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Highway interests seek silos for state transportation funds

October 4, 2014

As Indiana charts a path out of its transportation-funding shortfalls, highway-building interests are moving to cordon off their share of future revenue.

A blue-ribbon panel report to Gov. Mike Pence calls for transportation-related taxes and fees to be kept separate from general funds and for the money to be divided among highways, airports and waterways. The report states more than once that federal and state highway funds should not be spent on mass transit, and further, that the money should not go to enhancement, safety or other “non-road” programs, which currently help local communities pay for things like bike paths, sidewalks and intersection improvements.

Browning INDOT Commissioner Karl Browning wants new revenue sources to go to highways, roads and bridges.

Indiana is not alone in looking to protect transportation dollars from other government spending, but no state has gone so far as to divide each mode of transportation into its own funding silo, said Joshua Schank, president of the Eno Center for Transportation, a Washington, D.C., think tank.

“Why restrict yourself to specific modes of transportation?” Schank said. “Modes don’t have inherent goodness. The benefits are in the outcomes.”

INDOT Commissioner Karl Browning said his agency won’t change its allocation policies because of the blue-ribbon report, but he wants to make sure new sources of state revenue go to highways, roads and bridges.

highway-factbox.gif“Our projections suggest, at the current spending levels over the next 10 years, our system will degrade, particularly in the bridge arena,” Browning said. “I have a difficult time, from a responsibility level, that we should forgo bridge maintenance or highway maintenance in favor of something different.”

Franklin City Engineer Travis Underhill said he understands that state policymakers see highways as an economic-development tool, but cities are looking to other elements of the transportation network.

That’s why Franklin’s $6 million project to rebuild King Street, formerly State Road 44, west of Interstate 65 includes adding a bike path and sidewalk leading into downtown. INDOT awarded Franklin $1.8 million in federal funds for the pedestrian improvements.

“The entire country is moving in a direction that citizens want those types of facilities and are moving to areas, or a region in the state, that have those facilities available,” Underhill said. “That puts each government entity … at competition with each other to improve those offerings.”

The reason there’s so much competition among transportation interests is that gas-tax revenue isn’t keeping up with the cost of maintenance. Governments including Indiana are rapidly losing purchasing power as the price of petroleum-based construction material climbs, but people drive fewer miles in more fuel-efficient cars. INDOT has projected that a highway-preservation fund with $500 million in 2004 will hold half that by 2024.

INDOT spends $1.5 billion a year, and most of it comes from gas taxes. In Indiana, the taxes total 36.4 cents per gallon, split nearly evenly by the federal and state government.

At the behest of the Legislature, INDOT hired a consultant, Cambridge Systematics Inc., to forecast revenue from potential new funding mechanisms, such as vehicle mileage fees. The report is due out next summer, Browning said, and it will launch discussion about how to fund transportation.

Whatever mechanism Indiana chooses, Browning said, the money it generates should go to highways, roads and bridges, as suggested by the Blue Ribbon Panel on Transportation Infrastructure, which submitted its report to the governor on July 9.

“There’s a clear recognition of a shortfall of state funding,” said Dennis Faulkenberg, a lobbyist for the Build Indiana Council, a group of road construction firms. Faulkenberg sat on the 23-person panel, which was led by Lt. Gov. Sue Ellspermann and Cathy Langham of Langham Logistics and included representatives from nine other firms working in logistics or distribution.

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Faulkenberg said the panelists agreed that vehicle-generated user fees ought to be spent on roads, while transit finds its own source of funding.

“They don’t object to you being funded,” he said of public transportation. “Don’t be dipping into ours.”

Kent McDaniel, executive director of the Indiana Transportation Association, which represents public mass transit agencies, was not surprised the panel’s report was highway-oriented.

“One of our lobbyists tried to get someone from public transportation on the committee,” he said. “We were not invited to participate.”

The report grabbed headlines by making the controversial Commerce Connector, a second Indianapolis bypass, a top-priority project and by urging Indiana to adopt technology like self-driving cars.

The funding policies received less attention. Broadly stated, the panel’s recommendation was to “consider new, creative funding streams.” The panel said all funding should be indexed to inflation for all modes of transportation and that revenue sources should be based on user fees. The panel also advised creating new dedicated funds for air and water infrastructure.

The panel’s objective to “end any and all revenue diversions … from their original intended funding purpose” raised eyebrows at the Indianapolis Metropolitan Planning Organization, which distributes federal funds for regional projects, including the Indy Connect mass transit system.

Indianapolis and surrounding suburbs have yet to ask voters for the tax increases necessary to fund the Indy Connect system. The plan now includes a specific route alignment for the proposed Red Line from Carmel to Greenwood, and communities are looking to spend $2 million in federal funds plus $1 million in local contributions on environmental and design work for the Red Line.

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“They are definitely approaching things a little differently than we are from a regional perspective,” said Anna Gremling, executive director of the MPO. “What they’re looking at is transportation being the movement of cars, versus the holistic view of moving goods and people.”

While the report won’t affect INDOT’s allocation of federal money to the MPOs, planners are watching to see how it influences future legislation.

Indiana lawmakers already have moved to shore up highways while leaving mass transit funding stagnant over the last several years. In 2011, lawmakers did away with a share of the state sales tax that went to the Public Mass Transportation Fund, which supports northern Indiana commuter rail and bus systems around the state.

Now the fund is an annual line item that’s been at $42.5 million for seven years, McDaniel said.

Highway construction got a $100 million boost in the 2013 budget because the Legislature stopped diverting a share of gas-tax revenue to state agencies.

In addition, 1 percent of the state sales tax goes in the Motor Vehicle Highway Fund. INDOT and local governments split the annual distribution from this fund.•

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