By David Holt, Vice President of Operations, Business Development for Conexus Indiana
Confucius once said, “It does not matter how slowly you go, as long as you do not stop.” I would argue that this quote is very applicative to the recommendations made by the Conexus Indiana Logistics Council (CILC) to the Indiana General Assembly.
CILC has recommended many policy changes to the General Assembly with little movement in previous sessions. Those recommendations included a tax credit for infrastructure investment and future financing mechanisms for funding our infrastructure needs. The General Assembly not only heard the recommendations this session but turned them into a reality by the time they adjourned on Saturday, April 27.
Tax Credit for Infrastructure Investment
After three years of debate, testimony and presentation of the facts by the logistics industry to the General Assembly, a tax credit for logistics and infrastructure investment passed both the House and Senate with bipartisan votes.
House Enrolled Act (HEA) 1545, Various Tax Matters, incentivizes private companies to invest in private and public infrastructure (including warehouse infrastructure) through a modest reform to the Hoosier Business Investment Tax Credit (HBITC). HB 1545 would cost-effectively incentivize companies to invest in privately and publicly-held infrastructure, encouraging expansion and growing our overall capacity to move freight.
· Gives the Indiana Economic Development Corp. (IEDC) an additional economic development tool for their toolbox.
· Allows IEDC to award up to 25% of a company’s state income tax liability for qualified logistics investments that will enhance the logistics industry by creating new jobs, preserving existing jobs that otherwise would be lost, increasing wages in Indiana, or improving the overall Indiana economy in order to approve the credit.
· Limits the total amount of credits that IEDC may award up to $10 million per year (or $20 million for the biennium).
· The credit is available only to those firms that make substantial capital investments that are at least 105% of their average investments in the prior two years. For example, if Company A spent $1 million in 2012 and $1 million in 2011, their total investment would be $2 million divided by two or an average of $1 million, plus an additional 5%. Therefore, any qualified logistics investment that is above $1,050,000 would be eligible for the credit.
Special thanks to the following legislators and organizations that made this a reality:
· State Sen. Tom Wyss (R-Fort Wayne), Chairman of the Senate Committee on Homeland Security, Transportation and Veterans Affairs
· State Sen. Brandt Hershman (R-Buck Creek), Chairman of the Senate Committee on Tax and Fiscal Policy
· State Rep. Jeff Thompson (R-Lizton), member of the House Ways and Means Committee
· State Rep. Eric Turner (R-Cicero), House Speaker Pro Tem
· Mark Shublak, Partner, Ice Miller
· Cam Carter, Vice President, Indiana Chamber of Commerce
Future Financing Mechanisms for Funding Infrastructure
In 2012, CILC released recommendations to the public and General Assembly on how to finance all four modes of transportation. The list was extensive and consisted of short and long-term solutions. The General Assembly included a few of these suggestions in HEA 1001, the Biennial Budget, such as ending diversions from the state gas tax and allocating a part of the sales tax to highways.
Leaders in the Indiana House of Representatives, the Indiana Senate and Governor Mike Pence all recognized the importance of investing in Indiana's road system and made this a priority in budget negotiations. During testimony on the new state budget, Chairman Tim Brown (House Ways and Means Committee) said, "Indiana is now using the gas tax for what it should be used for." He added, "The budget is a jobs bill, and construction on roads and bridges can start now." On the Senate floor, Chairman Luke Kenley (Senate Appropriations Committee) said, "We have determined our priorities and planned for the future" with transportation funding. He thanked Governor Pence for the early endorsement of a transportation plan and the idea of a future fund for major projects. Although the House and Senate passed the budget on nearly party-line votes (70-30 in the House and 39-11 in the Senate), minority Democrat leaders also spoke favorably about the road funding provisions, only noting that they wished the road funding had been greater.
END OF DIVERSIONS: The budget ends the funding of the Indiana State Police and the Bureau of Motor Vehicles from the motor vehicle highway account beginning July 1, 2013. This frees up about $140 million annually in new road funding that will be shared by the Indiana Department of Transportation (INDOT) and local governments (53 percent to INDOT and 47 percent to locals).
SALES TAX DIRECTED TO ROADS: The budget also directs one percent of overall state sales tax collected in the state to the motor vehicle highway account beginning July 1, 2013. This results in about $75 million per year in new road funding that will be shared by INDOT and local governments (53 percent to INDOT and 47 percent to locals).
Together these two components total $215 million annually in new road funding. And while the legislature can always change laws in the future, its intent is to provide long-term, dedicated and stable new road funding. NOTE: While lawmakers did not raise taxes to accomplish this, the annual $215 million increase in road funding is the equivalent of a 7-cent increase in the state gas tax.
NEW TRUST FUND ESTABLISHED AND FUNDED: In addition, over the biennium, the budget appropriates $400 million from the state general fund ($200 million each year) to a new Major Moves 2020 Trust Fund. The state is to use the fund exclusively for major highway expansion projects that enhance the ability of goods to be transported in, and through, Indiana. The Indiana General Assembly must appropriate the funds to be available for expenditure, meaning INDOT cannot spend these funds without future approval by the state legislature.
CREATES ADDITIONAL METHOD FOR IMPLEMENTING THE WHEEL TAX: The budget also creates more flexibility, and therefore likelihood, for locals to pass the surtax/wheel tax. The new law provides that either the county council or a county income tax council may pass the local surtax/wheel tax. Current law only allows passage by the county council. A county income tax council is comprised of the fiscal body of the county and the fiscal body of each city or town that lies either partially or entirely within that county. Each county income tax council has a total of one hundred votes. Every member of the county income tax council is allocated a percentage of the total votes based on population. In urbanized counties, for instance, the cities and towns will have more influence in a vote on the surtax/wheel tax.
OTHER ISSUES IN THE BUDGET: The budget also includes language that gives INDOT broad authority to do public private partnerships (P3s) on non-tolled highways or freeways. And, on a disappointing note, the budget includes language that allows INDOT funds to be used for Amtrak service and equipment purchases. However, the budget agency must approve any appropriation for this purpose.
Special thanks should go out to the following legislators and organizations that made this a reality:
· State Sen. Luke Kenley (R-Noblesville), Chairman of the Senate Committee on Appropriations
· State Sen. David Long (R-Fort Wayne), Senate President Pro Tem
· State Rep. Tim Brown (R-Crawfordsville), Chairman of the House Ways and Means Committee
· State Rep. Brian Bosma (R-Indianapolis), Speaker of the House
· Our Transportation Funding Partners – Indiana Chamber of Commerce, Build Indiana Council, Appian, and many others
Other Bills of Significance
FEDERAL FUNDS PENALTY ISSUE: The legislature did pass HB 1579, but it resolves only one-half of the federal government's penalty on Indiana's federal highway funds. The Senate would not agree to change the statute related to community hours of service for repeat drunk driving offenders. Therefore, the federal government will require Indiana to direct about $20 million annually in federal highway funds to specific safety programs. INDOT has testified that it will be difficult to use these funds for construction since the rules are very restrictive. On the other hand, the bill does change Indiana law pertaining to open container. This change prevents the federal government from imposing another $20 million penalty for that provision.
FEES ON ALTERNATIVE FUELED VEHICLES: The legislature passed HB 1324 which provides tax incentives for commercial use of CNG and LNG fueled vehicles and also imposes a diesel-gallon equivalent road use fee on these vehicles. However, it sent the issue of requiring road use fees on hybrid and electric vehicles to a summer study committee.
The legislation above is a significant win for the logistics industry. Thank you to all who have contacted legislators to discuss any and all of the above issues. Your grassroots efforts back home, along with the hard work by the transportation funding partners at the Statehouse, have made these wins possible. Last but not least, please thank all state legislators and the Governor for recognizing the importance of the logistics industry and for making it a priority. We ask that all CILC members please personally thank your legislators for their efforts in ensuring that Indiana maintains its designation as the “Crossroads of America.”