LANSING – A package of bills that would change both how transportation agencies in the state get funds and how they use them saw more discussions Tuesday in the House Transportation and Infrastructure Committee.

The key funding part of the package (HB 5477 ) would repeal the current fuel taxes and replace them with a 6 percent tax on the wholesale price.

As structured, the bill would be neutral for gasoline users, but would generate some additional revenue from diesel sales.

Moving to a percentage tax allows the revenue to be indexed to inflation, Rep. Rob VerHeulen (R-Walker), sponsor of the bill, said.

“If we linked the 19 cents with inflation, we would have $900 million more and we wouldn’t have a problem,” VerHeulen said of the current fuel tax.

The bill caps the annual revenue increase from the tax at 5 percent, and among the changes coming for future discussions is the language that implements that. The bill would give some discretion to the Department of Treasury in setting the actual tax rate, which supporters said would be taken away in future language.

Rep. Tom Cochran (D-Mason) questioned why changing to the percentage tax was better than bringing the diesel tax to 19 cents from the current 15 cents and then indexing that to inflation.

VerHeulen said the proposed option would require less adjustment by the state to maintain the revenue.

The package would also require additional contracting of projects and warranties on those projects.

Under HB 5167 , the state would have to shift its maintenance projects from time-based to performance-based contracts and allow private companies to compete for those projects.

“It’s more about the final outcome for the driver,” Transportation Director Kirk Steudle said of the proposal. “It’s a new way of thinking; it’s more about outcomes.”

The bill would require the new system be developed by September 2015, with the first bids out in September 2017.

While Michigan has not been providing performance-based contracts for maintenance, Steudle said a number of other states and Canadian provinces have, which will give some basis for developing the new system.

To questions from the committee, Steudle said the state would have to follow Civil Service contracting rules, meaning the change would have to save the state at least 5 percent over conducting the work itself.

The change also, though, will drive some innovation in how maintenance is conducted, he said. The contractor will have standards to meet in keeping a roadway in certain condition and will have to decide how best to do that.

“We’re not paying for every hour somebody’s out there,” he said of the new system. “We’re paying to have the potholes not exist.”

Steudle acknowledged, to questions from the committee, that the legislation is broad, but he said it would be more appropriate to put the standards in the contract than in statute.

“You want it broad enough so there can be an agreement,” he said.

HB 5460 would expand use of warranties on state and local road projects. Supporters said there were still discussions needed on how to ensure the warranties could be enforced. And Steudle said the state would need to include funds for local road agencies to administer the warranties because none are currently using them.

The package would also expand competitive bidding at the county level. HB 4251 would allow any township footing more than half the bill for a project to require that the county submit the project for competitive bids.

Rep. Gretchen Driskell (D-Saline) said most of the proposals were coming at the wrong end of the road funding discussion. “I see a lot of this as an unfunded mandate when we’re not doing the lift to invest in the roads,” she said.

Steudle said the changes were needed to get support among legislators for the additional funds. “Ultimately, in the end, you end up saving money,” he said of the proposals. “It’s one of the tickets you’ve got to punch if you want your revenue.”

Plans to change fees for oversized and overweight vehicles (HB 5452 and HB 5453 ) also raised some concerns.

The bills would essentially double most of the fees, but Rep. Marilyn Lane (D-Fraser) said that would still leave the state substantially less than many of its neighbors. Rep. Michael McCready (R-Bloomfield Hills), sponsor of HB 5452, said he would be open to discussions on further increases to those fees. “We don’t want to make a small step,” he said. “We want to be competitive with other states.”

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