Republican Lawmakers Cornered in Road Funding Debate

March 10, 2019

Crain’s Detroit Business

By: Chad Livengood

Albert Berriz is taking his money elsewhere.

Or, put differently, the CEO of the Ann Arbor-based real estate investment giant McKinley Inc. is taking the firm’s founder Ron Weiser’s money to other states like Florida with pro-growth strategies on transportation investment.

“We’ve actually exited certain parts of Michigan,” Berriz said. “We don’t think people will continue to build there, because the roads just don’t support growth in those communities.”

On the day before Gov. Gretchen Whitmer rolled out an eye-opening $2.5 billion fuel tax increase proposal, Berriz tried to reframe the debate in Lansing to get beyond the dollar-amount focus that has consumed a generation of state leaders.

“All of you are talking about a number — whether you believe it’s $1 billion, $2 billion or $3 billion — I think it’s $4 billion, by the way,” Berriz told a room full of stakeholders at a Business Leaders for Michigan lunch last week.

“Your number only does this: It keeps a status quo population in Michigan of 10 million (people). As a real estate investor, if you told me the proposition is the job growth is going to be flat, the population is going to be flat — that’s not a Top 10 state.”

Berriz was frank in discussing how McKinley — which has a real estate portfolio valued at $4.6 billion, $1 billion of which is in the Ann Arbor area — is investing in new apartments in growing states like Florida instead of the state where Weiser started building a real estate empire a half-century ago.

“Quite frankly, there comes a point where what passes for roads is going to obstruct economic development,” Berriz said.

After years of debate, the Republican-controlled Legislature now finds itself boxed in on road funding.

They’re boxed in by the fact that they’ve been in control of the Legislature for eight consecutive years.

“If there’s a lot of (waste) there, I mean, why didn’t you go after it?” asked former GOP Senate Majority Leader Ken Sikkema, who is part of a bipartisan group pushing for a 47-cent fuel tax hike spread over nine years. “That’s a really tough narrative for Republicans to sort of advance.”

Republican legislators are boxed in by a Democratic governor calling for a 45-cent fuel tax hike who has the bully pulpit to publicly taunt lawmakers to “fix the damn roads” every day from now until the next election.

Unlike her predecessor, Whitmer is not likely to let legislators off the hook for passing a plan that takes a half-decade to ramp up and doesn’t change the pavement’s downward trajectory.

Senators are boxed in by their own Senate Fiscal Agency that says at least $2.7 billion more is needed annually to get 90 percent of roads in good condition. It’s not just the road construction industry with a vested interest tossing around big numbers anymore.

Senate Majority Leader Mike Shirkey and Appropriations Chairman Jim Stamas both acknowledged last week that $2.5 billion should be the target for increased annual spending on roads, though they want to count the $1.2 billion the Legislature budgeted in 2015 (a plan that’s currently $925 million funded and won’t be fully funded until 2021).

Lawmakers are boxed in by business groups like BLM, Michigan Chamber of Commerce and the Detroit Regional Chamber pressuring them to come to grips with the reality that money from their 2015 road-funding plan isn’t getting to the roads fast enough, especially in metro Detroit.

And now they’re boxed in by influential businessmen like Berriz — and, by extension, Weiser, one of the nation’s leading fundraisers and megadonors for Republican politicians who just ended his second term as chairman of the Michigan Republican Party.

Berriz declined in an interview with Crain’s to say where McKinley will no longer invest in apartment housing in Michigan.

But during the BLM forum, Berriz made it clear that much of Michigan is no longer an investment priority beyond the U.S. 23 corridor between Ann Arbor and Brighton.

The reason for investment along U.S. 23?

Berriz credited the recent $92 million project completed in 2017 that converted the left shoulder to a third “flex” lane for rush-hour traffic and included bridge replacements on an 11-mile stretch that carries 66,000 vehicles a day and was previously Michigan’s most congested corridor.

“The Livingston-Washtenaw connection is the fastest growing area in terms of total GDP,” Berriz said. “As a real estate investor, that’s where I want to be right now — and we are,” said Berriz, who has run McKinley day-to-day since 2001, when Weiser started venturing off into Republican politics. Weiser remains McKinley’s largest shareholder, but no longer sits on the board of the firm he founded in 1968.

Berriz, a civil engineer by training, hopes to reframe the policy goal for road funding from one of managed decline to a growth strategy for 10, 15 and 25 years into the future.

Capital goes where there’s a long-term strategy to grow; the current “paradigm” in Michigan caps growth, Berriz said.

“I’m just trying to change the thinking a little bit,” Berriz said.

Because Michigan’s current pothole-patching strategy is already scaring off investors, he said.

“All of your conversations are about just fixing roads,” Berriz told the roomful of Lansing lobbyists and insiders. “This has nothing to do with moving the business community forward. … At the end of the day, people will stop coming here.”

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