Indiana road plan calls for higher fuel rates, new vehicle fees, possible tolls

By Keith Goble, Land Line state legislative editor | 1/12/2017

Work has begun at the Indiana statehouse to reach agreement on a long-term road funding plan to address a projected $1.5 billion annual shortfall.

The push follows up the Legislature’s action from a year ago to approve a two-year, $1.2 billion transportation funding deal. The short-term funding package relies largely on releasing surplus dollars to address infrastructure needs. The second part taps existing tax revenue.

House Republicans now have their sights set on a 20-year deal that includes plans to raise fuel use taxes by a dime, tie the tax rates to inflation, and to authorize tolls.

HB1002 would raise the state’s 18-cent-per-gallon gas tax and the 16-cent diesel tax by 10 cents. The tax rates have remained unchanged since 2003 and 1988, respectively.

In addition, the state’s 11-cent motor carrier surcharge tax would nearly double to 21 cents. The tax rate was last raised in 1988.

The fuel use tax increases would raise about $520 million the first year for state and local roads. The taxes would also be indexed on an annual basis.

Democrats at the statehouse are opposed to a fuel tax increase. They say the tax is regressive and would hit low- and middle-income residents the hardest.

Republicans say recent tax cuts in the state would help soften the blow.

The plan also calls for revenue from the state’s sales tax on fuel to be devoted solely to the state Highway Fund over the course of four years.

State law now allots the equivalent of one penny of the sales tax on fuel to the state highway account. The other 4.5 cents is routed to the state’s general fund.

Shifting money out of the general fund would reduce revenues available for education and public safety by $448 million once completely phased-in.

Vehicle fees would also be implemented to the tune of a $15 annual fee on all vehicles, including those registered under the International Registration Plan. The new fee would add $90 million the first year for local roads.

In addition, the state would raise $2 million in the first year via a $150 annual fee on all electric vehicles registered in the state.

Tolls are also on the table. If approved, the Indiana Department of Transportation would be required to study tolling and submit a waiver to the Federal Highway Administration to allow tolling on existing interstates.

The statute that requires the General Assembly to approve tolling certain portions of interstates would also be removed.

Currently, the only toll road in the state is Interstate 80/90. As of the first of the year Indiana also charges users to cross the I-65 bridge over the Ohio River into Kentucky.

Adding tolls to existing interstates is estimated to raise as much as $1 billion annually within the next decade.

Local governments would also have the option to impose local vehicle registration taxes.

Another component of the GOP plan would authorize INDOT to study implementation of a vehicle-miles traveled tax.

State lawmakers are pursuing new money as Indiana’s “Major Moves” initiative wraps up. State officials have said that something must be done because money remaining from then-Gov. Mitch Daniels’ $3.85 billion lease of the Indiana Toll Road in 2006 is mostly spent or due to be spent for specific projects.

A report commissioned by the state found that lawmakers need to approve about $1.5 billion annually to keep the state’s existing infrastructure in “good or fair” condition for the next 20 years.

House Speaker Brian Bosma, R-Indianapolis, said House Republicans are committed to getting a deal done.

“We are focused on passing a comprehensive and sustainable road funding plan that takes into account the needs of the next generation while ensuring our infrastructure continues to fuel our state’s economic engine,” Bosma said in prepared remarks.

HB1002 is in the House Roads and Transportation Committee.

To view other legislative activities of interest for Indiana, click here.

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