Using State's Credit Card To Fix Roads Now Means 25 Years Of Payments

Gov. Gretchen Whitmer is moving forward on $3.5 billion in new state borrowing, announced in her State of the State address on Wednesday, which she says is needed to improve roads. On Thursday morning the State Transportation Commission approved the issue of new revenue bonds, which will be repaid using revenue from future fuel tax and vehicle registration tax collections.

State Transportation Commissioner George Heartwell, the former mayor of Grand Rapids, called the idea of going into debt to pay for roads a “thoughtful, conservative approach,” according to the Gongwer news service.

Gongwer reported: “Mr. Heartwell said while he needs to see the details, bonding is a sensible approach. He said it worked well in Grand Rapids when he was the city's mayor.”

Heartwell served as mayor of Grand Rapids from 2004 to 2016.

In 2004, Grand Rapids officials estimated that future debt service payments on the long-term debt the city had accumulated would total $691.85 million over the next 30 years.

When Heartwell left office in 2016, the city's projected 30 year-debt service expense had increased to $770.13 million.

As of 2018, Michigan was still making payments on $1.2 billion the state had borrowed in the 1990s and 2000s. The principle and interest payments for transportation revenue bond debt comes of out of future fuel tax and vehicle registration (license plate) tax. Those payments reduce the amount of revenue the state would otherwise have to spend on current road repairs.

The last of this debt was not extinguished until 2019, when $34 million was repaid on road bonds issued 20 years earlier by then-Gov. John Engler.