BIC Matters: Indiana Legislature Passes Long-Term, Dedicated, Stable Highway Funding Package

TO: BIC Grassroots Network
FROM: Vicki Kitchin
DATE: April 22, 2017

BIC Matters: Indiana Legislature Passes Long-Term, Dedicated, Stable Highway Funding Package

The Indiana state legislature has passed HB 1002, the highway funding package that will provide long-term, dedicated and stable increased funding for state and local highways, roads, streets and bridges. The House voted 69-29 in favor; the Senate voted 37-12 in favor; and both votes had bipartisan support. The bill now goes to Governor Holcomb for his signature; he has publicly indicated his support for the package.

HB 1002 will result in additional funding of $617 million in FY 2018 growing each year to an additional $1.209 billion in FY 2024. Specifically, it includes the following:

  • Raises gas, diesel and motor carrier surcharge taxes by 10 cents each beginning in FY18 and indexes the taxes annually for seven years with a one cent per year cap
  • Gradually shifts the sales tax on gas to the state highway fund by 2025 (but allows the Governor to hold back these funds for general fund purposes subject to review by the state budget committee)
  • Increases the International Registration Plan and BMV registration fees by 25% for trucks greater than 26,000 lbs.
  • Implements a $15 statewide transportation infrastructure fee for all vehicles less than 26,000 lbs.
  • Implements an annual electric vehicle fee of $150 and a hybrid fee of $50
  • Eliminates the sales tax on special fuel
  • Requires INDOT to study tolling and to apply for a federal tolling waiver; requires state budget committee review before INDOT could implement tolling
  • Requires INDOT to develop metrics and prioritize projects using a data-driven model
  • Moves the motor carrier surcharge tax to the pump and applies to all diesel buyers
  • Continues the community crossing matching grant program for locals and modifies the match requirements as follows: counties over 50,000 population and cities/towns over 10,000 population will be at a 50/50 match; counties under 50,000 population and cities/towns under 10,000 population will be at a 75/25 match
  • Allows INDOT to operate a federal funds exchange program with locals
  • Extends local wheel tax/surtax adoption deadlines
  • Restricts local uses of MVH funds to exclude paying for police and painting structures and requires that 50% of MVH funds be used for construction, reconstruction and maintenance
  • Phases in changes to the MVH split from current 53% state/47% local to 60% state and 40% local beginning in FY18 and ending in FY23
  • Allows the IFA to facilitate the completion of a P3 project in a situation where the P3 agreement has been terminated or the IFA has exercised its right to seek remedies

Our state legislators deserve our praise and thanks for taking this courageous vote to improve our state’s highways and bridges and ensure that Indiana reaches the next level for the future.

Chairman Ed Soliday has worked to achieve this measure for at least six years. He has mandated an approach and solution that is unequivocally data-driven. House Speaker Brian Bosma and Chairman Tim Brown have led the House Republican caucus in pressing for solutions, understanding the significance of this issue and advocating for this vote.

In the Senate, Chairman Luke Kenley has worked hard to figure out a financing plan that invests in our highway system while ensuring general fund stability. President Pro Tempore David Long, Chairman Mike Crider and Chairman Brandt Hershman worked with their caucus members to ensure this issue is addressed for the long-term.

BIC would like to thank our broad coalition of partner organizations who have worked closely together for many years to convince legislators of the need for additional investment. These partners include local governments, agriculture, state and local chambers, organized labor and many others.

Also, BIC would like to thank our member associations: ACEC-IN, ACPA-IN, APAI, ICI, IED, IMAA and IRMCA for continued support and perseverance. Our members (all of you, the members of these associations) have been the core of our grassroots network and have responded to our calls to action. Your contacts have made all the difference in this effort.

Finally, we owe great thanks to our professional highway funding experts and lobbying team: Dennis Faulkenberg and Laurie Maudlin of APPIAN Advisors and Bill Livvix of BRL Associates. This achievement is a direct result of their expertise and tenacity and wouldn’t have been possible without them.

Thanks to all.

2016 Legislative Session Wrap-Up

Road Funding

The Indiana General Assembly didn’t pass long-term transportation funding during the 2016 short session, but it approved several bills allowing for diversion of existing and future collected tax funds from the local option income taxes reserves, general fund and gas use tax. These will provide:

  • $330 million for local units of government in fiscal year 2016;
  • $228 million for INDOT in fiscal year 2017
  • $414 million for local units of government in fiscal year 2017;
  • $68 million for local units of government in fiscal year 2018; and
  • $105 million for local units of government in fiscal year 2019.

Counties can now double their wheel tax (raising an additional $286 million), and municipalities with a population of more than 10,000 may impose a wheel tax at their existing rate (raising an additional $90 million).

Lawmakers created a 16-member task force of legislators and gubernatorial appointees (including one recommended by Build Indiana Council) to analyze state and local road and bridge needs and long-term funding methods. The task force must present its recommendations to the State Budget Committee by January 1, 2017.

Lake, LaPorte, and Porter counties will see additional funding from revisions to local income tax laws, and Henry County plans to use a food and beverage tax for roads. Lagging farmland assessment values will decrease local tax revenues across the state.

Time & Material

Contractors selling non-tax exempt construction under a time and material (T & M) agreement or simply providing invoices including detailed labor, material, and equipment costs should consult with an accountant familiar with contract law and the new Indiana Code 6-2.5-4-18, Retail Transactions of Merchants. The new law is retroactive to January 1, 2007. Indiana Department of Revenue supported the bill to provide a legal basis for existing administrative code 45 IAC 22-3-9. The law states that contractor selling construction under a T & M contract must collect and remit the state gross retail tax.


Legislators adopted language that provides a specific legal basis for “named driver exclusions” that limit liability to the insured.


Lawmakers added a definition of “veteran” to Indiana’s small business code. For the purposes of qualifying as a veteran-owned business for set-aside government purchases, a veteran is any individual who is serving, or has served, in any branch of the armed forces of the United States or their reserves, the national guard, or the Indiana National Guard. The bill also removed the requirement that a veteran be a resident of Indiana for at least one year before making an offer to bid on a state contract.

Public Works Contracts

The public works contractor qualification requirement, adopted in 2015 and scheduled to go into effect on July 1 will now go into effect on December 31 of this year. Lawmakers added two new sections under State Public Works – Qualifications for State Public Works Projects and INDOT – Qualifications of Bidders for Contracts. Contractor prequalification is not required for public works contracts awarded by a local unit of government if

  1. The total estimated contract amount does not exceed $300,000;
  2. The public agency complies with Indiana Code 36-1-12 including bidding procedures, bonding and drug testing.

Local government units may not establish wage rates in a contract in a public works contract unless mandated by federal or state law.