Contemplating New Approaches to Road Funding

Indiana local governments need almost $1 billion more than they currently receive to maintain and preserve the condition of the roads and bridges (IndyStar). Over 80% of the state revenue for roads comes from fuel taxes. Indiana Department of Transportation (INDOT) has noted that as cars get more fuel efficient, electric vehicles are becoming more popular, and as the cost of construction materials inflates, INDOT has already lost and will continue to lose revenue. To help combat this loss, the Indiana House of Representatives has introduced House Bill 1461. The bill introduces many ideas to get more funding for road construction and upkeep. The bill introduces ideas such as a new tax on food deliveries and rideshares, instituting more toll roads, and special taxes for Indianapolis (IndyStar). 

A New Tax on Food Deliveries and Rideshares: 
Counties will have the option to administer an extra fee on food delivery in order to funnel a few extra million dollars toward road repairs. An analysis of the bill estimates that if all counties were to adopt this fee in 2026, local road revenue could potentially increase between $150 million and $190 million (IndyStar). The bill exempts smaller businesses making less than $1 million in sales annually, and delivery services or rideshares that facilitate less than $100,000 in transactions the previous year. This bill is really targeted toward deliveries made by companies such as DoorDash and Uber. A spokesperson from DoorDash estimated that if this tax were to be implemented statewide, there would be an additional $28 million paid in taxes, and merchants could lose more than $49 million due to lost business (IndyStar). There have been some worries about the fees affecting those of lower income who have a fixed budget and rely on these services for groceries and to get to work. The author of the bill, Jim Pressel, heard these criticisms but is skeptical that the burden would be that cumbersome compared to the fees already tacked on.  

Institute Toll Roads 
Indiana currently has one toll road in northern Indiana. Former governor Mitch Daniels leased that toll road in 2006 to a private company for almost $4 billion. INDOT could decide to lease a new toll road for another large sum of money, or it could contract with a concessionaire and share revenue. Fiscal analysis projects that tolling could result in an extra $850 million a year in revenue on average and $32 billion over a 22-year period (IndyStar).  The major road funding bill of 2017 (HB 1002) gave INDOT the ability to pursue new toll roads with the approval of the governor and bypassing General Assembly approval. House Bill 1461 would remove two restrictions making it easier to implement toll roads; first, INDOT would not have to do a feasibility study beforehand, and second, if the agency applies for the requisite waiver from the federal government by July 1, it can toll lanes anywhere. Like the tax on food deliveries and rideshares, there have been some critiques. The president of the Indiana Motor Truck Association, Gary Langston, called tolling an “inefficient and inaccurate process” compared to fuel taxes and predicted the administrative costs to be higher. (IndyStar). Langston argued that these tolls would hurt the trucking industry as fuel-efficient trucks are not near being commercially available. He argued that the main proponents of tolling discuss how it is important to make all who use the roads pay for them and that fuel is going away, but none of those factors apply to the trucking industry. On the other hand, some argue that the benefit of tolling is to help Indiana reap the benefits of drawing out-of-state workers and travelers and it is important that they pay their fair share.

There has been some research done on the tolling and its affordability when it comes to people experiencing low-income or economically disadvantaged groups. There has been a study done by the Oregon Toll Program that had some important takeaways such as the fact that tolls could be a more equitable way of funding transportation. The Federal Highway Administration (FHWA) has said that without tolls, the costs of providing peak-period highway service are borne by more people than those who are using the highway. Tolls can be less burdensome to low-income drivers than systems that are based on taxes, such as car-registration tax, sales tax, and fuel tax. This is because many low-income drivers, for example, drive older vehicles that are not as fuel-efficient as newer models and pay higher fuel taxes for each mile driven. Another important takeaway that the study discussed was that people of all incomes travel at all times, but the research suggests that middle- and higher-income people are more likely to travel at the busiest times and thus are more likely to pay tolls. There are also concerns discussed in the study such as the impact on workers who are receiving lower pay, the barrier of electronic payment, and the cost and process to obtain a transponder. Tolls may make it difficult or too expensive for lower income workers to get to their jobs. Most entry level jobs may have readily available access to public transit, and even if there are those transit services, work hours are during off-peak times, making public transit use less appealing as an option. Not to mention, many low wage workers need to drive to retain their jobs.

There have been efforts by other departments of transportation such as the Oregon Department of Transportation (ODOT) to establish income-based tolls. The next concern with barriers to electronic payment is that tolls rely on cashless electronic payments. There are some households that do not have credit cards, bank accounts, or cannot afford large deposits so that they may not be able to set up toll accounts, which may limit their use. To combat this, toll facilities are offering cash options for payments. Finally, the cost and process of obtaining a transponder can be a barrier. Most tolled facilities that use electronic toll collection offers discounts to those who register and use transponders. This is to encourage people to join into the system and lower the cost to monitor and enforce toll fees. However, for low-income drivers, the cost to purchase a transponder and pay monthly fees to maintain it can be a barrier. Additionally, distrust of the department of transportation and government systems can be a barrier for trust in signing up for an electronic transponder that follows where people drive. To address the financial impact on people and workers who are experiencing low-income, toll programs offer credits and rebates such as waving the monthly registration fees, free transponders, and credits for a certain number of trips taken per month. Many also argue that the administrative costs will outweigh the revenue gained from the tolls. There have been some tolls that are successful and generate revenue, while there are some that struggle to break even. Federal policy encourages the use of tolling to attract private investors into highway and bridge construction, but numerous private toll roads have been financial failures. The administrative costs of toll collection are much higher than the cost of fuel tax collection. According to a CBS report, even with extensive use of electronic tolling, collecting highway tolls cost between 8% and 13% of the amount collected.  
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Special Taxes for Indianapolis:  
House Bill 1461 would give Indianapolis the option to put a referendum question to Marion County voters on whether to raise property tax to pay for road work. This bill would also triple the size of the wheel and excise taxes that Marion County could choose to levy on those who register vehicles in the county. The city is open to the idea of the property tax referendum but is opposed to increasing its wheel and excise taxes.  
All of these are just ideas in order to fill the funding gap to maintain and improve roads in Indiana. These all have their advantages and their critiques that need to be worked out.  As of right now, the bill has had a first reading and has been referred to the Committee on Roads and Transportation. House Bill 1461 is just one of many bills that the Chamber is following right now.  

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