The city of Indianapolis is about to get a boost in road funding from the state—at the expense of other cities and towns—but city leaders say it’s still not enough to address the growing infrastructure needs.
The change, which will impact local government budgets starting next year, is being made after State Auditor Tera Klutz and Indianapolis Mayor Joe Hogsett’s administration discovered a discrepancy in how the formulas for certain taxes had been applied for years.
The net gain for the city next year is expected to be about $12 million, an increase of about 23% from the amount it received this year for road funding.
But it also means every other city and town in the state, including the local government units within Marion County that operate independently, will see an 8% decrease in their allocation of certain road funding dollars.
The complication dates back to when the Indiana General Assembly approved the creation of Unigov, which combined governments of Indianapolis and Marion County, in 1970.
The law says the state auditor should use the population within what’s known as the fire special service district to calculate the distribution of certain tax funds, including the motor vehicle highway, local road and street, and cigarette tax, rather than the entire consolidated city’s population.
The result is fewer residents are counted in the city’s population and, therefore, not included when the state auditor calculates the city’s distribution.
In the mid-2000s, the fire special service district was expanded through several consolidations that added five townships to its population. Three townships are still excluded—Wayne, Pike and Decatur.
But city and state officials recently realized that the larger population area hasn’t ever been used in calculations, even though they agree now that it should have been in effect after the 2010 census, which certifies the population figures the auditor’s office uses in the formulas.
“Why it didn’t happen, we have absolutely no idea,” Thomas Cook, chief of staff for Hogsett, said. “Nobody seems to know.”
Now, the expanded fire district area will be used to calculate the city’s population, which will create a boost to Indianapolis’ budget and the drain on other local governments’ budgets.
Cook said the Indianapolis still received funding for every citizen in past years, because it collects both the city and county allocations, but this change is still impactful in particular because of how the motor vehicle highway formula is designed. Within that fund, the distribution is based on the entire population for all cities and towns—except Indianapolis, which uses the fire district population—but for counties, it is based on road mileage and vehicle registrations.
“A person in the city side of ledger gets us more money than a person on the county side of the ledger,” Cook said. “We get more money for people in the fire district than if they were out.”
Indianapolis Department of Public Works Director Dan Parker said the change means they will receive slightly less money from the county distribution of motor vehicle highway and local road and street dollars—a drop of about $4 million—but they’ll receive more from the city distribution—an increase of about $16 million.
Together, the city and county distributions from those taxes accounted for about $51 million last year, so the $12 million net gain accounts for an increase of about 23%.
City leaders said they are pleased about the increase, but cautioned it’s not enough to solve all of the ongoing infrastructure issues.
“It is significant relevant to what we were receiving,” Cook said. “It is not so significant to address the underfunding of our road infrastructure.”
Cook said the extra dollars are not built into the 2020 budget that’s currently before the Indianapolis City-County Council, but they will look to add them after the first of the year when they receive the first distribution. It’s undecided how the dollars will be used.
Klutz sent a memo to cities and towns throughout the state earlier this month alerting officials of the change.
“We felt it was important to notify them,” Klutz said. “It stinks when you’re impacting so many units of local government.”
In a statement, AIM, which represents Indiana’s cities and towns, called the situation “unfortunate.”
“Thankfully, this will be a one-time adjustment, but the timing of the distribution change has presented challenges for communities that were well on the way to finalizing 2020 budgets,” the statement read.