Partial Funding for I-69 Section 6 in New State Plan

I69bridgeThis posting is a brief follow-up on a report on Indiana Public Media: How Much Money is Included For I-69 in the State’s New Roads Plan? As the report pointed out, the state’s new 5-year infrastructure investment plan (so-called Next Level Indiana) provides some funding for the final section of I-69 in Indiana, Section 6, which runs from Martinsville to I-465 in Indianapolis. However, as the report also notes, I-69 is not fully funded in the report.

The investment plan breaks out the investments by county. The following table shows the funding for I-69 by county (and also by segment in Marion County):

Screenshot 2017-07-15 07.28.51

So, a total of $554M has been allocated for I-69 through 2022. It appears that the segments going through Morgan County have been fully funded, with allocations going down from there.

How does this compare to the overall costs of the project? The Draft Environmental Impact Statement (DEIS), Chapter 6 Comparison of Alternatives provides the following summary of the estimated costs by segment:

Screenshot 2017-07-22 12.01.51

Alternative C4 (of which there are two variants) is estimated to cost approximately $1.5B. So at first blush it appears that Section 6 has been funded at around 36% through 2022.

Screenshot 2017-07-22 11.58.46Although the subsections don’t line up perfectly with county boundaries, they are pretty close. Subsections 1-4 are in Morgan County, going from Indian Creek (where Section 6 begins) to Banta Road in Morgan County. Using Alt C4A, total estimated costs are $515.7M, of which $263M (approximately 50%) is funded. Subsection 5 is in Johnson County, and it appears that approximately $153.2M out of $203.5M, or 75%, is funded. And Subsections 6-8 in Marion County appear to be funded at $138.1M out of a total cost of $785.1M (18%). There could, however, be some additional funding in the 5-year plan that isn’t labeled as I-69 — for examples, I-465 improvements — but are part of the overall cost of I-69 Section 6; I don’t know.

So I think one can draw two conclusions from this 5-year plan: (1) the final section of I-69 is not fully funded — not by a long shot. It isn’t clear whether the state will fund the gap by sustaining this level of investment beyond 2022, or through some sort of public-private partnership, or some other approach entirely; and (2) that while section 6 is not fully funded, the state has earmarked a substantial amount of funding for it, belying the claims of some that the state would just “declare victory” after section 5, and leave 37 to Indianapolis as-is. It is clear that the state is serious about completing the project, and is already committing substantial resources to complete it.

New Road Money for Local Governments

rockport5This past week, House Enrolled Act 1001 and Senate Enrolled Act 67 both passed the Indiana General Assembly, and are on their way to the Governor’s desk. Both have implications for local units of government around the state and here in Monroe County.

SEA 67: Returning Local Income Taxes to the Locals

First, let’s consider SEA 67. This act reduces the amount that the state is required to hold in each county’s income tax trust fund from 50% of the amount that is actually certified to be distributed to the local governmental units in the county to 15%. The trust fund is essentially an escrow account that holds the money collected from local option income taxpayers and that is used to pay out the annual distribution to local governments each year (referred to as “certified shares”). The theory is that local option income tax trust fund balances have been increasing over the years, and too much is being withheld from local governments.

Further, SEA 67 requires the state to make a one-time distribution of ALL of the excess trust fund balance as of December 31, 2014, to local units of government that receive local option income taxes (using the standard procedures for allocating local option income taxes to these units). This includes the county, cities and towns, public libraries, townships, and fire protection districts.

However: for the county and cities and towns, there is a restriction. 75% of the money must be spent on roads and aviation (or deposited in the rainy day fund, and later spent on roads and aviation). The remaining 25% can be spent on any lawful expense of local government. So basically, money that has been collected from local taxpayers, as authorized for particular purposes by local governments — is being given back to local governments by the state, but being restricted in use. And these restrictions only apply to the county, cities, and towns — townships and the public library have unrestricted use of these funds!!

The following table provides my very rough estimate of the amounts that each taxing unit in Monroe County will receive. Note that the total amount distributed to Monroe County ($6,892,000) is based on the latest fiscal note on SEA 67 (authored by Legislative Services Agency). However, it isn’t clear from the fiscal note whether the total is based on 88% of the December 31, 2014 trust fund balances (where the bill started out) or 100% (where the bill ended up). So please don’t take these numbers as definitive — they are simply estimates of roughly what the taxing units might be expecting.

Screenshot 2016-03-14 09.43.34
My Estimates of What Local Governments Will Receive Under SEA 67 (One-Time Distribution)

As the chart shows — Monroe County Government could be receiving approximately $2.7M from its income tax trust fund — however, only $675K would be unrestricted. And remember — this is money that has already been collected from taxpayers.

HEA 1001: Additional Local Option Highway User Tax and New Local Road and Bridge Matching Fund

839DE454-D67C-4C8A-B2C4-1D9CDB7D9303House Enrolled Act 1001, on the other hand, provides additional road funding to local governments through several very different mechanisms: (1) the provision for local units to increase their wheel tax/excise surtax; and (2) the creation of a new matching fund called the Local Road and Bridge Matching Grant Fund.

Wheel Tax/Excise Surtax

Sometimes referred to as a Local Option Highway User Tax (LOHUT), this refers to two separate taxes that must be adopted concurrently: a wheel tax and an excise surtax. Currently, this is the only local option tax available for road funding. The excise surtax portion is a surtax paid at the time of vehicle registration, and applies to cars, motorcycles, and trucks under 11,000 pounds. It is currently $25/vehicle in Monroe County. The wheel tax applies to all vehicles that aren’t subject to the excise surtax, including RVs, tractors, trailers, trucks, and buses. The wheel tax is currently $40/vehicle, except for vehicles under 3000 pounds (i.e., mopeds). Both the wheel tax and the excise surtax in Monroe County are at the statutory maximum (well, until HEA 1001).

The following table from the Bureau of Motor Vehicles shows the current LOHUT rates for Monroe  County:

Screenshot 2016-03-14 21.10.54
Wheel Tax / Excise Surtax Information for Monroe County as of 2016-03-14

Once collected, these taxes are then distributed to the county and to municipalities, and are earmarked for construction, reconstruction, repair, and maintenance of roads in each unit’s jurisdiction. The LOHUT (wheel tax/excise surtax) brought in $1,574,021 (2014) and $1,288,792 (2015) to Monroe County Government respectively.

HEA 1001 provides a couple of additional options for local governments with respect to the LOHUT:

  • It doubles the maximum rate for the wheel tax/excise surtax for counties (i.e., counties would be permitted to adopt up to $50 excise surtax and $80 wheel tax), IF the county is using a transportation asset management plan (see the section on the Local Road and Bridge Matching Grant Fund, below).
  • It allows municipalities (cities and towns) with a population of at least 10,000 to adopt the wheel tax/excise surtax (maximum of $25 for the excise/surtax and $40 for the wheel tax). Formerly only counties could adopt the wheel/excise surtax. To adopt these taxes, municipalities must also be using a transportation asset management plan.

Local Road and Bridge Matching Grant Fund

Bill Williams Bridge in Stinesville
Bill Williams Bridge in Stinesville

HB 1001 also creates a new program called the Local Road and Bridge Matching Grant Fund. The new fund provides a competitive 50-50 match to local units of government for local road and bridge projects that “repair or increase the capacity of local roads and bridges” and that are “part of the local unit’s transportation asset management plan” (a new requirement that local governmental units have a plan for transportation assets and drainage systems and rights-of-way that affect transportation assets).  INDOT (the administrator of the program) is instructed to “give preference to projects that are anticipated by the department to have the greatest regional economic significance for the region in which the local unit is located.” In addition, at least 50% of the grants in each fiscal year are required to be made to local units in counties with populations of less than 50,000.

The grant program is funded from state reserves and one percentage point of the 7% gross retail sales tax (for fiscal year 2018) and 1.5 percentage points of the sales tax for fiscal years 2019 and after.

The local unit must provide their 50% match out of the following sources:

  1. revenues from an increase in the wheel tax/excise surtax rate (see above)
  2. any special distribution of local income taxes (again, see above); or
  3. any  money in the unit’s rainy day fund.

Since most local counties and municipalities, including Monroe County and the City of Bloomington, will receive substantial cash infusions into their rainy day funds from the excess trust fund balances, the goal will be to use this revenue to lever the same amount of money in the new Local Road and Bridge Matching Grant Fund, and effectively double its spending power on local roads.

Per Pupil School Funding in Indiana

This post comes out of a brief online discussion among several participants in the Parent Community Network of Monroe County about the financial impact on a local school corporation of a child moving from the public school corporation to a charter school. Someone had heard that a local school corporation loses about $500K for every 100 students who leave to attend a charter school and wanted a source for that figure. As you will see here, that figure makes a good rough estimate of the hit that local public schools take when students leave for charter or private schools (now funded by vouchers).

Although the details are arcane and have changed several times over the years, Indiana’s school funding formula has based the tuition support (the amount of funding provided to a local school district by the state) on the number of students attending the school district, based on a once-per-year (in September) count of students called the Average Daily Membership (ADM) (the ADM count was changed to twice a year starting in 2013). For example, Monroe County Community School Corporation’s tuition support per student for 2013 is approximately $5231 and Richland-Bean Blossom’s is approximately $5160 (there is some uncertainty in these numbers because of the expiration of the school funding formula).

In recent years, Indiana has moved even more aggressively to a “funding follows the child” model for school funding. In 2012, changes in the legislation eliminated some protections that school districts had from rapid fluctuation in enrollment (a process oddly-named “re-ghosting” adjusted ADM numbers based on a 5-year average of enrollment increases or declines) and also incorporated charter schools into the funding formula. In essence now, when a student leaves the public school corporation for a charter school, the public school loses the funding associated with that student, and the charter school gains the funding associated with that student. Using the above numbers, if 100 students leave MCCSC for a charter (or private) school, MCCSC loses around $523,100.

While a “funding follows the child” approach has a patina of fairness, this loss of funding when parents flee the public schools can do real harm to the public schools. Public school corporations operate under substantially greater regulatory burdens than do charter and public schools, have substantially greater fixed costs, and must serve all students in the district. The losses to charter and private schools tend to be spread out around the district, covering multiple schools and grade levels. The public school corporation can’t therefore simply eliminate a few positions to compensate for the loss. Instead, it puts an even greater burden on the entire system, which is already straining from increased demand and stagnant funding.

On a personal note, I do believe that parents should have choices. My own child attended the Bloomington Project School (a public charter school), and I cannot say enough good things about it. But alternatives like the Project School need to exist on top of a base of public education that is well-funded and available to all.  The funding formula needs to ensure that these basic needs are met first — that the public schools are funded well and that every child in every public school in the state has access to a high-quality public education. But our general assembly has been moving in exactly the opposite direction.

Here is a summary of the (estimated) 2013 per-student tuition support for each school district in Monroe County:

School District 2013 Estimated
Tuition Support
Monroe County Community School Corporation $5231.35
Richland-Bean Blossom School Corporation $5160.05
The Bloomington Project School $5101.74

SourceReport from Indiana Department of Education, Office of School Finance

Note: NPR’s StateImpact Bite Sized Breakdown: How Are Schools Funded? provides a brief summary of several of the changes made by the General Assembly during the 2012 Session. During this session, the existing school funding formula was set to expire on July 1, 2013, and there are still some outstanding questions about exactly how much schools will receive during subsequent school years.

Is an Elected Official an Employee? It Depends…

During a recent discussion on the implications of the Affordable Care Act (i.e., Obamacare) on Monroe County Government, a vigorous discussion emerged on the question of whether an elected official of an employer (i.e. Monroe County Government) counted as an employee under the Affordable Care Act, and if so, how to measure the number of hours per week an elected official works.  The distinction matters because of the new Affordable Care Act requirements to provide affordable, minimum essential coverage (these terms have precise definitions) to full-time employees (or at least 95% of full-time employees), or face a penalty.

As it turns out, the answer is complicated, and not entirely clear in the end with respect to the Affordable Care Act. An elected official is an employee, by IRS regulations. However, an elected official is not an employee by the Fair Labor Standards Act (FLSA). The blog posting Is an Elected Official an Employee an excellent summary of the conflicting legal standards with respect to elected officials (although it is written from the perspective of Illinois law rather than Indiana).  It should also be noted that, contrary to popular opinion, there is no such thing as a “full-time” elected official vs. a “part-time” elected official. Although the salaries of some elected officials (e.g., Auditor, Assessor, Treasurer, Clerk, Recorder) in Monroe County are closer to that which a full-time employee would receive, and others (e.g., County Council) are closer to that which a part-time employee would receive, there is no distinction in law or policy.

So back to the question that prompted this brief discussion — is an elected official an employee from the perspective of the Affordable Care Act? That answer doesn’t seem to exist in the Act, nor in any case law falling from the Act (as there is essentially no case law yet). The conclusion of those in the discussion I participated in was that the safest position was to treat elected officials as full-time employees and offer them health insurance (as Monroe County Government currently does).

Gateway a Useful Tool for Reporting on Local Government Finance

The Indiana Gateway for Government Units — generally just called “Gateway” — is a tool developed in 2010 by a collaboration between the State of Indiana and Indiana University (the Indiana Business Research Center) to make local government financial submissions easily accessible to the public. Local units have been required to use it for the past two years for submission of standard budget documents during the fall budget process.

Although some data has been available to the public since 2011, very recently some major upgrades were released that makes it much easier for local officials and members of the public to retrieve local government financial information. Because Gateway is now to the point where it can actually be useful to members of the public, I though I would bring it to the attention of the readers of MoCoGov.

The Report Builder for Gateway is available at:

The Report Builder provides a number of pre-made reports for all levels of local government — counties, cities and towns, townships, libraries, fire districts,   school districts, solid waste management districts, etc., and the user interface is pretty intuitive.

The following are a couple of reports that might be particularly interesting to taxpayers (along with some instructions for accessing the reports).

  • Employee Compensation (100R)
    • Provides the salaries of all public employees for all levels of local government, state government, public universities, and even public charter schools
    • Choose Employee Compensation (100R) ->  Employee Compensation. Choose your county and then the unit of government within that county. For state and public university employees, choose “State” as your county.
  • Budget Estimate and Tax Rate
    • Provides the information on the Form 4B — sometimes called the “16-line statement” — submitted by local governments for each fund with a tax rate.  Includes the adopted budget, the property tax levy, and the property tax rate for each fund adopted during the fall budget process for the next year.
    • Choose Budgets -> Budget Estimate – Financial Statement – Tax Rate.  Choose your county, year, unit, and fund.
    • For example, see the report for the 2013 Monroe County General Fund below.  You can see, for example, that the general fund budget adopted by the County Council and then certified by the Department of Local Government Finance is $20,300,041, with a property tax levy of $15,097,664, and a tax rate of 0.2389 for every $100 of assessed value.

2013 4B for Monroe County General Fund

  • Budget Summary
    • Provides a summary of budget estimates for each unit of government, for each fund and department, summarized by budget category (i.e., personal services, supplies, services and charges, and capital outlays).
    • Choose Budgets -> Budget Summary
  • Line-Item Budget Estimate
    • Provides a detailed line-by-line budget for each unit of government, for each fund and department.
    • Choose Budgets -> Line-Item Budget Estimate
  • Net Assessed Value by District
    • Provides the net (after exemptions and deductions) assessed value for each taxing district in a county
    • Choose Assessed Value -> Certification of Net Assessed Values by District
    • This report is particularly interesting because it shows not only the assessed value for real property and personal property (i.e., industrial equipment), but also shows the amount of assessed value captured by Tax Increment Finance (TIF) districts for each taxing district.
    • The following screen shot shows the report for Monroe County for 2013

Screen Shot 2013-03-17 at 7.51.05 PM

  • Debt Management
    • Multiple reports that show all debt owed by local government. This set of reports is particularly interesting, because it shows not only the standard property tax-based general obligation bonds (for example, the Showers purchase bond), but also equipment lease-purchases, such as the Vactor and street sweeper trucks purchased by the new Monroe County Stormwater Management Program, and the Innkeeper’s Tax-backed land purchases for the Convention Center
  • Redevelopment Commissions
    • Includes links to all of the annual reports for each of the Redevelopment Commissions in each county. The Redevelopment Commissions are responsible for the TIF districts in each county. The Monroe County Redevelopment Commission annual reports concern the county’s 3 TIF districts, and the Bloomington Redevelopment Commission annual reports concern the City of Bloomington’s 6 TIF districts as well as the City’s Certified Tech Park.
  • Disbursements by Fund and Department Report
    • Shows the actual expenditures (as opposed to the budgeted expenditures) for each fund and department of a local unit of government for a prior year.
    • Choose Annual Financial Report -> Disbursements by Fund and Department. Expenditures are summarized by category (i.e., Personal Expenses, Supplies, Services and Charges, and Capital Outlays).
  • Grants
    • Grants have become an increasingly essential funding mechanism for many aspects of local government. The Grants report shows all of the Federal (including Federal pass-through) grants received by each unit of government during the previous year. Note that this report does not include local grants and grants from non-government foundations.
    • Choose Annual Financial Report -> Grants, and choose the unit of government.

My examples above only scratch the surface of the data available in the new Gateway reports. I encourage everyone interested in local government to give the system a try!

Update on Cuts to Casino Gambling Revenues

On February 22, I wrote about possible cuts to the casino gambling revenues received by local governments in Indiana (Riverboat Wagering Tax to Monroe County May be Cut).  Since then, Senate Bill 528 passed the full Senate and was sent to the House for consideration.

The version of SB528 that passed the Senate makes some major changes to the taxes levied on gambling businesses, including eliminating the riverboat admissions tax (paid by casinos based on the number of people that go through the turnstile at the casino, regardless of amount paid by casino patrons), and replacing it with a 3.45% supplemental wagering tax based on the adjusted gross receipts of the casino.

In addition, and of direct interest to non-casino counties such as Monroe, SB528 replaced the flat $33M/year revenue sharing arrangement (which allocated $33M of riverboat admissions taxes to local units of government in non-casino counties based on their relative populations) with a new arrangement in which 5.1% of the taxes collected (after June 30, 2014, and other than from the French Lick Casino) will be distributed to local units of government in non-casino counties.

Legislative Services Agency, in the Fiscal Impact Statement for SB528, estimates that this change will result in a net loss of $6.65M in revenue to non-casino casino counties as of FY2015 and beyond.

The Association of Indiana Counties (AIC) provides a projection of the impact of this change on each local unit of government in Indiana. I did my own projections based on the FY2015 change in overall receipts from the 5.1% tax as projected from the Fiscal Impact Statement, and came up with slightly different numbers from AIC — but they only differ by a few hundred dollars, which is well within the margin of error for the $6.65M revenue reduction, in any case.

The table below then summarizes the impact of this legislative change on Monroe County for FY2015 (including both AIC’s projections and my projections). It appears that Monroe County as a whole will see $164K or so less in revenues from casino gambling in 2015. This is clearly something that needs to be taken into account in budgeting for the next few years — but is not a game-changing (pun intended) hit to our community’s revenues for public services.

Unit of Government  2012 Distribution  AIC Projected Loss 2015 Projected Distribution (McKim) 2015 Projected Loss (McKim)
Monroe County Government  $302,078.48  $60,415.70  $241,205.09  $60,873.39
City of Bloomington  $476,312.84  $95,262.57  $380,328.59  $95,984.25
Town of Ellettsville  $37,782.77  $7,556.55  $30,168.97  $7,613.80
Town of Stinesville  $1,172.94  $234.59  $936.57  $236.37
Monroe County Total  $817,347.03  $163,469.41  $652,639.22  $164,707.81

And of course — anything could happen to this bill as it hits the House! So stay tuned…

Gas Taxes in Indiana, Part 2

Yesterday, I posted about how gas taxes in Indiana were calculated (Gas Taxes in Indiana). As promised, today I wanted to share some data about how Indiana’s fuel taxes (both gasoline) compare to those of other states.

Note that comparing gas taxes between states isn’t as straightforward as you might think. States use a combination of specific taxes (taxes that are based the number of units of the item or service taxed) and ad valorem taxes (taxes that are based on the value or price of the item or service taxed). To the point here, while the Indiana excise tax for gasoline is 18c per gallon (a specific tax), the non-tax part of the retail price of gasoline also is subject to the general gross retail sales tax of 7% (the same sales tax you pay for any other items purchased). So the actual taxes paid by motorists at the pump per gallon depend on the price of gasoline at the time. In analyzing the tax on fuel between states, therefore, one must use some sort of average fuel price across the state as a basis for comparison.

So how does Indiana stack up?

First, consider only the excises tax on gasoline. The following table shows the excise tax by state (based on 2012 information from the American Petroleum Institute).

State Excise Tax
Fla. 4.0
Ga. 7.5
Alaska 8.0
N.Y. 8.1
N.J. 10.5
Pa. 12.0
Wyo. 13.0
S.C. 16.0
Okla. 16.0
Ala. 16.0
Mo. 17.0
N.M. 17.0
Hawaii 17.0
Va. 17.5
Miss. 18.0
Ariz. 18.0
N.H. 18.0
Ind. 18.0
Vt. 19.0
Ill. 19.0
Mich. 19.0
La. 20.0
Tex. 20.0
Tenn. 20.0
W.Va. 20.5
Iowa 21.0
Mass. 21.0
Ark. 21.5
Colo. 22.0
S.D. 22.0
Del. 23.0
N.D. 23.0
Nev. 23.0
Md. 23.5
D.C. 23.5
Kans. 24.0
Utah 24.5
Idaho 25.0
Conn. 25.0
Ky. 26.4
Nebr. 26.7
Mont. 27.0
Ohio 28.0
Minn. 28.0
Ore. 30.0
Maine 30.0
Wis. 30.9
R.I. 32.0
Calif. 35.7
Wash. 37.5
N.C. 38.9

Indiana shares the 10th lowest rank for gasoline taxes by state.

However, when you throw in the sales tax and other taxes, the ranking changes quite a bit:

State Excise Tax Other State Taxes and Fees Total
Alaska 8.0 0.0 8.0
Wyo. 13.0 1.0 14.0
N.J. 10.5 4.0 14.5
S.C. 16.0 0.8 16.8
Okla. 16.0 1.0 17.0
Mo. 17.0 0.3 17.3
Miss. 18.0 0.8 18.8
N.M. 17.0 1.9 18.9
Ariz. 18.0 1.0 19.0
N.H. 18.0 1.6 19.6
Va. 17.5 2.3 19.8
La. 20.0 0.0 20.0
Tex. 20.0 0.0 20.0
Ala. 16.0 4.9 20.9
Tenn. 20.0 1.4 21.4
Ark. 21.5 0.3 21.8
Iowa 21.0 1.0 22.0
Colo. 22.0 0.0 22.0
Del. 23.0 0.0 23.0
N.D. 23.0 0.0 23.0
Mass. 21.0 2.5 23.5
Md. 23.5 0.0 23.5
D.C. 23.5 0.0 23.5
S.D. 22.0 2.0 24.0
Utah 24.5 0.0 24.5
Kans. 24.0 1.0 25.0
Idaho 25.0 0.0 25.0
Vt. 19.0 7.1 26.1
Nebr. 26.7 0.9 27.6
Ky. 26.4 1.4 27.8
Mont. 27.0 0.8 27.8
Ohio 28.0 0.0 28.0
Minn. 28.0 0.1 28.1
Ga. 7.5 21.9 29.4
Ore. 30.0 1.0 31.0
Maine 30.0 1.5 31.5
Pa. 12.0 20.3 32.3
Wis. 30.9 2.0 32.9
R.I. 32.0 1.0 33.0
Nev. 23.0 10.1 33.1
W.Va. 20.5 12.9 33.4
Fla. 4.0 31.0 35.0
Wash. 37.5 0.0 37.5
Ind. 18.0 20.9 38.9
Ill. 19.0 19.9 38.9
N.C. 38.9 0.3 39.2
Mich. 19.0 20.4 39.4
Hawaii 17.0 30.1 47.1
Conn. 25.0 23.6 48.6
Calif. 35.7 12.9 48.6
N.Y. 8.1 40.9 49.0

Now, Indiana ranks at the 7th highest overall gas tax. So when you compare state by state, it is critical to take into account all of the applicable taxes, not just the so-called Gasoline Tax.

The American Petroleum Institute (API), an oil and gas industry trade group and certainly not an unbiased source, nonetheless puts out some useful graphics that illustrate the magnitude of gasoline taxes by state.

The following chart  illustrates the overall tax on gasoline by state (click to enlarge).


The API numbers illustrated on the chart include all combined federal, state, and local taxes on gasoline. Note that these numbers won’t necessarily absolutely match any other set of statistics on fuel taxes, since the numbers for the states with ad valorem taxes (like Indiana’s sale tax) will depend on the prices used in the analysis, which vary by day.

Now, for diesel: the following chart illustrates the overall tax on diesel by state (click to enlarge).


This chart shows that Indiana actually has the second-highest tax for diesel fuel (used by motor carriers), after Connecticut. Remember that in addition to the 16c per gallon excise tax on diesel fuel, Indiana also assesses a motor carrier surcharge tax of 11c per gallon, which is paid quarterly by the carrier.

Of course, depending the pricing at the time, New York and California may challenge Indiana for motor carrier fuel tax supremacy!

In addition, a number of states (including California, Iowa, Michigan, Washington, Ohio, and Florida), struggling with declining infrastructure and reduced overall revenues from gas taxes (from more fuel-efficient vehicles and behavioral changes from drivers) have seen recent conversations in their respective statehouses considering raises on fuel tax, as well as more radical fee structures for road funding including Vehicle Miles Traveled (VMT) taxes. So this map may look quite a bit different in the foreseeable future!

Gas Taxes in Indiana

AGas Prices week ago I wrote about some potential changes in legislation to the way in which gas taxes are allocated to local governments for road construction and maintenance (Counties Agitate for Increased Road Funding). Since then I have received several questions about what exactly comprises the taxes paid on gasoline (and diesel) in Indiana, so I thought I’d explain how gas taxes work in Indiana.

Calculating the Gasoline Tax

In Indiana, the price that you pay at the pump for a gallon of gasoline consists of 4 elements:

  • The retail price of the fuel
  • 7% Indiana retail sales tax on the retail price of the fuel
  • 18.4c per gallon Federal gas excise tax
  • 18c per gallon Indiana gas excise tax

Just as an example, consider the gas that I paid $3.85/gallon for this morning. That price at the pump consisted of:

Retail Price  $3.260
Federal Tax  $0.184
Indiana Gas Tax  $0.180
Sales Tax (7%)  $0.228
Total  $3.85

At this particular price, taxes comprise 15.4% of the  total price paid at the pump. Since the federal and state excise taxes on gasoline are charged per gallon (rather than ad valorem, or based on the price of the gasoline), taxes comprise a smaller percentage of the overall price paid per gallon the higher the price of the gasoline.

The 18c per gallon Indiana gasoline excise tax has been the same since 2003. The 18.4c per gallon Federal gasoline excise tax has remained the same since 1993!

Calculating the Diesel Tax (for Motor Carriers)

The taxes on diesel fuel, primarily used by motor carriers (trucks), differ in rate in Indiana, but also include an additional charge: a Motor Carrier Surcharge Tax. The total price paid consists of the following components:

  • The retail price of the fuel
  • 7% Indiana retail sales tax on the retail price of the fuel
  • 24.4c per gallon Federal diesel excise tax
  • 16c per gallon Indiana excise tax (as opposed to 18c for Indiana)
  • 11c per gallon Motor Carrier Surcharge Tax (paid quarterly by the carrier)

Here is a pricing example for diesel:

Retail Price  $3.260
Federal Tax  $0.244
Indiana Gas Tax  $0.160
Surcharge  $0.110
Sales Tax (7%)  $0.228
Total  $4.00

The diesel excise tax and the motor carrier surcharge tax has been the same since 1998. Note that the 11c per gallon Motor Carrier Surcharge Tax is paid to the state quarterly by the carrier.

With this particular example, using the same retail price as with gasoline, the taxes on diesel make up 18.5% of the total price paid at the pump — making diesel in Indiana more heavily taxed than gasoline. This is true in most jurisdictions, primarily because diesel is primarily paid by motor carriers rather than individuals, and thus is less unpopular politically.

Tomorrow, I’ll put out some data comparing Indiana gas taxes to those in other statues. Hint: our gas taxes are among the highest in the nation!

Indianapolis-Marion County Considers Eliminating the Homestead Credit. Should we?

Fish Atop the Monroe County Courthouse

Today’s Indianapolis Star has a longish article on Mayor Ballard’s budget proposal for 2013:

In particular, what caught my eye was the mayor’s proposal to save $8.1 million by eliminating the homestead credit:

“The remaining money to close next year’s deficit would come from ending the homestead tax credit.

Doing away with it is estimated to save $8.1 million. That credit is different from the far more lucrative homestead deduction, which wouldn’t be touched.”

The homestead credit is a portion of local income taxes (County Option Income Taxes) that are held back and used to reduce the property taxes of homeowners. It is a local option to have the homestead credit, and not all counties have one. This is entirely different, as the article points out, from the homestead deduction, which substantially reduces the assessed value of owner-occupied properties.

In Monroe County, the homestead credit cost local units of government $1,346,093 (and conversely the credit saved local homeowners the same amount). The 2012 COIT Distribution Report for Monroe County from the Indiana Department of Local Government Finance (DLGF) shows this credit at the upper right-hand corner of the report.

In the past I have suggested that we may want to consider eliminating or phasing out this credit, should the budget situation become dire. Fortunately although budgets for local government are still stressed, we have not faced the likelihood of large-scale cuts in essential services. However, should this become a possibility, the homestead credit is one option that local government has to raise a bit of revenue. Of course, this would be perceived as a tax increase (from the taxpayer’s perspective, elimination of a credit is the same as an increase).

Surprisingly, although the homestead credit is a county-wide tax credit, it is actually up to the Bloomington City Council to modify or rescind the homestead credit. That is because the Indiana Code chapter that defines the homestead credit (IC 6-3.5-6-3) gives the responsibility for setting income tax rates and credits to the County Income Tax Council, which consists of the fiscal bodies of the county and all cities and towns inside the county (this means the County Council, the Bloomington City Council, and the Ellettsville and Stinesville Town Councils).

However, it assigns votes in the County Income Tax Council proportionally to the population in each of the areas represented by the fiscal bodies — in other words, the Bloomington City Council gets votes in proportion to the percentage of Monroe County’s population that is within the Bloomington city limits, the Ellettsville Town Council within the Ellettsville town limits, and the County Council the remaining votes (the population that is outside of the incorporated areas). Stinesville doesn’t have enough population to receive any votes. But in any case, the Bloomington City Council actually has a majority of the votes (greater than the share of the County and Ellettsville combined) — so essentially the City Council has complete say over the county income tax rates and any homestead credit.