Transit tax faces City-County Council vote Monday
INDIANAPOLIS –Monday night City County Councilors will vote on whether to tax Marion County residents $54 million a year to improve bus service.
The .25% income tax approved by 60% of the residents who voted last November would cost a Marion County taxpayer $100 for every $40,000 of annual income.
A $75 million federal Small Starts grant to build an expanded service is on the line and its approval has been delayed by Congress until this spring while the overall pool of money to fund bus systems across the United States has been reduced by a third since its submission by then-President Obama.
Some city county councilors are uncomfortable with the uncertainty of federal help while committing Marion County taxpayers to a new tax with no sunset in sight.
“We need to slow this down a little bit and make sure that we do get the $75 million and make sure that the money’s in place,” said Councilman Monroe Gray, a democrat. “This is like building a house without the loan.”
While the ballot language for the referendum last fall clearly stated such a tax could be utilized to build IndyGo’s proposed Red, Blue and Purple lines, a service spokesman confirms voters and reporters were told repeatedly last fall that the new levy was not a “Red Line Tax” and the local tax money would be used to fund the Blue and Purple east/west feeder lines.
“The intent before the election was that the referendum funds would not be used for the Red Line,” said Bryan Luellen, “however, responding to concerns about changes at the federal level and potentially changes of priorities with transportation funding, we were asked, ‘Can we deliver the plan we promised without the federal funds?’, and that answer is, ‘Yes.’
“Its not an ideal situation that we don’t have more certainty at the federal level, but the reality is that we can deliver the plan that we proposed with or without those federal funds.”
Without federal aid, IndyGo admits more local tax money will be spent on bond interest payments instead of actual immediate construction and completion of the various lines will be delayed from one to three years.
IndyGo’s bond debt would more than double from $80 million to $176 million and many road, sidewalk and station improvements would be shelved without the federal grant.
A longer build out would also increase the costs by millions of dollars due to inflation.
During a recent meeting of the council’s Rules & Policy Committee, Luellen was asked what harm the proposed Indygo expansion would suffer if the full council delayed approval of the new tax until after federal support was approved.
Luellen cited the delay of planning decisions and pre-construction agency upgrades that must be in place before the Red Line project can break ground.
If approved, the new tax would be collected starting October 1st with revenues flowing to IndyGo in 2018.
IndyGo expects one percent fare box revenue increases with every one percent service expansion.
Councilman Gray asked how the agency intended to finance its construction and improvements if fare revenues did not increase and whether the council would be asked to make up the shortfall.
Luellen said the system would create a foundation to raise a matching ten percent of its new tax revenue which state lawmakers mandated must not consist of tax funds.
“The plan does not rely on funds from a foundation though the statute does require that we set up a foundation and we will do that,” he said after the meeting, “so its kind of parsing out the difference between what… the plan doesn’t require the funds raised from a foundation but the statute requires it so we will be creating a foundation.
“Our interpretation and our position is that we can deliver the plan within the .25% even if the full ten percent from the foundation doesn’t come through.”
$5.4 million in projected foundation funds, if raised, would help stretch the expenditure of new income tax revenues.
Last fall proponents of the transit plan told voters that the foundation would be funded by businesses and corporations which will financially benefit from improved bus service but pay not a direct tax to fund it.
On February 13th, at Luellen’s invitation, IndyGo Board Member Greg Hahn told the council’s Metropolitan Development Committee that the bus service viewed the General Assembly mandate as not binding.
“The money that would go into that foundation is not an additional tax,” he said. “Its money that can come from advertising, it can come as part of the $54 million (new tax revenue), and its kind of unusual how its been set up because it’s a directory which means, ‘We’re giving it instructions on you need to do this but if you don’t do it nothing happens. It doesn’t invalidate the statute.’”
Hahn said lawmakers did not specify any penalties if the agency failed to follow through on the foundation funding through non-tax revenues.
“When the debates took place, they wanted the employers and employees to participate and pay a certain percentage of either wages or corporate profits to the bus to IndyGo to help fund this.”
Council Attorney Fred Biesecker told the Rules & Policy Committee the General Assembly did intend the foundation requirement to be binding and that unless IndyGo comes up with the non-tax revenue in 2018 to fund the foundation, the council must.
In a reversal of position, it appears now that IndyGo will create that foundation but has not specified how it will be funded to reach its mandated goal.
“This is brand new legislation and this is the first time that a community in Indiana is going to be accessing this income tax for transit improvements,” said Luellen, “and with that comes some strings and there’s always interpretation that is required. The lawmakers aren’t subject matter experts in every single subject that they legislate for and so this is pretty typical in the way that legislation works in that there’s generally an intent that’s communicated and then at the end of the day there has to be an interpretation of that intent and then application of it.”
Many councilors cite the support the transit tax received in their districts and the glaring need to improve Marion County bus service in their intentions to vote in favor of the levy even though they have concerns about the financial stability of the plan without guaranteed federal funds.