Road Bonding Plan Explained By Transportation Officials


Michigan transportation officials are working to explain why Governor Gretchen Whitmer’s issuing of $3.5 billion in bonds to pay for road projects is a sensible option. On a recent episode of the MDOT podcast, Talking Transportation, MDOT finance director Patrick McCarthy said the projects being paid for with the bonds will last much longer than it will take to pay off the debt.

“It makes sense now to bond because the interest rates are at historical lows,” McCarthy said. “They’re in the 2.5-3.5% range across the yield curve of the bonds, which is fancy financial terms for when you’d have to pay those bonds back.”

MDOT chief administrative officer Laura Mester said the projects to be covered with the bonds are reconstruction projects. That’s compared to the more routine fixes.

“We do a lot of patches, we do a lot of smaller projects that extend the useful life, but don’t really address the underlying issue.”

McCarthy said reconstructing state trunk lines with those bonds will be worth it.

“We took an analysis of a bond program that was done in 2004, and looked at all of the projects that were constructed or reconstructed during that time frame, and the analysis that we have is that while the debt service on those bonds is going to be fully paid off in 2023, the life of those projects is going to be until 2027 or longer.”

The bonds will only pay for work on a handful on state trunk lines, and not local roads. Meanwhile, the Michigan Legislature continues to work on a more comprehensive solution to the road funding question. Many lawmakers are pushing for all of the money collected via the state’s fuel tax to go directly into road repairs.