Indiana Roadway Funding Study

Indiana Department of Transportation/Indiana General Assembly

Objective

Support the Indiana Department of Transportation (DOT) in their response to a request from Indiana’s General Assembly for an evaluation of potential revenue mechanisms to provide sustainable funding for current and future roadway needs in the State of Indiana.

Our Approach

Funding transportation is a two step process: deciding what to buy, and how best to pay for it.

What to Buy

We understand that making transportation investment decisions can be tough: there is no single answer to what a state should buy in terms of transportation system maintenance. We worked with Indiana DOT to determine:

  • What options the State could buy;
  • The relationship between funding and the condition of the highway system;
  • Other potential investment priorities; and
  • The transportation needs of local agencies throughout Indiana.


This chart demonstrates the average annual cost over the next 20 years to fund several potential scenarios.

How to Pay for It

Once we determined the possible scenarios that would dictate what Indiana should buy, we had to evaluate potential sources of revenue. When it comes to generating revenue to fund transportation, decision-makers must understand the pros and cons of each potential funding option. Funding options were summarized on qualitative criteria, including revenue potential, revenue sustainability/predictability, business climate friendliness, ease of implementation/ability to enforce, and public acceptance. Our team then developed a detailed financial model for several revenue mechanisms under each of five categories: fuel tax, road use taxes, vehicle and driver taxes, general taxes, and property taxes. Using this qualitative analysis, we provided Indiana DOT with a set of realistic expectations.


This graphic illustrates the study approach.

Outcome

CS provided Indiana DOT and the Indiana General Assembly with research to help identify the best possible path forward for Indiana’s transportation system, including an on-line funding package visualization tool.

The research included with several funding scenarios and developed models to demonstrate the revenue generated from various mechanisms to determine the best ways to fund each of the potential scenarios. We determined that the best mechanisms in terms of revenue generation to fund Indiana’s projects include increased fuel taxes, increased sales taxes, road user charges based on distance traveled, and distance/damage fees for commercial trucks based on weight, axle configuration, and distance traveled.

By presenting detailed examples of how each funding mechanism would work, and how some would complement one another, it is clear that no singular mechanism is the correct choice. Indiana may benefit maximally from a mix of the proposed mechanisms.