Indiana’s 2017 road funding legislation Laurie Maudlin APPIAN

Goal: “Truth in Funding” History of funding Goal: “Truth in Funding”

History of funding Goal: “Truth in Funding” Public private partnerships Goal: “Truth in Funding” Indiana Toll Road lease in 2006 – out of $3.8b lease deal, $2.8b went to roads. It was a huge deal, but one impact it had was that it went just to larger, non-preservation projects. Authorized further use of P3’s in 2010.

History of funding Goal: “Truth in Funding” Public private partnerships Goal: “Truth in Funding” Diversions Diversions were a huge issue, costing the highway fund $140m at its peak. The funds went to the state police, to the bmv, to the department of revenue. In 2013, they were removed and these funds stayed with the road fund.

History of funding Goal: “Truth in Funding” Needs studies Public private partnerships Needs studies Goal: “Truth in Funding” Diversions Governor Pence Blue Ribbon Panel convened in 2013. FIRSST task force convened in 2016.

History of funding Goal: “Truth in Funding” Needs studies Sales Tax Public private partnerships Needs studies Goal: “Truth in Funding” Sales Tax Diversions Sales tax – 7 cents collected on gasoline and sent to the general fund. 1 cent in 2017 moved to roads, and then another 1.5 cents. Always a struggle because of the hole it left in the general fund. Estimates were up to $350M for a GF hit.

History of funding Goal: “Truth in Funding” Needs studies Sales Tax Public private partnerships Needs studies Goal: “Truth in Funding” Sales Tax Diversions General fund money appropriated for 2014-2017. Transfers from general fund surpluses were moved to the highway fund. LOIT reserves released in 2016. - $323m to locals. Other funds

Goal: “Truth in Funding” History of funding Goal: “Truth in Funding” By 2017, all avenues had been explored, and still a funding shortfall. RESULT? THERE IS STILL A NEED

Challenges Is there a shortfall? Conservatives/no taxes No bipartisan cooperation Not if, but how Need $1B a year…but too large to solve with just one source Challenges: Do we really need to do this? Used the truth in budgeting argument, and then showed 11% of state pavement is “poor”…want to get to 95% of pavement fair or better. The no tax argument was big – the Americans for Prosperity were vocal, as well as family groups (don’t hurt the young families), and the tea party. None said that it wasn’t needed, but all wanted to use existing resources and cut other programs. Democrats did not vote for the bill until the very end. Passed 61-36 and then 69-29 (got 8 democrats) and 34-13 and 37-12. (did have some dems all along in the senate). Not if, but how….how do you tackle such a big issue? No one source is going to get us there, and is it even possible to raise $1b without damaging hoosiers?

messaging Messaging: Last increase in 1993, diesel hadn’t been increased since 1988 Don’t leave it to our kids and grandkids Conservative message of taking care of problems without debt Helps state and locals Front loaded for locals Community crossing grants Stable, known sources went to locals Had some high profile road issues (bridge closures, bad conditions on interstate) Media was supportive of legislation Polling was 62% in favor of gas tax increase

2017 legislation Gas tax increased by 10 cents and indexed Diesel tax increased by 10 cents, indexed Surcharge increased by 10 cents, indexed Sales tax moved to highway fund IRP fee increased by 25% Registration fees increased by $15 Electric and hybrid fees instituted - $150/$50 Additional wheel tax authority for cities and towns Authorized tolling in future Our gas tax was 18 cents, split between state and locals. It had been a 53/47 split, but had to change it account for the extra funds going to the locals. The indexing on all goes for 7 years and then has to be renewed. There is a 1 cent per year cap. Diesel tax was split between state and local. It had been 16 cents. The surcharge was an extra trucking charge paid quarterly based on miles driven. Split between state and local. Sales tax just to INDOT. Started with .75 cents beginning in 2020, full phase in by 2025. This was point of contention with the budget folks, who didn’t want to lose those general funds if an emergency happened. So through 2024, a decreasing portion of the sales tax transfer is eligible for the special transportation flex fund, which allows the governor to determine that the money should not be transferred if needed in k-12, health care or child services. IRP and bmv fee increases split between state and local; statewide registration fee to locals Electric and hybrid fees go to locals. Allowed wheel taxes Tolling – instructed INDOT to study tolling, and make a report to the legislative council and budget committee, required INDOT to submit a tolling waiver to FHWA, required state budget committee review before implementing projects A major point of this is the future uncertainty of traditional revenues (thus the tolling piece)

Summary of new funding Gas tax $302M $423M Diesel tax $118M $196M FY18 FY24 Gas tax $302M $423M Diesel tax $118M $196M Surcharge $112M $153M Sales tax $55M $292M IRP fee $36M $36M Registration fees $43M $85M Electric/hybrid $4M $20M Wheel tax $5M $9M Tolling New lanes/2 interstates $178M All lanes/2 interstates + bridge $1.23B BOTTOM LINE: $617M in FY18 growing to $1.209B in FY24* *(without tolling) The tolling piece has continued to evolve. INDOT did a more indepth study and found that tolling 6 interstates would provide 1.3b a year (85% chance) up to $1.86b a year (50% chance). But late this past year, Gov Holcomb decided not to move forward with tolling (possibly because 1/5 approves tolling), although he does leave it open for a future governor to look at, and if needed, will look at other funding solutions.

What is the impact? Pre-1002: 2018 - $807 (now $1169)

Looking to the future Protect our gains Reducing impact of revenue declines

Questions? Laurie Maudlin 317-822-9206 lmaudlin@appianadvisors.com