An inquiry to the DDA indicated that it is not known (by them) how many of those are actually being used by Google.

UPDATE 6/2/2009: The Ann Arbor Business Review reports that there has been a management change at the Ann Arbor office of Google.  The reporters were not able to learn anything more about the current state of the office.

UPDATE 8/2/09: AnnArbor.com reports that Google is still “only one-quarter of the way to its initial goal” of 1000 employees and refuses to discuss its hiring plans.

UPDATE 10/19/09:  A new report by AnnArbor.com indicates that Google may have as few as 204 employees, not counting contractors.

UPDATE 9/14/2011: AnnArbor.com reports that Google is now using a global outsourcing firm to hire new employees at much lower wages than the original employees.  The terms of their employment is not clear.

UPDATE 3/19/13:   A new report by AnnArbor.com states that Google failed to pay Michigan Business Tax owed in relation to its Ann Arbor office.  The state has placed a tax lien on the company in Lansing.

UPDATE 11/6/14: McKinley Inc. is reported by the Ann Arbor News to be looking for new tenants for the space Google is leasing in the Towne Center building.  Apparently the current lease expires on April 30, 2016, but the property is already being listed.  No word on what will happen with the Google AdWords operation.  It is not clear how well that mode of advertising is faring in the new media environment; see for example this article from the New York Times about small businesses using AdWords.