Study of Indiana Transportation Infrastructure Funding Mechanisms

This slideshow requires JavaScript.

Indiana House Enrolled Act 1104 of 2014 required the Indiana Department of Transportation to commission a third-party study of transportation infrastructure funding mechanisms. The study was required to include charges based on at least the following:

  • Vehicle gross weight and miles traveled
  • Usage and degree of damage caused to transportation infrastructure
  • Flat per vehicle fees
  • Adjustments to sales tax on motor fuel, gas tax, special fuel tax (i.e., diesel), and the motor carrier fuel tax and surcharge
  • Tolling

INDOT commissioned Cambridge Systematics, D’Artagnan Consulting, and Indiana University to perform the study. The results were surprisingly hard to find on the INDOT Web site. You can find the study here: INDOT Road Funding Study Cambridge Systematics.

As you might imagine, there is no really good answer. Some alternatives, like an increased general sales tax (either an actual rate increase or dedicated revenue stream from the existing sales tax) produce enough revenue but harm the business climate and would be politically unpopular (especially if diverting the revenue from the existing sales tax resulted in a reduction to other important priorities like education or health care). Periodic increases and/or indexing to inflation of the gas, diesel, and surtaxes are easy to put in place but provide unstable revenue streams and are very politically unpopular. Others, like an increased rental car excise tax are easy to put into place and popular, but do not produce nearly enough revenue to make a difference. Road user fees, which are currently being piloted in Oregon (Oregon Road Usage Charge Program) and California (California Road Charge Pilot Program), are very difficult to enforce/collect, and are not yet politically popular. Etc. The study considers 17 different funding mechanisms (starting on page 16).

Probably the most seemingly obvious, but also most important, points that the study makes is that determining a road funding system is really a two-step process: first, the state needs to determine what Indiana wants to buy, and then select the funding mechanism to raise the necessary revenue. The first part involves some major policy decisions: do we just maintain the roads we already have, or do we build new roads as well?  If the latter, which roads, and how are they prioritized? For maintenance, at what condition do we want to maintain our roads and bridges? (Of course everyone will say that they should be maintained in top condition, until they are required to pay for that maintenance). And of course the issue that is most important to me — how do local roads and bridges fit into the funding mix?

The report also had a page on the public’s perception of transportation funding, which was probably the most fascinating of the whole study. The takeaways on this aspect included the following:

  • The Hoosier public both believes that road quality is poor and demands improved and new roads
  • The Hoosier public significantly overestimates the amount they pay in fuel taxes
  • For revenue mechanisms, the public preferences fees that shift the tax burden to “others” (any surprise there?)
  • General sales tax and road user charges are the most polarizing

This issue will be one of the bigger challenges ahead, both for Indiana and the nation.


Leave a Reply