Indiana House committee approves higher fuel rates, new vehicle fees, tolls

By Keith Goble, Land Line state legislative editor | 1/26/2017

An attempt at the Indiana statehouse to pump more revenue into the state’s ailing road system has taken its first step toward becoming a reality.

In a joint meeting with the House Ways and Means Committee, the House Roads and Transportation Committee voted 8-5 on Wednesday, Jan. 25, to advance an amended bill that is touted to help the state address the $1.2 billion needed annually for roads over the next 20 years. The 45-page bill includes plans to raise fuel use taxes by a dime, to tie the tax rates to inflation, and to authorize tolls.

Sponsored by Rep. Ed Soliday, R-Valparaiso, 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 bill also authorizes the taxes to be indexed on an annual basis. A change made in committee would cap annual adjustments at one penny.

Soliday, who also chairs the committee, said the effort is a major reform to Indiana’s outdated road funding formula.

“This plan would ensure Indiana has money dedicated to roads and bridges to maintain what we have, and build for the future,” Soliday said in prepared remarks.

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.

Rep. Dan Forestal, D-Indianapolis, voted on Wednesday against the funding plan. He predicts the legislation will continue to evolve as it winds its way through the statehouse.

“My hope is that both parties will arrive at a plan that is fair for all Hoosiers and invests in our infrastructure and future,” Forestal stated.

Another component of the plan 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 would also be removed that requires the General Assembly to approve tolling certain portions of interstates.

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.

“The world is changing, and so the reason we are doing things ... is so as that gasoline tax falls off, we have a study for tolling. Will it fill the gap?” Soliday said during the meeting.

In addition, he said that adding tolls to Interstates 65 and 70 would allow the state to expand both to at least six lanes border to border. Soliday said tolling would also free up state resources for other infrastructure work.

Forestal voiced his concerns about the tolling authority granted in the bill.

“The bill gives the governor the ability to toll anywhere without any oversight,” he said. “Giving a politician the ability to use tolling as punishment, without any checks or balances, is a bad idea.”

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.

HB1002 can now be considered by the House Ways and Means Committee.

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

Copyright © OOIDA