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.
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.
Transportation Funding Approved by Michigan Legislature
An increase in vehicle registration fees will raise approximately $200 million dollars and begins January 1, 2017. There is an approximate 20% increase for all trucks and passenger vehicles. Electric hybrids under 8000 pounds pay an additional $30 with electric hybrids over 8000 pounds paying an additional $100. Non-electric hybrids under 8000 pounds pay an additional $100 with non-electric hybrids over 8000 pounds paying an additional $200. An “alternative fuel” tax rate was also created.
An increase in fuel taxes (gas, diesel and diesel parity) beginning January 1, 2017 will raise approximately $400 million. Gasoline taxes increase by 7.3 cents and diesel by 11.3 cents. Indexing begins on January 1, 2022. There is an alternative fuel tax component.
General funds transferred to MTF will be $150 million in 2019, $325 million in 2020 and $600 million in 2021 and beyond.
The homestead property tax has been changed with the household resources cap changed to $60,000. The income multiplier is 3.2% in tax year 2018. The maximum credit is $1500 in tax year 2018 with an increase in the renter credit. The taxable value threshold ($135,000), household resources cap and maximum credit amount will be indexed beginning tax year 2021.
This funding information was obtained from a report prepared by the County Road Association of Michigan.