Indiana lawmakers are considering a compromise on the IndyGo funding debate that could significantly reduce the amount of private donations that would need to be raised while still holding the organization accountable.
An amendment added to House Bill 1279 on Feb. 27 would have withheld 10% of IndyGo’s local income tax revenue in years that it failed to meet the private funding threshold imposed in a 2014 law.
That 2014 law authorized a 0.25-percentage-point increase in the city’s income tax rate to fund IndyGo operations and new services—such as the Red Line—with approval from the City-County Council and Marion County voters. The law also said that IndyGo would be required to provide a 10% match of that new income tax revenue, raised only from private sources, not fares or taxes.
The tax went into effect in October 2017 and is generating about $60 million per year, meaning IndyGo should be raising $6 million in private donations annually to be in compliance, but the agency has not even come close to doing so.
The 2014 law did not include penalties for failing to comply with the 10% requirement, but now some lawmakers are trying to hold IndyGo accountable.
IndyGo officials, however, have expressed concerns about the legislation jeopardizing the municipal organization’s operations and its ability to build the planned Blue and Purple transit lines.
The amendment authored by state Sen. Aaron Freeman, R-Indianapolis, also would ban IndyGo from moving forward with expansion projects, like the Blue and Purple lines, until it secured private funding.
State Rep. Ed Soliday, R-Valparaiso, is the author of the underlying bill, which initially only addressed a regional development group in northwest Indiana, and he has been trying to strike a compromise to lessen the penalty while still pushing IndyGo to comply with the law.
The new language offered Monday afternoon by Soliday would gradually phase in how much IndyGo has to fundraise and would require a new traffic study on the impact of the proposed Blue Line.
Instead of having to immediately raise a 10% match to the local income tax revenue, IndyGo would have to raise a match of 2% of its bus rapid transit operating budget by July 2021, then 4% the following year, and then 10%.
IndyGo President and CEO Inez Evans said the Red Line’s operating budget is about $11 million, meaning the organization would need to raise $220,000 by July 2021 to meet the 2% threshold. That would increase to $440,000 the next year and $1.1 million the year after that.
Once the Blue and Purple lines are operating, the bus rapid transit budget would increase, though, meaning the amount of private dollars IndyGo would need to fundraise would increase.
Evans said IndyGo officials estimate that the private funding requirement would be bumped to about $3 million annually when all three lines are operating. That would cut in half how much IndyGo would have to fundraise when compared to the existing law.
The private dollars raised also would not be restricted to operating expenses, as the existing law requires.
“People rarely give to operating expenses,” Soliday said.
If IndyGo doesn’t meet the fundraising threshold, tax dollars would still be withheld under the new language, but the state auditor would release enough funds to cover any bond payments.
As for the Blue Line study, the Indiana Department of Transportation would be required to hire a third-party firm to conduct the research and report the findings to the State Budget Committee by April 2021. Soliday said he included that provision after hearing concerns about the dedicated lanes the Blue Line would use on the west side of Indianapolis.
The Blue Line is proposed to run along Washington Street between the town of Cumberland and the Indianapolis International Airport. Traffic on the west side of the route would be limited to one lane in each direction after the line was built, a plan that has drawn some opposition. But IndyGo officials say the dedicated lanes are necessary to help secure federal funding.
Soliday said he specifically picked April 2021 for the report because the legislative session would not be concluded yet. So, if lawmakers needed to take action, they could.
Democratic state lawmakers in the conference committee hearing on Monday did not indicate support for the new language and questioned why a study of the Blue Line route was needed. They expressed concerns that any threat of a penalty could affect existing bond ratings and jeopardize federal funding.
“If you do any of this, you are going to cause a strain on our credit rating,” state Sen. Greg Taylor, D-Indianapolis, said.
Soliday said his big concern is making sure the existing bonds used to fund the bus rapid transit projects are not negatively affected.
“I want to find something that works that does the least damage,” Soliday said.
Sarah Riordan, executive director of the Indianapolis Local Public Improvement Bond Bank, said changing the law to include any sort of threat of withholding a pledged revenue stream “will change the assessment of risk” on the existing bonds used to finance the bus rapid transit projects.
That description seemed to worry Soliday.
“What I’m hearing is no matter what you do, if you change anything, then the bond community sees you in a different light,” Soliday said.
Evans said the Blue and Purple lines have already been evaluated for federal funding, but she has been told that if the law changes, IndyGo will have to submit a new budget for those projects and be re-evaluated by the Federal Transit Administration.
“We’ve been advised they are watching us very closely,” Evans said.
Soliday is hoping to finalize a compromise within the next two days, but if he can’t reach one, he could kill the bill.
“That’s probably not going to happen,” Soliday said. “But if I have to do it, I have to do it.”
IndyGo is not opposing the compromise, but isn’t offering strong support either.
“If a compromise needed to be made, this is the best option that’s on the table,” Evans said.
The legislative session is expected to end Wednesday.