After the Indiana Senate passed a compromise on the IndyGo funding feud Wednesday night, the Indiana House killed the measure by not voting on it before adjourning for the year.
The Senate passed House Bill 1279, which would have required the transit agency to raise $220,000 in private donations by the end of the year. That was a significant drop from the $6 million IndyGo initially needed to fundraise in order to comply with a 2014 law.
Since the House did not vote on the measure, the bill died Wednesday night, which means IndyGo is still expected to raise $6 million annually. But state law continues to lack any penalties to punish IndyGo for not meeting the fundraising threshold—a situation that sparked the Statehouse debate this year.
The 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 come close to meeting that requirement.
Because the 2014 law did not include penalties for failing to comply with the 10% requirement, lawmakers over the past couple of weeks drafted language to try to hold IndyGo accountable.
The initial penalty, proposed by state Sen. Aaron Freeman, R-Indianapolis, would have withheld 10% of IndyGo’s local income tax revenue in years that it failed to meet the private funding threshold. It also would have banned IndyGo from moving forward with expansion projects, like the Blue and Purple lines, until it secured private funding.
IndyGo officials, however, expressed concerns about the legislation jeopardizing the municipal organization’s operations and its ability to build the planned Blue and Purple transit lines.
House lawmakers were also worried about the impact the language could have on existing bonds related to IndyGo’s bus rapid-transit projects.
The compromise measure offered by the bill’s author, state Rep. Ed Soliday, R-Valparaiso, would have gradually phased in how much IndyGo had to fundraise and required 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 had to raise a match of 2% of its bus rapid- transit operating budget by the end of the year, then 4% in 2021, and then 10% in 2022.
IndyGo officials estimated that would have been $220,000 this year, and it would have increased to $440,000 the next year and $1.1 million the year after that.
As the Blue and Purple lines start operating, though, the bus rapid transit budget will increase, meaning the amount of private dollars IndyGo would have needed to fundraise would have increased.
IndyGo officials estimated that the private funding requirement would have been risen to about $3 million annually when all three lines were operating.
IndyGo has received a $35,000 grant from the Central Indiana Community Foundation and several other smaller donations so far.
Under the compromise, if IndyGo didn’t meet the fundraising threshold, tax dollars would have been withheld, but the state auditor would have been allowed to release enough funds to cover any bond payments.
House Speaker Todd Huston said he felt like more work could have been done on the bill.
“I think everybody knows now what the expectation of Indianapolis is… to provide matching funding,” Huston said.
Huston said lawmakers will see what IndyGo does the rest of the year before determining whether legislation needs to be considered in the 2021 session.
“We hope they honor the commitment that was made,” Huston said.