Roads deal would raise taxes, generate $617M in 2018

April 20, 2017
Hayleigh Colombo

Legislative leaders announced Thursday afternoon an agreement on a new state road funding package—one that has Gov. Eric Holcomb’s endorsement and involves increasing the gas tax and over time transferring additional sales tax revenues to roads.

By 2024 the plan would generate more than $1.2 billion in new revenue for state and local road funding annually, according to legislative leaders. In 2018, it would result in $617 million in new money: $357 million for state roads and $260 million for local roads.

“We’ve reached an agreement on what we collectively believe is the strongest, absolutely best infrastructure program in our state’s history,” said House Speaker Brian Bosma, R-Indianapolis. “It meets our goal of being sure that those who benefit from and use our roads are responsible for their improvement.”

The deal, which still needs to be approved by both the House and Senate, would increase the current 18-cent-per-gallon gasoline tax by 10 cents—an estimated $5 extra per month at the pump for the average driver, according to lawmakers. The gas tax increase in itself would result in $300 million in additional revenue in 2018.

The special fuel tax, currently 16 cents per gallon, and the motor carrier surcharge tax, currently 11 cents per gallon, would also increase by 10 cents per gallon.

Then all those fuel tax rates would be indexed annually “using a formula that incorporates inflation and Indiana personal income growth,” meaning the taxes will likely increase over time.

The deal would also transfer more sales tax revenues to road construction and maintenance. For years, that money was treated like all other sales tax revenue and used for general government services and property tax relief. But pressure has grown on lawmakers to dedicate the sales tax drivers pay on gas purchases to roads, even though that creates a hole in the budget.

The last budget, passed in 2015, moved some of that sales tax revenue to road funding. The current deal would continue that shift until in 2025, all sales taxes paid on gas purchases would be dedicated to roads.

The House had proposed making that change immediately but the Senate insisted on a more financially cautious approach that spread the move over several years.

The deal would also add a new $15 annual statewide infrastructure improvement fee on all passenger vehicles registered in the state and increase registration fees 25 percent for trucks.

Electric vehicles registered in the state would have a new $150 annual fee and hybrids will have a $50 annual fee. Those fees will be directed to a matching fund for local roads.

The bill also requires INDOT to study tolling and submit a waiver to the federal government that—if approved—allow tolling on existing roads.

Bosma said he wants consumers to start seeing the benefits of the tax increase on their roads as soon as possible.

“We want them to start smelling asphalt in July,” Bosma said.

Holcomb congratulated legislative leaders on a plan he said “will strengthen our global reputation as the ‘Crossroads of America.’ This plan provides the tools necessary to maintain what we have, finish what we started, and invest in the future.”

Matt Greller, CEO of Accelerate Indiana Municipalities, a group that represents cities and towns, said the proposal appears to accomplish the goal of offering a long-term road funding strategy for local governments.

“The funding plan in this bill could be transformational for Hoosier cities and towns of all size,” Greller said in a statement. “Watching the leadership coming out of the House and Senate on this issue has been inspiring and I believe our state is taking a huge step forward with this comprehensive plan.”