An Assessment of Highway Financing Needs in Indiana

Abstract

IntroductionIn order to facilitate informed fiscal planning, it is necessary to reliably assess the current and future trends in highway financing needs both at the state and local levels vis-à-vis revenue projections and to identify any future gaps in financing. This report provides a methodology for state and local agencies to track past, current and future needs for highway funds and expected revenue levels under a range of scenarios. Using such a methodology, shortterm and long-term financing plans can be developed both for state and local highway networks. The need was assessed for a 2006-2020 horizon period. FindingsThe needs for highway infrastructure preservation and capital improvements were primarily estimated by considering the current and projected road and bridge conditions. Capital needs were estimated using existing long-range plans. The financing needs for the state highway agency are about 30 billion dollars (2002$) for the 15-year period of 2006-2020. Local highway needs during the same period are about $29 billion.Long-term forecasts of highway revenues by revenue source were developed.The forecasting model provides state and local shares of state generated revenues year by year for the 15-year period. On the basis of the model results, the 15-year revenues for the state agency from state-generated sources would be about $10 billion while the local share would be about $7 billion. Using the best possible estimate of the Federal aid, the state highway revenue is expected to be about $16.87 billion. The resulting revenue gap for the state highway agency would then be $12.93 to $13.33 billion for the 15-year period or $0.86 to $0.89 billion annually. The projected revenue for local agencies was found to be about $13.8 to $15.7 billion for the 15-year period. The total resulting shortfall ranges from $12.4 to $14.7 billion or $0.83 to $0.98 billion annually. ImplementationPolicymakers at the state and local levels can use the results of this study for fiscal planning and budgeting. The recommendations for raising revenues presented can be a starting point for further exploration to address the funding gap identified. The present study addressed the 15-year highway financing needs for the state of Indiana, and in the process identified a number of areas that could be investigated at a future date. Future research may seek to expand the present study to answer the question of what type of user tax would be equitable and politically acceptable to taxpayers in Indiana. AbstractIn recent years highway revenues in Indiana have been eroding due to inflation, increased costs, and the increased use of fuel-efficient vehicles. It is necessary, therefore, to reliably assess the current and future needs for highway funding in order to facilitate informed fiscal planning. This study provides a methodology for tracking current and future demand for highway financing, along with a systematic modeling approach for revenue projections such that financing plans can be developed for state and local highway networks...

Alternatives to Fuel Tax: a State Level Perspective

“…Highway needs and funding gap trajectory under several hypothetical scenarios were studied in the research conducted by the Joint Transportation Research Program (Sinha et al, 2005). Including all projects in INDOT's Long Range Plan and using HERS-ST model, the study estimated that the state highways would require $29.8 -30.2 billion during 2006-2020.…”

“…There are also contributions from service charges, title fees, transfer fees, etc. (Sinha et al, 2005).…”

“…The analysis was conducted for a future scenario which assumed completion of projects that are planned not only to preserve the existing facilities but also to improve mobility and accessibility. A separate highway needs study conducted by JTRP (Sinha et al, 2005) provided another set of future financial needs.…”

“…When based on PPI, the range of revenue increase would be lower than what was estimated using CPI; it will be between 15.0% and 41.6%, as noted in Table 6.4. -up to 2000and index 1,007,716 1,009,449 1,107,842 1,190,437 22.3% Catch-up to 2005and index 1,276,558 1,278,754 1,403,396 1,508,026 54.9% Catch-up to 2007 64.3% Base case prediction source: Sinha et al (2005) -Inflation impact since 1988 to a selected year is incorporated based on CPI (Consumer Price Index). -CPI beyond 2005 was assumed to increase 3% annually.…”

“…The data was collected from the FHWA reports on highway statistics, a highway financing needs study (Sinha et al, 2005), and Indiana Statewide Travel Demand Model (ISTDM) results (INDOT 2004(INDOT , 2005. Recent records of Indiana's expenditures for state highway system, including reimbursement from the federal government, were obtained from the highway statistics.…”