Indy leaders support bill that could lead to roads-focused tax increase

The Hogsett administration testified Monday at the Indiana Statehouse in support of a wide-ranging road-funding bill that could lead to higher property taxes in Indianapolis.

The measure includes a provision to allow Marion County residents to vote, through a referendum, for property-tax hikes that would be used to pay for road improvements.

Rep. Jim Pressel, chair of the House Roads and Transportation Committee, authored House Bill 1461. He introduced the bill before the committee as a piece of legislation that gives local communities options for addressing road-funding gaps, while also attempting to address the state’s road-funding issues. 

A report from the Local Technical Assistance Program at Purdue University estimated that the state would need to spend an additional $500 million annually to maintain current road conditions.

Lawmakers did not vote on the legislation Monday. Pressel told the committee that he would hear amendments next week.

Indianapolis officials have long decried the state’s road-funding formula, which is based on road miles rather than lane miles. For example, a one-lane, bidirectional country road receives the same funding as the widest portion of Keystone Avenue.

“We believe that the formulas and funding programs we all pay into should be economically allocated based on vehicle miles traveled, rather than on center-line mileage,” Dan Parker, chief of staff for Indianapolis Mayor Joe Hogsett, told the committee. “Put more succinctly, road funding should follow traffic.”

The nearly 40-page omnibus road-funding bill doesn’t make that change, which Parker told IBJ he would still like to see. However, he testified in favor of the bill and told reporters that there are positives in that the city’s multiyear push for change has materialized in a “serious conversation” and “Indianapolis-specific tools.”

The measure in the bill that could be most impactful in filling the gap Indy faces for road funding is a provision to allow the City-County Council to ask voters through a referendum whether an additional property tax should be used to pay for road-funding costs. Funds collected through the tax, if approved, would be used to pay off debt incurred through bonds.

Indianapolis has funded road improvements in recent years by issuing debt through the city’s Metropolitan Thoroughfare District. Former DPW Director Brandon Herget told a City-County Council committee last summer that this strategy could soon become irresponsible.

Parker called the referendum piece “an interesting new tool” but did not specify whether the Hogsett administration would utilize it.

According to the bill’s fiscal note, the referendum could only be held in a general election. It the referendum were held in 2026 and voters approved it, it would affect taxes in 2027.

The legislation also sets aside $60 million in the Community Crossings grant fund for cities and counties with a population more than 100,000. Currently, the Community Crossings grant program pays out a matching grant of up to $1 million. 

However, the change would require that Indianapolis max out existing tax options—the county wheel tax and excise surtax. Parker said that is the “one piece we’re absolutely opposed to.”

“You’re asking our residents to pay more for a system that we feel is broken,” he said.

The current maximum rates for county wheel tax is $80 and for excise surtax is $50. The bill would triple the maximum levy for both taxes to $240 for wheel tax and $150 for excise surtax.

Indianapolis does not currently require residents to pay the highest possible rate. According to analysis from Indiana’s Legislative Serivces Agency, Indianapolis and Marion County have a combined $67 million left untapped from the two taxes.

Currently, the county collects approximately $14.4 million from county excise surtax and $1.1 million from county wheel tax each year.