Indiana infrastructure needs.

by Michael Puente

Indiana is considered by many to be the Crossroads of America. But some of those crossroads are in need of a major upgrade. That need became evident last summer when a portion of Interstate 65 near Lafayette was forced to shut down for repairs. The northbound lanes of Interstate 65 between Lebanon and Lafayette were shut down for about a month in August when the Wildcat Creek bridge started to tilt. Walsh Construction of Crown Point completed repairs just before the big Labor Day travel period.

“I am grateful for the Indiana Department of Transportation's around-the-clock efforts to reopen the interstate ahead of schedule,” Indiana Gov. Mike Pence said. “We appreciate the patience of citizens in communities that have been affected.” But repairing the heavily traveled I-65 isn't the only issue facing the state. Other highways and bridges are in desperate need of repair.

“We think it's a critical need,” says Dennis Faulkenberg, president and chief executive officer of Appian Inc., a transportation consulting and government affair firm. Faulkenberg, whose firm is based in Indianapolis, said Indiana lawmakers have taken steps to address infrastructure needs but not nearly enough money has been dedicated to fixing the problems. “The Indiana Legislature has made some incremental steps toward fixing the problem but not a longtime solution,” Faulkenberg says.

Most highway and bridge repair work is funded primarily out of the Indiana Motor Vehicle Highway account.

Faulkenberg says prior to 2013, some of that money went to pay for non-road repair work, such as to the Bureau of Motor Vehicles and the Indiana State Police. “In 2013, we were able to convince the Legislature that that money needed to stay in the Motor Vehicle Highway account for roads and bridges. Money for the BMV and ISP were instead paid out from the general fund, not the Motor Vehicle Highway account. That amounted to $200 million a year,” Faulkenberg says. But even with $200 million dollars for roads and bridges, funding to repair roads and bridges remained a billion dollars underfunded, Faulkenberg says.

In 2005, former Indiana Gov. Mitch Daniels pushed for the lease of the Indiana Toll Road, which resulted in $2.6 billion. Only a relatively small portion of that money, about $150 million, went to more than 500 cities, towns and counties to help fund local highway departments. The Indiana Department of Transportation received the rest. “It's become a critical need on the local level and now the tollway money is gone,” Faulkenberg says. “It's become a substantial need on the state level too.” The closure of I-65 seems to be a wake-up call to elected officials on the need to invest in infrastructure. But how to pay for it is the key issue.

In October, Gov. Pence announced his 21st Century Crossroads proposal, a plan that would make $1 billion in new road funding available over the next four years but without the need to raise taxed. Under 21st Century Crossroads, the Indiana Department of Transportation would resurface 16,000 miles of state highways and repair more than 5,200 bridges over the next 15 years. “These additional funds will help INDOT make future maintenance and repairs as the interstate system comes of age, and will help ensure that our roads can support the economic and employment growth our state has seen over the last few years,” Pence said in a statement. “Just as Hoosiers seek to build a financial reputation that allows them to build a future, our state has put in the hard work to guarantee that Indiana's future is bright as we enter our third century.”

According to Pence's statement, the governor plans to pay for the road improvements from the state's reserve funds. This is how the Governor's office laid out the plan:

* Reserves: The state is projected to have more than $2 billion in reserves beginning in July 2016. Approximately $241 million may be invested in roads and bridges while maintaining 11.5 percent of the state's annual budget in reserves.

* Budget appropriations: During upcoming budget sessions of the legislature, Governor Pence would propose an additional $150 million during fiscal years 2018, 2019 and 2020, for a total of $450 million.

* Next Generation Trust Fund: The 2006 Major Moves program invested $500 million in a trust fund. An accelerated distribution of interest in 2019 would contribute an additional $50 million.

* Bond financing: Indiana's AAA credit rating and extraordinarily low interest rates will provide an additional source of $240 million.

* Refinance existing bonds: At current interest rates, refinancing existing bonds will contribute $6.5 million in annual savings through 2029.

But Appian's Dennis Faulkenberg says Pence may have other options besides tapping into the state's reserves, primarily raising user fees or using money collected through the taxing of fuel for road repair. “Right now, that money is going to the general fund. We would like for that to come back to the Road Fund and not the General Fund,” he says. Another option would be to raise the taxes paid on gas and diesel fuel. Faulkenberg says inflation and the improved fuel efficiency has reduced the amount of money that has been collected over that time. “Inflation has really chewed away from the gas tax. It's only worth about 8 cents on the dollar,” Faulkenberg says. “But it's really tough to convince elected officials to raise taxes. That will be tough.”

But even Indiana's fiscally conservative Republicans are warming up to the idea of an increase to the state's gas tax. Indiana House Republicans are proposing a 5 cents-a-gallon increase to the state's gas tax to pay for roads and other infrastructure needs. The last time Indiana raised its 18 cents-a-gallon gasoline tax was in 2002.

In a statement, House Speaker Brian Bosma (R-Indianapolis) says funding infrastructure improvements will be a key issue in the upcoming legislative session, which begins in January 2016. “We must work together to develop a responsible, sustainable and comprehensive plan to protect and improve our state's infrastructure,” Bosma says. “Investment in roads is an investment in our future, and we look forward to addressing state and local needs with a data-driven, long-term plan that makes sense for Hoosiers.” Bosma adds that while some people will oppose a tax increase, he believes most will realize that Indiana is facing big infrastructure needs.

Meanwhile, Tim Larson, president of the Northwest Indiana Contractors Association, urges his members to lobby the governor's office for more funds to be dedicated to infrastructure improvements. A number of the association's members are firms who do road construction and repair. “We urge all our contractors to make their views known to the governor's office on what the problems are–to speak out on infrastructure,” Larson says. “Infrastructure is very important. It costs a lot of money to taxpayers and businesses when roads are neglected.”