Economics of an Eclipse: Tourism Boost or Total Bust?

Thanks to astronomy and a little thing known as the internet, you’d have to be hiding under a rock to be unaware of our impending celestial event today: a solar eclipse where the path of totality stretches across the entire United States.

Cities along that path – where the sun will cast a perfect full shadow around the moon – are hoping and planning for a big bump in tourism.

While viewers in Indianapolis will see about 92% coverage of the sun, those in Evansville will see about 99% and Jeffersonville residents will see about 96%, according to the Indiana Department of Transportation (INDOT).

But Hoosiers interested in seeing the full totality need only travel a few hours south to Hopkinsville, Kentucky, where they can be near the “Greatest Eclipse” point and will be able to see the eclipse last for two minutes and 40 seconds. A number of other Kentucky cities will also be prime eclipse-viewing locations, including Paducah, Bowling Green and Madison.

Cities throughout the country are preparing to cash in on the once-in-a-lifetime event – the most recent coast-to-coast solar eclipse was in 1918 – by building and upgrading infrastructure. A CNBC report on the subject highlights Hopkinsville spending half a million dollars on sidewalk and other improvements, while a Casper, Wyoming, a downtown plaza is costing $8.5 million (which was already planned and needed by the city, but stimulated by the eclipse potential), according to CNBC.

That same report cautions that because the path of totality is relatively accessible and there are numerous highway exits along the route, entities might end up overspending on projects without recouping additional tourism dollars. Additionally, the concern is that too many eclipse tourists could put a strain on things like gas, food and local infrastructure and might backfire in the form of a public relations nightmare if crowds overstress local health care facilities or get stranded without gas or lodging.

The economic benefit (or cost) of the solar eclipse won’t be calculated until after the heavenly bodies have realigned. But if the fervor around scrounging for the last pair of unclaimed eclipse glasses is any indication, it’s possible those cities and towns made a safe bet on a short-term tourism event.

INDOT is also warning travelers in southern Indiana to plan for traffic congestion and reminding Hoosiers that overnight camping at rest areas is prohibited. INDOT is also urging motorists to pay attention to the road during the eclipse, turn on headlights when it gets dark out and don’t stop along the highway to view or take photos.

And remember to take safety precautions when viewing the solar eclipse, from wherever you choose to view it. Wear ISO-certified protective eye glasses or (if you’re like me and didn’t get glasses in time) make a pinhole projection. The American Astrological Society has instructions here on how to construct one.

Happy viewing!

Road Funding Set for Conference Committee Showdown

The Chamber was pleased to see the Senate pass a long-term road funding bill (34-13). During the floor vote, the Chamber lobbying team worked to get additional votes for what might have been a much closer margin. Five Republican senators voted against the Chamber on HB 1002: John Crane (Avon), Mike Delph (Carmel), Aaron Freeman (Indianapolis), Jean Leising (Oldenburg) and Andy Zay (Huntington). One Democrat, David Niezgodski (South Bend), voted with the Chamber.

There are differences between the House and Senate proposals, however:

  • House version raises just over $1.1 billion per year; the Senate about $672 million a year.
  • House version converts all sales tax collected (well over $300 million) on fuel sales to road funding; the Senate does not.
  • House version has $15 annual registration fee for regular automobiles and $150 for electric cars; the Senate adds $75 fee for hybrids (the Chamber supports this addition).
  • House version has a 10-cent fuel tax increase for both gasoline and diesel fuel, with annual increase based on index from 2019-2024. The Senate phases in the fuel taxes: five cents per year for two years; diesel tax is three cents a year for two years. Both are indexed at no more than one cent a year per gallon from 2019-2014.
  • House version requires the Indiana Department of Transportation to seek a federal tolling waiver; the Senate says it may seek the same waiver but with the approval of the Governor.
  • Senate version contains a $5 per new tire sale use fee in addition to the current 25-cent fee; the House does not.
  • Senate version increases registration fees for trucks in lieu of additional diesel taxes.
  • Senate version adds a 10-cent per gallon aviation fuel excise tax, with revenue from that going to the airport development grant fund.

The “swim lanes” of the bill are now clearly defined. Work will continue during the next two weeks by the Chamber and our coalition partners to reconcile the differences between the two versions. We believe Indiana will finally end up with a long-term sustainable transportation infrastructure funding bill, one of our Indiana Vision 2025 goals.

Call to Action: Please contact your legislators to encourage them to support HB 1002. Let them know today that long-term funding is important to you and your company!

Get Your Motor Running for Transportation Funding

The long-awaited road funding bill (HB 1002, authored by Rep. Ed Soliday) arrived during the first week of session. It addresses the structural deficit of $1.2 billion per year for Indiana roads. The bill includes many good things that the Chamber supports; it is user-fee based and data-driven. While the bill will have changes during the next four months, we will work to support its basic concepts. The state’s situation: Over the years, technology (that led to better gas mileage) and inflation have combined to erode Indiana’s road maintenance dollars. Also, the last time the gas tax saw an increase was 2003. There will be a major hearing on this bill by the Roads and Transportation Committee on January 25 and the Chamber will be there to formally advocate its full support.

HB 1002 provides for a one-time fuel tax rate increase of 10 cents per gallon on gasoline  currently $0.18), special fuel tax (currently $0.16) and motor carrier surcharge tax (currently $0.11.) It also does the following:

  • Provides for an annual rate increase in fuel tax rates based on an annual index factor
  • Increases alternative fuel decal fees by 50%
  • Establishes a $15 transportation infrastructure improvement fee that applies to all motor vehicle registrations
  • Requires a person who registers an electric vehicle to pay a supplemental registration fee of $150 with an increase every five years based on an index factor
  • Provides that the gasoline use tax is distributed to highway funds over a phase-in period
  • Repeals restrictions on when a tolling project can be undertaken
  • Requires the Indiana Department of Transportation (INDOT) to seek a Federal Highway Administration waiver to toll interstate highways
  • Permits INDOT to approve certain railroad crossing projects and authorizes the Indiana Finance Authority to finance an approved project subject to a maximum annual debt service limit of $10 million
  • Makes various changes to the transportation funding exchange program between the state and counties and municipalities

Logistics, Infrastructure Take Center Stage at Summit

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Hoosiers don’t take lightly the title “Crossroads of America.”

It’s a moniker we’ve earned honestly: The state is in the heart of the Midwest and is one of the top manufacturing states in the country. Going hand-in-hand with manufacturing success are logistics and distribution, and the ability for Hoosier companies to move their goods efficiently and through cost-effective means.

We move products by sea, rail, over the road and through the air to national and global locations. More than 700 million tons of freight is moved annually in Indiana, according to the Indiana Department of Transportation.

As part of the ongoing Beyond the Bicentennial campaign, the Indiana Chamber of Commerce will release an open letter detailing the necessary policy positions for advancing the state’s Superior Infrastructure, as outlined in the Chamber’s long-range economic development plan Indiana Vision 2025. The letter, to be published on Sept. 27, will be the third in a series of four letters addressed to the major party gubernatorial candidates. Each letter details policies impacting the four drivers of Indiana Vision 2025. Additionally, the Indiana Logistics Summit will return to downtown Indianapolis on Nov. 16-17.

Keynote speaker Paul N. Jaenichen, Sr., United States Maritime Administrator, will address attendees on Nov. 17. Jaenichen was appointed to his position by President Obama in 2014 and is a retired career naval officer. He was a nuclear trained Submarine Officer in the U.S. Navy for 30 years, and will be speaking about the National Maritime Transportation Strategy and Marine highway projects.

New to the summit will be a series of educational breakout sessions. These will feature speakers on topics such as: rail, air cargo, barge and trucking industries; going global; innovation; policy; and workforce.

Early discounted registration is open until Sept. 30 (though registration will continue after that date). Visit the web site at www.indianalogistics.com for more information and to register.

Lawmakers Hear from INDOT on Road Funding; Gov. Makes $1 Billion No-Tax Proposal

30449450Two key events in recent weeks on the transportation front in Indiana: A long-awaited Indiana Department of Transportation (INDOT) study on long-term funding options for Indiana’s roads, highways and bridges was presented on Oct. 15 to the Interim Study Committee on Roads and Transportation; and just a few days before, on Oct. 13, Gov. Pence proposed a $1 billion, four-year plan for short-term transportation needs whose most prominent feature was no tax increases. INDOT Commissioner Brandye Hendrickson appeared with the governor at his announcement and testified before the interim study committee.

Hendrickson provided a broad overview of the state of Indiana’s roads and bridges during her testimony and INDOT’s study vendor, Cambridge Systematics, testified at length on the options available to the state to address long-term transportation funding, concluding that policymakers need to “decide what Indiana should invest in and how best to pay for it.” Both federal and state highway revenues are expected to decline in future years due to a number of factors, including increased fuel efficiency standards and more alternative-fuel vehicles hitting the roads.

All fuel excise tax revenues from the state’s highway fund are required for maintenance of existing infrastructure; no funding is available for expansion projects such as completion of I-69, adding lanes to I-65 or I-70, or new bridges across the Ohio River. Additionally, more than half of the state’s bridges are in the last 25 years of their useful life (50-plus years or older) and will need significant reconstruction or remediation in coming years.

Bottom line: The state needs more revenues to address a growing need for maintenance of existing infrastructure – let alone expansion of the state’s highway network.

Pence proposes a mix of bonding (debt), general fund appropriations and use of the state’s reserves in his “21st Century Crossroads” plan. His proposal would seek $450 million over three years to be appropriated by the General Assembly from the state’s general fund, $250 million to be used from the state’s reserve funds, $50 million from the state’s Next Generation Trust Fund (established by Major Moves monies) and roughly $240 million in new bond financing as existing debt gets retired or refinanced. The plan is short term in nature and, while tapping appropriate sources, needs the consent of the Legislature (where several Statehouse voices expressed reservations about the bonding aspect of the plan).

The Indiana Chamber would like to see a mix of increased fuel excise taxes, indexation, tolling, fees on alternative fuel vehicles and other tools based upon a “user fee” model discussed in the 2016 legislative session, along with the use of existing tax authority by cities, towns and counties to address the needs of local streets and county roads. Policymakers must make some hard choices with the support of the state’s business community to address the scale and scope of the challenge.

In short, the era of strategic investments fueled by the Major Moves program is over. The prevailing (default) practice of making stop-gap appropriations from the state’s general fund is not a reliable or strategic means to pay for future maintenance and upgrades to Indiana’s surface transportation network. Currently, we risk wasting strategic investments already made, and our roads and highways will deteriorate along with our reputation as “The Crossroads of America.”

Chamber Convenes Infrastructure Leadership to Discuss I-65, Long-Term Solutions

10049160The Indiana Chamber recently brought together a trio of the state’s top leadership on infrastructure issues to discuss Indiana’s current maintenance and funding challenges, including the closure of Interstate 65 near Lafayette due to emergency bridge repairs, and long-term solutions to an estimated $1 billion annual road and bridge maintenance funding gap.

Indiana Department of Transportation (INDOT) Commissioner Brandye Hendrickson, House Ways and Means Committee Chairman Tim Brown M.D. (R-Crawfordsville), and House Roads and Transportation Committee Chairman Ed Soliday (R-Valparaiso) appeared before the Chamber’s Infrastructure Policy Committee to share their views and hear the viewpoints of the state’s business leadership.

INDOT Commissioner Hendrickson stated that the I-65 closure represented significant logistical and engineering challenges and economic costs, but that the bridge repairs should be completed and the interstate back online by mid-September. She stated that INDOT was doing all it could to expedite the process, but that the bridge failure pointed to the state’s maintenance needs. A statutorily required study of potential funding mechanisms has been underway and will be made public at a legislative interim study committee this fall, most likely in October.

Both Brown and Soliday agreed that the state needs to commit for funding to road and bridge maintenance – and that was the case prior to the I-65 bridge incident. Brown suggested that revenue projections look pretty good for the $200 million appropriated to the 2020 fund to be deployed later this year, but acknowledged that more needed to be done – most likely in 2017, the next budget-writing session of the General Assembly. He also said he was open to using the $500 million in the Next Generation Trust Fund for immediate infrastructure maintenance needs. Brown would like to see a “consistent funding stream on an annual basis for transportation infrastructure” enacted in the future, but left all options on the table pending review of the INDOT study.

Soliday praised the INDOT study and described it as a “tool to look at a number of funding mechanisms and options”; he plans to hold a study committee hearing in October to review the tool and various options. Soliday said that the average Hoosier driving 12,000 miles/year pays about $108/year in taxes for transportation infrastructure and described that as a “bargain” compared to the average monthly cell phone or cable TV bills consumers pay. Both legislators were supportive of public-private partnerships and progress on existing road projects; they expressed frustration that county wheel taxes had not been more fully utilized to address local funding needs for local and county roads.

It was clear from the panel discussion that it is a question of when and how the transportation funding gap will be addressed, not “if” it will be addressed. Most likely, these issues will begin to be discussed in-depth in the 2016 legislative session with some supplemental funding being found, but that a longer-term solution will be waiting until the budget-writing process in 2017.

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

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

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.

Chamber Comments on State’s Blue Ribbon Panel on Transportation Infrastructure

Indiana Chamber of Commerce President and CEO Kevin Brinegar on the release of the report from the state’s Blue Ribbon Panel on Transportation Infrastructure:

“The recommendations of the Blue Ribbon Panel on Transportation Infrastructure are an important first step. The group has identified priority projects and clearly defined the funding challenges. Equally important will be the work called for in HEA 1104 (2014), legislation outlining an Indiana Department of Transportation study of financing alternatives that will help meet future funding needs.

“In addition, it’s time for Washington to get its act together and assure that federal funding shortfalls are addressed. Some states are already cutting back on important projects in fear of Highway Trust Fund deficiencies as soon as August 1. What is truly needed – instead of short-term, crisis-avoiding extensions – is a multi-year renewal of the federal transportation plan.

“Superior infrastructure is one of the four drivers of the Indiana Chamber-led Indiana Vision 2025 and strong transportation via road, rail, air and water is critical to our state’s economic future.”

Bennett: No Slowing Down on Education Reforms

If you haven’t heard Indiana Superintendent of Public Instruction Tony Bennett talk about education, you’re at a disadvantage. Reading the words here, in a newspaper story or on a web site do little justice to the passion he brings to what is not only his current job, but his mission to improve opportunities for all Indiana students.

Bennett spoke to Chamber members earlier today in our monthly Policy Issue Conference Call. (The next round is June 4 at 9:30 a.m. EDT, the topic is infrastructure and the guest is INDOT Commissioner Michael Reed. Registration details will be available here soon). Bennett, by the way, will receive an honorary degree and speak at Marian University’s commencement ceremony on Saturday.

Just a few of his key points from Friday’s discussion:

  • Bennett says you generally need "either a legislative framework to make bold reforms or union buy-in. And we don’t have either." While that may have kept the state from being a contender for federal Race to the Top funding, the implementation of the reforms will move forward under the Department of Education’s Fast Forward program
  • Annual teacher and principal evaluations are a necessity, with student growth data being part of that process
  • A barrier that needs removed are some collective bargaining laws that keep the lowest-performing teachers in the classroom simply because they have been there the longest
  • Bennett sees many opportunities for municipal and school partnerships to maximize services that are offered
  • The General Assembly has given the State Board of Education broad authority to establish a third grade reading proficiency program. He is hoping for board approval by the end of the summer
  • Looking ahead, Bennett says work will continue on the student growth model, grading of schools (on a letter grade scale, as approved earlier this week), evaluations of teachers and schools, teacher tenure, additional options for children and more. "Indiana students can’t wait for us to act," he closed, emphasizing the need to move forward quickly and effectively