Rebuilding Michigan projects take shape across the state and an update on bonding

On this week’s Talking Michigan Transportation podcast, an update on Rebuilding Michigan road and bridge projects across the state as the 2022 construction season begins in earnest.

First, Gregg Brunner, director of MDOT’s Bureau of Field Services, talks about how the department, consultants, and contractors mitigated challenges from spring weather as well as supply chains and labor availability. He also offers progress reports on several high-profile road projects. 

Later, MDOT Finance Director Patrick McCarthy makes a repeat appearance to outline the Rebuilding Michigan bonding program and explain how it benefits the state. 

Brunner talks about several high-profile projects that involve completely rebuilding busy segments of freeways including: 

• I-96 Flex Route in western Oakland County,
• I-275 in western Wayne County,
•  I-69 near Flint,
• I-94 in Jackson, which includes installation of a diverging diamond interchange (DDI) at US-127, the third DDI in Michigan, and
• I-196 west of Grand Rapids in Ottawa County. 

In his overview of the bonding program, McCarthy explains why the ratings agencies looked so favorably on the sales and how they sold at a premium. 

He also explains how, with recent increases in the costs of materials and labor, MDOT’s issuance of the first rounds of bonds were especially timely and produced even more savings than previously expected. Looking in the bond sales also helped avoid some of the increases from inflation.

Podcast photo: I-69/I-475 interchange Rebuilding Michigan project in Flint.

Transcript

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Jeff Cranson: Hello, this is the Talking Michigan Transportation podcast. I'm your host, Jeff Cranson. 

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Cranson: Today, I'm going to be talking about some road and bridge projects that are underway across the state of Michigan, thanks to Governor Gretchen Whitmer’s Rebuilding Michigan program. First, I'm going to talk with Gregg Brunner, who's the director of the Bureau of Field Services at MDOT, overseeing statewide construction, and he's going to talk about some of the challenges that his staff and others have seen across the state as they launch these projects and construction season begins in earnest. And he's going to update us on how some of those are going. And later, I'll talk to Patrick McCarthy, who's the director of the Bureau of Finance at MDOT. He's going to talk about the bonding plan, how the sale of those bonds has gone, why it made sense to take advantage of the interest rates and take that approach. But again, first, I'm with Gregg Brunner. Gregg, thank you for being here. 

Gregg Brunner: Thanks for having me back, Jeff. 

Cranson: So, why don't you start first by what you're seeing in terms of challenges with this year's program? 

Brunner: Sure. Overall, the construction season started on April 16, 2022, and kind of the program this year is larger than we've had in the past, due to not only our normal federal funds that we get, but also the Rebuilding Michigan program. So, this year we're looking at approximately 1.7 billion dollars in new projects. And that's going to be in addition to some of the projects that carried over from last year. But kind of what we've seen since that April date, as many of you are aware, is a lot of the rain and colder weather that we've had throughout the spring, and that's slowed down things a little bit. And even as of today, there's still seasonal weight restrictions in place in the Upper Peninsula. But we're hoping those should be removed soon. And I’m sure if you've been out driving, you've already seen numerous projects have already started or are underway, but, again, we probably have 130 more that will be ramping up in the next few weeks to get going as well. So, with this high level of projects going on on the roadways this year, we asked for driver patience in our work zones. It's immensely appreciated by all of our staff. But again, as they talked about the weather there, we've also been hearing from our industry partners on some of the other challenges tied to work zones and construction and issues in general, whether those are still covid related problems, or industry shortages of materials, or even overseas events that are happening with the war in the Ukraine and other things. So again, we're continuing to monitor those types of things going forward, but some of the things we've heard about initially tied to low inventory and material shortages are everything from epoxy to plastic pipe to pavement markings to pretty much anything steel, whether that be steel beams or reinforcement or even some of the aluminum signs we're using on our roadways. So, we're continuing to monitor those items and make adjustments where we can. 

Cranson: So, yeah, we talked about this on the podcast with Brad Wieferich in the Bureau of Development about inflation, and what we're seeing. And I’ve been trying to underscore the context of this, that this is inflation on everything, and certainly other areas of construction are seeing it, whether it's local roads agencies in Michigan or other DOTs across the country. How do you react to that? What kinds of things can folks do to try to mitigate those kinds of things when you're in the middle of a construction season, and the contractors are trying to deliver on what they promised? 

Brunner: So, what's going on right now is when we do encounter some of those delays, we are starting to allow for non-compensable extensions of time for those material issues that we're seeing out there. And again, a lot of these material issues we're running into aren't necessarily a construction issue, either. I know when I go to the grocery store these days, and I’m looking for certain products, they're in limited supply there, where you can only buy a couple or some of them aren't even there. So, I think it's kind of not necessarily just a construction thing we're seeing, but across the board. So, I’m hopeful that folks are understanding of what's going on with all of our projects. 

Cranson: Always hopeful. So, let's talk some more specifics then about what we've got going in the program this year. You talked about an additional 1.7 billion dollars on top of those multi-year projects that were already in the works. Let's just move from the east side of the state to the west. Can you talk a little bit about the I-96 flex route; that's near and dear to a lot of people's hearts who care about traffic and operations, because we're actually enhancing things for commuters. 

Brunner: Yep, and this is one of the new exciting projects we're doing. The flex route will be in eastern Oakland County, and it's a 12-mile project that costs about 270 million dollars to complete over a three-year period. And for those of you not familiar with the flex route system, that's similar to what we're doing on US-23 north of Ann Arbor, which was already in place there. But what it is, it’s a lane control system that uses overhead signs, cameras, and electronic message boards to let drivers know when there's an additional lane available during morning and afternoon peak travel periods. So, not only will we be improving the roadway out there itself, we'll be adding in all these electronic operational features out there for active traffic management. And again, we'll be able to open up that additional inside lane during some of those peak periods, as well as adding in ramp signals for metering onto the freeway to make the overall roadway safer and operate more efficiently.  

Cranson: So, everybody always asks, why, if you can do that at certain times of the day, can’t it just be open all the time? 

Brunner: And again, this is an operational initiative. We're not necessarily widening the freeway to the full width, which would be a significant expense. Again, we're strictly focusing on the areas to keep the operations moving as best they can, given the current demands. 

Cranson: And the Federal Highway Administration has said in Michigan and other states, that it's okay to do this kind of active traffic management, as long as it's during finite periods of time. They're not going to sign off on you just using the shoulder as a travel lane all the time.

 Brunner: Yep, that's correct, and based on what we've seen with our US-23 flex route project north of Ann Arbor, it's had great results. So, we're hoping for something similar here. 

 Cranson: Yeah, people are very happy with it. Well, not too far from there, just down I-275 in western Wayne County, there's a major project going on. What can you say about that? 

 Brunner: For our I-275 reconstruction project, we'll be in our second year there. And that's going to be an overall four-year project in metro Detroit. This year, crews will be rebuilding about 13 and a half miles of southbound I-275 from Six Mile Road to Northline Road, with both bounds of traffic shifted over to the northbound side. Currently both bounds have two lanes of traffic open, and that should remain in place probably till November. And then looking ahead, 2023 will be reconstructing the northbound side, or the majority of the northbound side, and wrapping things up in 2024. 

 Cranson: Let's move next, before we go further west, a little bit north to the major project in the Flint area on I-69.

 Brunner: Okay, in Flint on I-69, we're in the second year of a 110-million-dollar project, right near the I-475 interchange. And this is going to be a two-and-a-half-mile roadway reconstruction between Fenton Road and M-54/Dort Highway in Flint. That also includes approximately 20 bridges with quite a bit of bridge work going on in there. Currently, we're working to reconstruct the eastbound lanes of I-69 from Fenton Road to M-54, and all that traffic is shifted over to the westbound sides, which were reconstructed last year. And in addition to that, right now there's quite a few bridge deck replacements going on throughout there, including the I-69, I-475 stack bridge out there. So, when folks are driving through that area, they can expect to see a couple detours due to that bridge work. But again, we're working to improve the structures themselves, so it should be a good repair when all said and done here.

 Cranson: Absolutely, that'll make a huge difference to a lot of that traffic, a lot of that truck traffic on I-69 is a major corridor all the way from the Indiana border to Port Huron. So, it'll help that for sure. How about 496; this is the second phase major work to rebuild 496 on the west side of Lansing. It reopened in 2020, a really successful project, and now the portion that goes downtown kind of toward the east side of the city is going on.

 Brunner: Yeah, and this segment we're working on now is I-496 from Cedar Street to Old Lansing Road. And, as of today anyway, we're focused on the east end of the project, working on some of the bridge approaches over the Grand River. And the other part we're working on in that area is the eastbound and westbound collector distributor roads, which run adjacent to I-496. And this is being done so that when we do the actual reconstruction of mainline 496 itself, we can use those as detour routes. But the work on those collector distributor roads should be completed by Memorial Day. So, there's some other minor work going on with joint repair and other types of things in the area. But, looking forward on June 2nd, we're planning to close 496 between that area to start the main line reconstruction. That work is expected to be completed by mid-October, so folks can expect to see those detours coming up. But again, they're going to be on the reconstructed collective distributor roads through there, so it should be a smooth ride for those detours.

 Cranson: And also in MDOT's University region, further south in Jackson, a major ongoing project on I-94. I think one reason that anybody that ever goes through there should be very excited is because we’re finally going to redo what is an outdated interchange at 127.

 Brunner: Yep, and again, this is another one of our large projects going on that runs about 120 million dollars for five miles of reconstruct. The expected completion date's not going to be until Fall of 2023, and we're about halfway done at this time. But again, as you mentioned, this project will modernize and reconstruct the 127 West Avenue interchange, the I-94 Elm Road interchange, and the Lansing Avenue Bridge. And again, once it's complete, I-94 will have three lanes in each direction through this area. And part of those upgrades we're doing to the interchanges is adding a new and innovative interchange solutions; the diverging diamond at the I-94, US-127 interchange, and also roundabouts at the I-94 Elm road interchange. This project required a significant amount of local coordination and cooperation as part of the project, but again, there'll be some aesthetic enhancements throughout the area that folks will like when we're done. And kind of where we're at in the project right now; two lanes of traffic are being maintained on I-94 to maintain mobility throughout, because we know how important 94 is from a commercial standpoint.

 Cranson: Oh, it's a major truck corridor, absolutely; from Chicago to Detroit and that area through Jackson, especially when you get east of 127, is always heavily congested. So all of this will be a tremendous help. And you mentioned the DDI; so that'll be our third in the state, I think. The one at University Drive and I-75 near Auburn Hills is the first, and then shortly after that was Cascade Road and I-96 on the east side of Grand Rapids. So, this will be MDOT's third DDI, right?

 Brunner: Correct, and they've been, from what we've been seeing from those other projects, they've been doing great so far in terms of operations and safety.

 Cranson: Yeah, there was a lot of concern early on when people understand and see videos, that it's kind of counter-intuitive, that it's going to be a problem, but it just hasn't been. I can especially speak to the one in Grand Rapids, on the east side of Grand Rapids actually, in the township, and it's worked marvelously well.

 Brunner: Right, and I was just talking to my parents about it just last week, explaining how they work, and I told them just to drive through one, and you'll see exactly how it works. They’re nothing to be concerned about, they're smooth and easy, and everybody seems to appreciate them once they're installed.

 Cranson: Yeah, much safer for sure. Well lastly, you want to talk a little bit about 196 in Ottawa County, west of Grand Rapids? That's a major rebuild, too.

 Brunner: Yup, the I-196 project in Ottawa County is from Byron Road to 32nd Avenue in the Zealand and Hudsonville areas. And this one's a 67-million-dollar Rebuilding Michigan project that has started, and it'll fully reconstruct the roadway and also have some drainage bridge and safety improvements throughout. As of right now, the westbound lanes of I-196 are currently under construction with pavement removals ongoing. And what we've done there from a traffic control standpoint is shifted traffic over to the eastbound lanes for a two-in-one configuration, maintaining two lanes westbound and then one lane eastbound, just to keep things moving throughout. And again, that work should continue throughout the summer.

 Cranson: And you know, real quickly; these aren't our bonding projects, but they're made possible because of the bonding. Could you talk a little bit about some of the work going on further north on I-75 and US-23 in Arenac County?

 Brunner: Sure. On I-75 and US-23 in Arenac county—it's actually near Standish through there—and what we're doing is some interchange improvements, as well as installing roundabouts at the M-13, US-23 interchange is a significant safety improvement in the area there. So again, we're kind of working, as you can hear today, we're working all over the state to make improvements to our roadway’s conditions, so it's good to see so much work going on. I know it may not always seem like it when you're driving through a lot of those work zones, but at the end of the day, it's going to be a lot better for folks traveling. 

Cranson: Well, talk a little bit about that, why it is, because it's a chronic complaint that every DOT has faced time and memoriam: that I drove through, and I saw all those barrels, and there wasn't any work going on. And there could be a number of reasons for that, right?

Brunner: Right, and it can be anything from leaving the concrete out there to cure, the different staging operations that are happening, or other types of things. So all we can do is encourage folks to be patient as we go through the process. Just like anything, if you're remodeling your house or anywhere else, unfortunately it takes time. But at the end of the day or end of the project, it's all going to be worth it. But as you're driving through those work zones, we do have some safety tips for folks or things to keep in mind. We just ask that you minimize the distractions while you're driving. Of course, put down any cell phones or anything else because things can change throughout the work zone, in terms of traffic shifting or other types of movements going on. Just pay attention to some of the signs that the roadway crews have installed out there if things are slowing down or shifting. And just at the end of the day, expect the unexpected, where normal speeds may be reduced, or traffic lanes may change, workers vehicles or other equipment may be near the roadways. So we just want you to keep your eyes open, not only for their safety, but your safety as well.

Cranson: Yeah, I think those are good tips, and I also wanted to mention that sometimes when you see work and a lane is closed off, and you think there's nothing going on, it's often because the lane had to be closed because they're working on a bridge overhead. And you can't risk things falling down on passing vehicles. But to your eye as you're driving through there, you don't see any work, and it's because it's kind of out of sight overhead. I saw that on US-127 south of Lansing, and I saw it last week on 131 south of Cadillac, where it looked like a lane was closed for no reason. And something else 127 that I learned is that there was a concerted decision made between the project staff for MDOT and HNTB to say, it's unsafe to do this kind of stopping and starting with traffic. Kind of like the green flag at the races, that you just don't want people hitting the gas and then hitting the brakes then hitting the gas again. So it made more sense just to maintain the traffic that way for several miles. So there's a method to the madness and a good reason that things are done that way. 

Brunner: Oh definitely, and that's where traffic engineering is a little different than other types of engineering, where I know when I was going through engineering school, a lot of it was based on physics and everything else, but that's where it gets to be the hard part and some of the traffic engineering that we do, where you have to take into account the human factor in people's decision making and other types of things. So it keeps things interesting. 

Cranson: Lots of soft skills that you gain along the way. Thanks, Gregg, for taking time to do this. We're gonna hear a message, and then I'll be back to talk with Patrick McCarthy, MDOT's finance director, about where things stand with our bonding program, and what we're hearing about the next phases there. Thank you, again.

Brunner: All right, sounds good. Thanks for having me, Jeff. 

Cranson: We'll be right back. Stay tuned.

Narrator: Know before you go. Head on over to Mi Drive to check out the latest on road construction and possible delays along your route. For a detailed map, head over to michigan.gov/drive

Cranson: Okay, once again, we're back now with Patrick McCarthy, who's the director of the Bureau of Finance at MDOT and worked closely with some private concerns, but was the in-house architect of the Rebuilding Michigan program that's financing so many of the projects that Gregg talked about earlier. Patrick, thanks for being here, and can you just once again kind of, I know we've talked about this before, but kind of high level explain the bonding program.

Patrick McCarthy: Sure, thanks for having me, Jeff, again. I appreciate that. The governor's Rebuilding Michigan program was started in early 2020 with an authorization from our State Transportation Commission to deliver 49 projects with an authorization of 3.5 billion dollars of new bonding to pay for those projects. To date, we've issued two rounds of bonds against that 3.5-billion-dollar authorization. Each of those first two rounds were 800 million dollars. So we've issued the 1.6 billion dollars so far, and we have about 1.9 billion available to authorize again. 

Cranson: And those initial offerings sold at a premium, which means we got more bang for our buck. 

Can you talk about how that works? 

McCarthy: Sure. When we issue bonds, the investors take a look at the credit worthiness of the department, which basically means how much trust they have in our ability to repay them for the bond that they purchased from us. We get ratings from the large rating agencies S and P and Moody’s that place a high confidence for that investor in purchasing our bonds. So in the transaction for the bond purchase, that investor is willing to pay a premium for the security of receiving that future debt service payment. They're willing to offer us an additional amount of money with the guarantee that at the end of the debt service, they're also going to get reimbursed for the principle that they put up at the beginning.  

Cranson: So by doing that and doing it when you did, you locked in some pretty good interest rates, and I think you made a point the other day when we were talking about doing that before inflation started to really take a toll on road construction. 

McCarthy: We did. We were very fortunate at the timing of the first two tranches of our bond program, that the all-in interest rates for all of the debt that we issued on these first two rounds was about a little under 2.4 percent. So, it's an outstanding interest rate from a historical perspective, and we're seeing now that the interest rate costs are starting to trend upward again as we see the rise in inflation and the action that's being taken by the federal reserve to increase interest rates. I'm sure you've heard, and other people have heard, about those actions being taken by the federal reserve board. And they're not done raising those interest rates, so it's definitely beneficial for MDOT to bond for these projects now, and lock in these low interest rates before inflation really starts to take a toll on the cost of these projects that we're working on. 

Cranson: When you talk about debt, and there's a lot of people that were opposed to bonding and said that you're leaving debt for our kids, but what our planning people have figured out, if you look at what the investment is; that would be necessary to get us back to 90 percent good or fair pavement. And what's not being met and what we're losing every day because the roads are crumbling, which is its own form of massive debt that we're passing on to our posterity, we're losing, if you break it down, about $3,500 a minute on our road and bridge system. You're not a guy who's prone to borrow money willy-nilly, but you've come to believe in the wisdom of this kind of debt, and why it makes sense. 

McCarthy: I absolutely do, Jeff. If you look at this from a practical perspective and say, yes we do have debt that we are entering into for the next 25 years. At least, though, when we're done with this program, the people that are driving on these roads for the next 25 years are driving on good roads while they're paying for that roadway over the useful life that they're driving on it. We're not asking them to drive on continually declining and deteriorating roadways and still have to find a solution down the road to repair and replace them. So, yes, I agree that nobody, especially me, is a big fan of having debt. But I also can't feel good or feel comfortable with having roadways that are unsafe or continuing to decline in condition and leaving that as the legacy for the future generations, either. 

Cranson: So, what do you see happening in the future? I mean, we know the market is volatile these days, but right now the bonding, if we're gonna issue another tranche, as you characterize it, whether it's tomorrow or months from now; it still looks pretty favorable, right?

McCarthy: It does. We continue to monitor the market and keep an eye on the trending of the interest rates in the municipal market space. We are still, we're not at the historical lows we were at a year or two years ago now. The municipal market has started to kind of bounce off the bottom a little bit. But it is still at significantly lower rates than what it was 10, 15, 20 years ago. You hear the horror stories of back in the day when people would have mortgages in the 14 and 16 percent range. I can go out right now and issue this new, the remainder of the Rebuilding Michigan debt at probably three and a half or four percent interest rates, which is still a remarkably low interest rate. And when you compare that to what we're seeing in the inflation increases, I think it was 8.3 percent that was just announced recently; it's still significantly cheaper to issue municipal debt than it is to lose that purchasing power from the inflationary increases that we're seeing.  

Cranson: So part of the problem is this historic context: people who have only come of age in the last 20 or 25 years and thought interest rates were always that low. They don't know that even with a little bit of a creep right now, they're still historically low. 

McCarthy: Absolutely, yup. That's a true point. 

Cranson: Okay, well thanks, Patrick, for explaining this once again. I'm sure as the year goes on, we'll be talking more about bonding, but I always appreciate the simple way you explain these things and break them down for people. 

McCarthy: Thanks again for having me, Jeff.  

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Cranson: Alright. Thank you again for listening to this week's edition of the Talking Michigan Transportation podcast. I would like to thank Randy Debler and Corey Petee for engineering this week’s podcast. To subscribe, to show notes, and more, go to Apple podcast and search for Talking Michigan Transportation 

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