Where the Money Comes From
The Michigan Transportation Fund
The primary source of revenue to county road agencies comes from the Michigan
Transportation Fund (MTF). All state fuel taxes, vehicle registration fees and other
transportation-related fees are deposited into the MTF and distributed according
to a formula established in Public Act 51 of 1951.
For many years the largest source of income to the MTF has been the state gasoline
tax. A combination of more fuel-efficient vehicles and motorists changing driving
habits and purchasing less fuel have eroded the power of fuel taxes, making their
future as a long term funding solution uncertain.
The Michigan Legislature last increased the gasoline tax in 1997 from 15 cents per
gallon to 19 cents per gallon. The tax on diesel fuel was not increased. Of this
four cent increase, three cents were distributed to state and local road agencies.
The other penny was dedicated to bridges, with one half cent directed to MDOT to
fix seriously deficient bridges on the state road system, and the other half cent
directed to local road agencies under the Local Bridge Program.
Federal Funds
A federal fuel tax of 18.4 cents per gallon is collected on each gallon sold in
the United States. Michigan receives approximately 92 cents on each dollar sent to
Washington D.C.
Approximately 75 percent of federal funding is allocated to MDOT, leaving 25 percent
to be distributed among 83 county road commissions and 533 cities and villages across
the state. These funds are dispersed according to regional formulas.
Both MDOT and local road agencies are required to provide a match to federal funds.
If local and state road agencies cannot provide the matching funds, the federal funds
are returned to the Federal Highway Trust Fund, and made available to other states.
According to the County Road Association of Michigan in 2009, it was estimated that
by 2010 Michigan could lose nearly $1 billion annually in federal funding due to
the lack of sufficient state and local funds to provide the required match to federal
aid. This means tax revenues collected in Michigan will be given to other states,
severely reducing or eliminating federal funding available to Michigan's state and
local road agencies.
Local Funds
Statewide the ability of counties and townships to generate additional funding
with special assessments and millages varies significantly, ranging from 0 to as
much as 20 percent. Though one township (Gilmore) has a local road millage the Benzie
County Road Commission does not receive any funds from a county wide road millage.
A county wide road millage in Benzie County has failed twice in the past 10 years.
Rising Costs and Declining Revenues
According to the Construction Materials Cost Index, construction costs climbed
43 percent between 2003 and 2007 compared to a 12.7 percent increase in consumer
inflation. The American Road and Transportation Builders Association (ARTBA) confirmed
this situation, noting the price of materials used for highway and street construction
outpaced inflation in 2007. Meanwhile the total MTF revenue continues to decline.
This funding information was obtained from a report prepared by the County Road
Association of Michigan, “Michigan's County Road Commissions, Driving our Economy
Forward”.
