On Tuesday, the Clay County Chamber of Commerce welcomed Indiana Local Technical Assistance Program (LTAP) Research Manager (located on the Purdue University campus) Neal Carboneau to speak about road and highway funding.
"Occasionally, I and other elected officials receive comments that the streets are bad," Clay County Council President Mike McCullough said prior to introducing Carboneau. "This is something which affects everyone, which is why we invited Neal so we can get a better understanding on how funding for roads and highways work. The state has so many restrictions on funding, and it is important to note that no property tax dollars go to roads."
Carboneau explained the gas tax is where the majority of Local Road and Street and Motor Vehicle Highway Fund dollars come from.
"In 2003, the state increased the tax to 18 cents per gallon, which is a fixed rate," he said. "That is one misconception out there because many people think that when the cost of fuel goes up, so does the tax. However, it is the same 18 cents whether gas at the pumps is $2 a gallon or $4."
He added combination of the gas tax and special fuel (Diesel) tax of 16 cents per gallon account for 71.9 percent of the revenue into the Motor Vehicle Highway (MVH) Account.
Despite a higher population and more cars on the road, fuel use per mile has dropped since 1970, creating reduced revenue for highway departments in recent years.
"The increase of costs and expenses is also compounding the problem," Carboneau said. "Some departments are even reporting they are near the same revenue amount they received in 2000 or 2001, which was before the most recent increase in the gas tax."
Carboneau said there are reasons other than the increased cost of gas which have contributed to fewer gallons being purchased.
"In recent years, there has been the effort to increase fuel efficiency, and there are also more hybrid vehicles on the road, which require fuel less frequently," he said.
Carboneau also presented other potential sources of funding which could be used on local roads, including the Local Option Highway User Tax (LOHUT or Wheel Tax).
"This is the only local option tax specifically for road funding," Carboneau said. "If the gross weight of the vehicle is more than 11,000 pounds, it is a wheel tax, and it is considered a surtax if the weight is less than that amount."
Currently 47 of Indiana's 92 counties are utilizing a LOHUT, including all the counties neighboring Clay.
"It is up to each individual county to determine the rate of the tax, as well as the vehicle classifications," Carboneau said. "Depending on the rate scale, the LOHUT could create anywhere between $200,000 and about $800,000 in road funding."
While the county council would be responsible for instituting the tax, if they chose, the funding would be split among all the cities and towns as well.
"Other than an administrative fee collected by the Bureau of Motor Vehicles, all of the funding would stay in the county," Carboneau said, adding there is a formula in place to determine how the funding would be distributed. "However, there are other options, including grants, loans, bonds and cumulative capital development funds, which can create additional revenue for road and highway work."
Carboneau said the passage of a LOHUT would not affect current revenue streams and he addressed a question regarding how much additional funding could be created if the gas tax were increased.
"If the state increased the gas tax by one penny, it would create approximately $30 million in additional dollars for the MVH Fund," he said.
He added the deadline for instituting the LOHUT is July 1 of each year, meaning in order to begin receiving the additional funding in 2012, the tax would have to be approved no later than July 1, 2011, as the deadline has already passed for a potential effect in 2011.
"None of us are jumping up and down to pass a new tax," McCullough said. "But we can't depend on Indianapolis and the legislature to do it for us, so if we want to see major improvements to our roads, we have to look into doing something and take action ourselves."