Author Archives: Cam Carter

On Tap in ’15: Road Funding, Sunday Alcohol Sales and 21st Century Fund

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Republican supermajorities and the biennial budget will be the context for all issues during the 2015 Indiana General Assembly, as a two-year budget must be passed and any caucus with 71 members (e.g., House Republicans) inevitably will have its internal disagreements. But, in the areas of economic development and infrastructure, another contextual factor will be a major road funding study by the Indiana Department of Transportation (INDOT) due in summer 2015 – after the Legislature has adjourned.

This INDOT study will examine existing fuel excise taxes, their future revenue potential and alternative funding mechanisms and revenue streams, such as vehicle miles traveled (VMT) or tolling. The study will provide a tool to address an acknowledged $750 million annual funding gap between current revenues and identified maintenance needs, let alone any new projects (such as third lanes on congested portions of Indiana interstates).

Legislative leadership and fiscal and transportation policy experts within the General Assembly seem content to await the results of the INDOT study before pursuing any significant changes to the way Indiana funds its roads, bridges and highways. Nevertheless, in the 2015 session we expect issues such as fees for electric or alternative-fuel vehicles to be addressed; examination of using more revenue from the 7% sales tax on gasoline for the state’s highway fund; and a discussion of indexing fuel taxes for inflation.

The INDOT study follows a report by the Governor’s Blue Ribbon Panel on Transportation Infrastructure identifying a set of priority projects and laying out a long-term vision for surface transportation infrastructure across Indiana. This report includes recommendations for waterborne, air and rail commerce that may be taken up by the General Assembly, including the creation of dedicated funds for these important modes of transportation.

Likewise, while the final segment of Interstate 69 has yet to undergo regulatory review and be announced, current law prevents it from running through Perry Township in Marion County as an option; we expect legislation to remove that prohibition to be introduced. We also expect investment in next-generation telecommunications infrastructure to be addressed through legislation that streamlines zoning and regulatory approvals, seeking to make them less cumbersome and more consistent across different political jurisdictions within the state.

In the area of economic development, many items will be discussed. Along with continued reform of Indiana’s business personal property tax, other anticipated issues include: examination of tax increment financing (TIF) districts; repealing Indiana’s ban on the Sunday sales of alcohol; increasing production limits on craft breweries; renewal and reform of the state’s 21st Century Fund; film production incentives; and review of both the existing patent-derived income tax exemption and the state’s venture capital tax credit.

Indeed, we expect a major thrust for fiscal leaders this session to be a re-examination of many of the state’s existing economic development programs and tax provisions, as well as discussion of a new Regional Cities Initiative by the Indiana Economic Development Corporation and the Pence administration.

Given mixed economic signals and the continued emphasis on job creation, we anticipate it will be a very busy session.

IFA, INDOT Address Transportation Committee About Toll Road, Future Plans

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The Interim Committee on Roads and Transportation heard from both the Indiana Finance Authority (IFA) and the Indiana Department of Transportation (INDOT) on the Indiana Toll Road and current and future road infrastructure needs on Sept. 23. IFA Public Finance Director Kendra York and INDOT Commissioner Karl Browning testified.

York reviewed the status of several public-private partnership (P3) projects around the state, but most of the interest and questions concerned the pre-packaged Chapter 11 bankruptcy of the private operator of the Indiana Toll Road, ITR Concession Company, LLC (ITRCC) and its affiliates. ITRCC filed for bankruptcy on September 11.

York testified that the bankruptcy proceeding is expected to result in either the sale of all assets of ITRCC (including lease rights to the toll road) to a new entity or a restructuring of the existing debt. Under either scenario, the toll road will continue to be owned by the IFA on behalf of the state of Indiana. IFA will continue to have the rights it negotiated in the original lease agreement including the right to approve any new operator and that operator will be strictly held to the same operational standards set forth in the original lease agreement. There will be no change to the current toll rate structure under the lease agreement. Road operations will continue as usual during the bankruptcy process without impact to drivers, employees, vendors and the communities served by the road.

York said IFA will continue to monitor the bankruptcy and work with related parties to protect the public interest. In other words, any concerns about adverse effects of the bankruptcy proceeding on the toll road or the state of Indiana are misguided at best, misleading at worst.

Browning provided a broad overview of the state of Indiana’s roads and bridges during his testimony. When adjusted for inflation, INDOT is operating much more efficiently than in years past: Operating expenses in 2014 are approximately $74 million less than in 2005, but while INDOT is operating more efficiently, the state needs more revenues to address a growing need for maintenance of existing infrastructure, let alone expansion of the state’s highway network.

Within the next five years, all fuel excise tax revenues from the state’s highway fund will be required for maintenance of existing infrastructure; no funding will be available for expansion projects. Additionally, more than half of the state’s bridges are in the last 25 years of their useful life (50+ years or older) and will need significant reconstruction or remediation.

Both federal and state highway revenues are expected to remain flat or slightly decline due to a number of factors, including increased fuel efficiency standards and alternative-fuel vehicles. This will cause the state to have to look for creative ways to finance projects (such as P3s) or find new sources of revenue. INDOT is in the middle of a legislatively-mandated two-year study of needs and funding sources.

In short, while the state did well in the Major Moves era with strategic investments, it is facing increasing challenges to pay for future upgrades to its surface transportation network. New sources of revenue need to be found and the Indiana Chamber looks forward to the final analysis by INDOT in the two-year study.

Congress Seeks Short-Term Fix to Highway Trust Fund Dilemma

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The U.S. Congress voted last week to provide $10.9 billion to the U.S. Department of Transportation to fund the Highway Trust Fund in order to reimburse states for repairs and infrastructure improvements for roads, rails and airports.

The nearly $11 billion was cobbled together from general fund revenues by any number of budgetary gimmicks not rationally tied to the fuel (gasoline and diesel) excise taxes that normally go into the trust fund (e.g., an extension of customs fees as well as so-called “pension smoothing”).

Few lawmakers in the Indiana delegation (and the entire Congress for that matter) are happy that it is not a longer-term solution; those we spoke with were frustrated by the delay and the funding mechanisms. The Indiana Chamber agrees this is no way to conduct the people’s business, but it is better than the alternative of the highway fund going broke, work stoppages and the idling of hundreds of thousands of construction workers across the country. We will work with the delegation to secure a more rational bill and reauthorization of the multi-year surface transportation bill in coming months.

Help Get I-69 Into National Freight Network

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The U.S. Department of Transportation (DOT) is currently seeking comments on the Primary Freight Network and National Freight Network designations. The Indiana Chamber believes that I-69 should be included as part of the National Freight Network and is asking DOT to support this effort.

As part of the National Freight Network designation, DOT has the opportunity to identify an additional 3,000 miles of highways that are critical to the future efficient movement of goods; this represents a strategic opportunity for the nation to enhance its freight transportation network.

A national priority over the past 20 years, I-69’s significance as a major freight route will increase as states along the corridor continue making progress toward its completion.

I-69 provides the most direct interstate access to principle international border crossings between the U.S., Canada and Mexico, as well as multiple Gulf Coast ports; the volume of traffic on I-69 is anticipated to dramatically rise as the interstate progresses. For all these reasons, I-69 should be included in the Primary Freight Network.

We urge you to show your support for including I-69 as part of the Primary Freight Network by signing this petition.

Immigration Reform Heats Up; Messer Weighs In

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The Border Security, Economic Opportunity and Immigration Modernization Act of 2013, S. 744, is currently being debated by the U.S. Senate, with Majority Leader Harry Reid (D-Nevada) seeking final passage prior to the July 4 recess. The comprehensive reform bill has something to like and something to dislike for just about everyone involved, but the primary political battle lines are being drawn between border security first (a Republican priority) and a path toward legalization and citizenship (a Democratic priority).

The so-called “Gang of 8” has labored mightily to keep a fragile coalition of support together in the Senate, but fissures are materializing. What once looked like a very sizable 70 votes in support has dwindled as the debate has progressed. As of Friday morning, June 21, senators were discussing a new compromise border security proposal in an effort to secure more support for the bill.  
 
The best guess at this point is that an amended S. 744 passes the Senate with overwhelming support from Democrats and just enough Republicans to get over 60 votes and send the legislation to the House of Representatives, where Speaker John Boehner’s caucus is even more uneasy and polarized than the Senate GOP. Boehner has publicly stated that any bill that does not have majority support from his caucus will not be heard, so the House may take a “piecemeal” approach addressing specific aspects or issues included in S. 744 (and likely tackling and emphasizing border security first). However, the Speaker has also met with the Hispanic Caucus and the House’s own “Gang of 8” seeking a comprehensive, bipartisan measure.
 
Indiana Congressman Luke Messer (R-6th District) told the Indiana Chamber recently that “if we are able to reach agreement on border security and documented status for workers, then we have an opportunity for further dialogue about what we do about citizenship once those workers are documented.
 
“My sense today is that we don’t yet have a consensus about what to do about citizenship, which makes it difficult if you tie all three together. That’s the challenge. There’s an opportunity to come up with a plan this year to deal with those first two topics. Probably it’s going to take demonstrated success on those to be able to move on to citizenship.” (Look for the full Q&A with Congressman Messer in the next BizVoice® magazine, available online June 28.)
 
We see Speaker Boehner’s leadership at a very serious crossroads on this issue, with many conservative Republicans rebelling against any bipartisan deal that includes a path to legalization or naturalization for illegal immigrants currently in the country. How Boehner squares this circle will be fascinating to watch.
 
The Indiana Chamber believes that now is the time to craft a principled, pragmatic reform that secures the border, strengthens the rule of law AND creates a program for undocumented workers to earn legal status, as it is utterly impractical to seek the mass deportation of an estimated 11 million individuals.

Keystone Pipeline Being Reconsidered; Tell Your Members of Congress it’s Important

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The Obama administration is seriously considering reversing its January 2012 rejection of the Keystone XL Pipeline project. A revised environmental impact statement from the State Department significantly eases environmental objections and opens the door for approval on a new application and revised route for the pipeline.

Opponents, most notably environmental extremists, have aggressively mobilized protests, lobbying and grassroots pressure on Congress and the President to kill the project. The White House is again under intense pressure and needs to hear from supporters of U.S. energy independence and the pipeline project.

The Indiana and U.S. economies are dependent upon reliable energy. Indiana has long been a leader in the energy and transportation industries. Low cost reliable sources of energy are critical to Indiana’s large and small businesses. Virtually every manufacturing process uses petroleum products as lubricants, parts, molds or finished products.

The $7 billion proposed Keystone XL project would construct a 1,700 mile pipeline to transport about 800,000 barrels a day of heavy crude oil from tar sand fields in Canada across the central U.S. to refineries on the Gulf Coast. The project is estimated to create more than 250,000 jobs and is supported by a broad coalition of business and labor organizations.

Recently, 53 members of the U.S. Senate, including nine Democrats, signed a letter to President Obama in support of the project. “We urge you to choose jobs, economic development and American energy security . . . there is no reason to deny or further delay this long-studied project,” they wrote. Nearly 70% of American voters support building the pipeline.

The new State Department statement predicts that Canada will continue to develop the oil sands and sell to other nations whether the U.S. allows the Keystone XL pipeline or not. Canada already provides more oil to the U.S. than all Persian Gulf countries combined. A new pipeline project would strengthen and expand this already productive and vital energy relationship. Not to mention, sourcing more of our energy from a friendly, democratic and North American neighbor will help reduce our reliance on energy resources from less stable areas of the world.

Call to Action: Send a message to President Obama and your members of Congress to urge approval of the Keystone XL Pipeline!

Congress to Reconvene Nov. 15 for Lame Duck Session

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According to House Majority Leader Steny Hoyer (D-Maryland), the U.S. House of Representatives will reconvene for a post-election “lame duck” session of Congress. What will be on the agenda? Probably not much, as Republicans will attempt to block any major Democrat legislation.

Some compromise will likely result as some bills demand immediate action. These include: a new continuing resolution to keep the government open past December 3; an extension of ’01 and ’03 tax cuts set to expire at year’s end without affirmative action by Congress, resulting in increases in marginal income tax rates; and yet another short-term fix for the alternative minimum tax (AMT), which will otherwise affect millions of middle-class taxpayers this year. Expect an extension of a year or two on the AMT while Congress awaits the report of President Obama’s debt and deficit commission on December 1 and then a decision on how to treat upper income-earners and small business pass-through entities.

In the Senate, there is talk of bringing the new START Treaty with Russia to the floor, but opposition by some GOP conservatives to the nuclear forces treaty and a recent glitch with our command-and-control systems at a Wyoming air base (50 nuclear-armed ICBMs went “offline” for a period of time – yikes!) may derail this effort.

It remains to be seen how Democrats will react to the election results and how motivated they will be to either pass legislation or punt issues. Stay tuned…

Chamber Visits Delegation in D.C.

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Approximately 50 members of the Indiana Chamber visited with Indiana’s congressional delegation during the Chamber’s annual D.C. Fly-in event September 14-15. The group, accompanied by Chamber President Kevin Brinegar and other staff, arrived in a city where partisan tensions were ever present and more than a few congressmen were absent, locked in tight re-election fights back in the Hoosier state.

The Chamber delegation visited with both U.S. Sens. Dick Lugar and Evan Bayh, engaging with the latter in an informal Q&A session in the U.S. Capitol’s Visitors Center. Senator Bayh pronounced that it was likely the last time he would be meeting with us as a U.S. senator and further stated that predictions of an active agenda for a post-election “lame duck” session of Congress were overblown. Senator Bayh told the group that there was very little momentum for a broad agenda beyond a fiscal continuing resolution to keep the federal government functioning and perhaps some action on extending the ’01 and ’03 or so-called Bush tax cuts.

Senator Lugar addressed the group during dinner on September 14, joined by Reps. Pete Visclosky, Dan Burton, Steve Buyer (who is retiring) and Mike Pence. The group echoed Sen. Bayh’s assessment about the congressional agenda through year’s end, and tax legislation, the federal budget and the upcoming election were foremost on their minds.

The Chamber participants pressed the delegation on a variety of issues, including pending appropriations bills, reauthorization of the federal surface transportation act and “card check” legislation. Special emphasis was given to extending the tax cuts, as expiration of this tax relief at year’s end would negatively affect the frail national economy and Hoosier small businesses.

On January 1, 2011, Americans will face the biggest tax hike in history. If Congress fails to act, marginal tax rates will increase for every taxpayer, the capital gains rate climbs 33%, and dividend rates jump by as much as 164%. American small businesses, our economic jobs engine, will face marginal tax rates as high as 39.6%. Compounded with the loss of certain itemized deductions and personal exemptions, these small businesses face rates as high as 41.6%. And this increase hits successful small businesses, our job creators, particularly hard: Approximately half of the business income reported on tax returns in 2011 will be subjected to the top two marginal rates.

The Indiana Chamber’s message to the delegation was that outcome is unacceptable and Congress must act before year’s end, but no one in D.C. seems to know when, or if, that debate might occur. In a time of economic uncertainty, raising taxes on businesses and investors would hinder Americans from building individual savings and further investing in the economy.

Extending existing tax rates would, in one bold stroke, boost investor, business and consumer confidence by taking the uncertainty of tax policy off the table. It would leave hard earned income in the hands of the individuals and businesses that earned it and allow them to spur investment, boost consumption, promote economic growth and create jobs.

Now is not the time to increase taxes on all taxpayers, but rather to work together to keep the economy on the road to recovery.

Congress Returns, Obama Ups Stakes on Health Care

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In a primetime address to a joint session of Congress, President Obama upped the stakes on health care reform – indeed, he may have staked the success or failure of his presidency on this issue and the debate has enormous consequences for the 2010 mid-term elections. Obama’s speech was combative; he both invited input from minority Republicans and challenged their opposition to present proposals. He also chose to attack the veracity of claims and arguments against his policies, asserting that "we will call you out" on false claims. In the wake of the president’s speech – which was interrupted by catcalls and one congressman calling the president a "liar" – the partisan environment on Capitol Hill could not be more toxic. The fundamentals of the bill and the policy debate have not really changed, however. Numerous provisions include mandates on employers to provide coverage or pay penalties, mandates on insurance companies to provide coverage and mandates on individuals to purchase coverage or pay penalties. A government-run "public option" remains a key sticking point, with Republicans adamantly opposed and Democrats deeply divided over the issue. 

The Congressional Budget Office analyses of the various drafts of legislation have been less than comforting, citing increased (rather than decreased) costs for the federal government (i.e., taxpayers) over the next decade with an acceleration of costs in future decades. This will exacerbate the federal deficit and is at odds with the president’s stated goal to "not add one dime" to the deficit.

The Indiana Chamber is engaged in the debate and conferring with its membership as the situation develops. The Chamber will also be taking a delegation of the state’s business leaders to Washington for its annual D.C. Fly-in event on September 23-24, at which time direct communication on this issue will be made to Indiana’s congressional delegation. The Chamber maintains that incremental, yet fundamental, changes in the areas of medical liability reform, health information technology and more consumer-driven health options are necessary first steps to controlling the costs of health care and extending private health care insurance to more Americans. 

Drowning in Overseas Tax Proposals

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The Indiana Chamber of Commerce is asking federal legislators to oppose the recent proposal to increase taxes on overseas profits. U.S. companies, including many in Indiana, will find it increasingly difficult to compete with their foreign competitors should these tax code changes be enacted.

American companies already pay the second-highest corporate tax rate in the world. During these difficult economic times, we believe economic development should be promoted to give our companies the tools they need to succeed in the global marketplace instead of burdening them with higher taxes. These tax proposals would add $200 billion to the tax burden of affected companies, putting them at a competitive disadvantage with their foreign counterparts who don’t have to pay or can defer taxes in their home countries.

Overseas investments by domestic companies strengthen our overall economy.  By adding overseas operations, U.S. companies create more opportunities for American companies to grow back home.  For every worker employed overseas by U.S. companies, 2.3 workers are employed in the U.S.