Michigan Governor Snyder has made improving and modernizing Michigan’s infrastructure a focus of his administration. Appropriations for infrastructure-related projects were a top priority in the Governor’s FY 2016-2017 budget recommendations unveiled yesterday. In addition to a $54.9B budget recommendation for the coming state fiscal year, the Governor also issued a supplemental budget request for FY 2015-2016, which includes $25M for water-related infrastructure projects in Flint and a $165M investment in the to-be-created Michigan Infrastructure Fund. This fund will be used to replace high-risk lead and copper lines in communities throughout the State. The fund, which must be created by legislation, will also be used to implement the recommendations of the Commission for Building the 21st Century Infrastructure, the formation of which the Governor announced in his 2016 State of the State Address, and whose report on the state of Michigan’s infrastructure is due in September 2016.

Infrastructure-related highlights from the Governor’s FY 2016-2017 budget recommendation include:

Transportation Infrastructure

In November 2015, the Governor signed into law a wide-ranging road funding package that, among other changes in law, increased motor fuel taxes, increased vehicle registration tax rates, and reallocated income tax revenue with regard to transportation funds. Changes to the motor fuel tax rates and vehicle registration fees begin to phase in on January 1, 2017, partway through FY 2016-2017. Part of the road legislation requires the first $100M in revenue raised by motor fuel taxes to go into the Roads Innovation Fund beginning in FY 2016-2017. That money can only be released for distribution to municipalities if the Legislature passes a one-time concurrent resolution allowing the distribution. The Governor’s FY 2016-2017 budget recommendation is predicated upon the Legislature taking such action.

The Governor’s FY 2016-2017 budget recommendation includes $533.3M in new transportation revenue. Congressional reauthorization of the federal Fixing America’s Surface Transportation (“FAST”) Act adds an additional $57.5M for state transportation projects. Of this $590.8M in new transportation revenue, a total of $197.6M will go towards state trunk line road and bridge repair; $315.1M will to county road commissions, cities, and villages for local road and bridge repairs; $29M will be used for transit capital, including improvements to busses and bus station terminals; and $15.8M will go towards rail-related infrastructure, including track and signal enhancements on the Detroit-Chicago railway corridor.

Additionally, in December 2015, the Governor signed a package of bills that redirected tax revenue generated by the retail sale of aviation fuel to the State Aeronautics Fund and the Qualified Airport Fund. As a consequence of that legislation, the Governor’s budget includes an estimated $13.5M in new revenue that will be used for structural improvements to the Detroit Metropolitan Airport and other airports throughout the State.

Water Infrastructure

Much of the Governor’s budget presentation centered upon how his recommended appropriations will address the water crisis in Flint. To that end, his budget contains a number of items related to water system infrastructure upgrades not just in Flint, but throughout the State. Among the appropriations related to water infrastructure are $5.4M to Flint in order to keep the City on the Detroit water system, and to provide for staff, testing, and equipment to ensure drinking water safety, as well as $9M to reimburse school districts throughout the state who choose to have the water in their buildings tested for lead contamination.

Additionally, the Governor’s budget includes several programs specifically aimed at improving water-related infrastructure in the state. The Governor proposed a one-time appropriation of $2.95M as part of the State’s required match for a $25M grant under the federal Drinking Water State Revolving Fund (“DWSRF”). The DWSRF is a program operated by the United States Environmental Protection Agency that provides grants to states in order to establish low-interest loan programs for local governments to undertake drinking water infrastructure projects, such as the rehabilitation or replacement of water pipes or contaminated water sources, or the construction of new drinking water systems. The Governor also proposed an additional $10M in debt service payments related to the issuance of new Strategic Water Quality bonds, which will fund municipal sewer and storm water infrastructure projects.

Energy Infrastructure

While not related to improving the State’s energy infrastructure, the Governor’s budget recommendation did include $750,000 to develop a statewide strategy to address potential widespread and long-lasting power outages, and to ensure that Michigan has the capacity to address the impacts to infrastructure that such an outage would cause.

Conclusion

The Governor’s budget proposal shows that infrastructure continues to be the predominant theme in Michigan politics. As State and local governments begin to consider how best to undertake large-scale investment in roads, bridges, mass transit projects, and water systems, the firm will monitor this critical area of law and policy and provide updates on legislation, projects, and procurement opportunities.