Attorney General dismisses IndyGo matching fund claim

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FILE – In this Sept. 16, 2020 file photo, Republican attorney general candidate Todd Rokita speaks during a news conference in Indianapolis. (AP Photo/Darron Cummings, File)

INDIANAPOLIS––In a letter to State Senator Aaron Freeman, Indiana Attorney General Todd Rokita found that IndyGo cannot count federal grant money toward its requirement to raise matching funds to augment income tax revenues to fund transit system expansion.

IndyGo has indicated that such a finding, and attending proposed state legislation, would doom its planned $200 million Blue Line expansion along Washington Street.

Freeman sought the opinion in support of SB 141 which would withhold transit income tax revenues from IndyGo in an amount equal to its shortfall in not reaching a state-mandated goal to be raised by the tax exempt Indianapolis Public Transportation Foundation.

Enabling legislation passed in 2014 that set the mechanism by which IndyGo and its supporters successfully sought a new transit income tax referendum from the voters required that IndyGo’s 501c3 foundation would raise a 10% match of the first year’s income tax revenues by the one year anniversary of the launch of the $96 million Red Line expansion and continue raising such non-taxable monies each year after that.

In its first year of collection, starting October 1, 2017, the transit income tax raised approximately $56 million.

By last September 1st, marking the Red Line’s one-year operational anniversary, the IPTF raised less than $100,000 of its stated $5.6 million goal.

According to state statute, the taxpayers of Marion County are committed to make up that shortfall.

During testimony before the Senate Appropriations Committee last week, IndyGo President & CEO Inez Evans told lawmakers that if the federal grant money matching fund criteria was denied and SB 141 was passed, the future of the proposed Blue Line would be in jeopardy.

Originally set for groundbreaking last fall with completion predicted in the third quarter of 2022, the Blue Line would link Cumberland on the east with the Indianapolis International Airport on the west, a span of 24 miles, at a cost of $200 million, half of which would be paid through a federal transit grant.

As envisioned, electric buses would run on dedicated lanes with mid-lane transit stations along the route.

Infrastructure improvements to streets, sidewalks and curbs would total $70 million with stations and vehicles each accounting for $30 million in budgeted costs.

Income tax revenues and IndyGo bonds would add another $84 million into the Blue Line construction budget with transit income tax collections relied on to fund ongoing operations.

While IndyGo supporters have framed SB 141 as an attempt to thwart the 60% majority of 2016 voters who approved the income tax for an enhanced public transportation system, Freeman said his bill is meant to protect Marion County taxpayers from shouldering the burden of the IPTF’s failure to reach its fundraising goal as mandated by the enabling legislation which was a compromise to rescue the failing tax creation referendum legislation in the 2014 General Assembly.

The original law also requires IndyGo to raise 25% of its share through fare box revenues.

This morning during committee debate, Senator Mike Young from Indianapolis’ west side said that IndyGo’s latest figures put its fare box revenues at 8%.

Last week, Evans maintained, in a newly articulated rationale never before set forth by IndyGo leadership, that the transit system brought in $131 million in revenue, most of it through federal grants, that should be counted toward the foundation’s 10% fundraising goal.

The original 2014 legislation mandates that the matching goal should be reached by non-tax sources which could include donations, private and corporate grants and other revenue streams such as advertising and naming rights.

Rokita’s letter to Freeman in which the senator sought clarification as to whether IndyGo could claim that non-local income tax revenue streams such as state and federal funds could be tapped for the IPTF goal instead found that IndyGo could not pass off such funds as non-tax money.

“Federal grant program funds are considered taxes under Indiana code,” wrote Rokita, “because they are public monies funded entirely by taxes and cannot be utilized by IndyGo to meet its funding obligations.”

Evans maintained that since the enabling legislation didn’t specifically rule out federal grant funds when referring to anticipated “private” sources for the matching monies, the transit system and its foundation were free to include revenues from the Federal Transit Administration.

Rokita disagreed.

“Federal grant money would not satisfy the requirements of Indiana code because it comes from the federal government, not a private entity.”

The AG’s opinion found, “To posit a contrary argument is either a complete misunderstanding of authorizing statutes or a benign attempt to obfuscate the law for convenience. Either should be concerning to the citizens of Indianapolis-Marion County.

“IndyGo may not use taxes, or other public monies, and fares to satisfy its 10% funding commitment.”

Regarding IndyGo’s claim that passage of SB 141 would derail the Blue Line, Rokita wrote, “The failure of IndyGo to comply with Indiana code does not cease operations of a public transportation project.”

Rokita found that IndyGo can continue with the Blue Line, however, “the Indianapolis City-County Council will be responsible for any funding deficit,” for the project.

Freeman’s proposed legislation would halt IndyGo’s Blue Line aspirations if the transit system cannot provide its own funding.

Opponents to the Blue Line claim that dedicated bus lanes, especially along West Washington Street, will lead to traffic congestion and hamper the ability of customers to access business parking lots.

IndyGo said that changing the configuration from dedicated bus to shared lanes with standard traffic would throw the entire project into doubt and result in the withdrawal of federal participation and support.

Sen. Young made an inquiry to federal transit authorities regarding that argument and received back a clarification that found that if IndyGo were to change its Blue Line plans from dedicated bus lanes to shared lanes, less than 50% of the route could be assigned fixed lanes, and while adjustments to plans are permitted, the FTA would have to re-examine the proposal for federal funding.

SB 141 passed out of committee by a 7-5 vote and now moves on to the full senate for consideration.

FOX59 News has contacted IndyGo seeking comment regarding the committee’s vote.

Below is a statement from Inez Evans, President and CEO of IndyGo:

“IndyGo has worked tirelessly to serve the riders that depend on our service, and to uphold the will of the voters for expanded transit service. SB 141 will directly impact our riders and our progress. The Purple Line is delayed while this legislation is being debated, and will not proceed if this bill passes as it is written. The Federal Transit Administration (FTA) has stated that IndyGo would be a financial risk and “would be prohibited from moving forward with the Purple and Blue Line.” Therefore, SB 141 risks $177 million of federal investment in our city.

The Indiana Legislative Services Agency (LSA) is the legislative service agency of the Indiana General Assembly handling all fiscal analysis and research matters. The LSA is served by three divisions that provide fiscal analysis, legislative research, revision of statutes, and publications to the legislature, media, and the general public. According to the Legislative Services Agency, we have met and are exceeding all requirements of the current legislation. Existing legislation does not require IndyGo to privately raise these funds, nor does it require the Indianapolis Public Transportation Foundation to solely be responsible for raising the funds.

In today’s hearing, Senator Young mentioned that a corridor project does not utilize designated lanes. He is correct, but IndyGo submitted and was granted funding for a rail fixed guideway project. It is important to understand the difference in FTA project types. This type of project does require dedicated lanes. Converting the Blue Line to a different project type would require the project to be re-evaluated by the FTA. IndyGo would be essentially starting over – the $41 million across the Purple and Blue Lines that has already been invested in the projects would be lost, and there would be no guarantee that federal funding would be awarded for the new project. The infrastructure benefits of the project would be significantly reduced. 

IndyGo agreed to meet the guidelines of the legislation and we did. The rules are being changed while the game is played, not with any risk to the lawmakers, but at the risk of current and future riders of IndyGo. It impacts the essential workers that need to get to work. It impacts the students that need to get to school. It impacts the elderly who need to access healthcare services. It impacts those who are already vulnerable and most at risk.”

Read the entire letter from Attorney General Rokita to State Senator Aaron Freeman below:

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