Cities and towns face changes to transportation funding distributions and reporting requirements

In April 2017, Indiana legislature passed HB 1002, a sweeping bill covering transportation infrastructure funding. Among the bill’s many provisions, of note were changes related to State motor vehicle highway distributions and how local governmental entities are permitted to use their distributions.

HB 1002 calls for an incremental increase in the amounts distributed from the motor vehicle highway account to state and local units to 60 percent for state units and 40 percent for local units after June 30, 2022. This reflects an increase from the current 53 percent and 47 percent for state and local units, respectively. 

In addition, cities counties, and towns are no longer permitted to use their allotted distributions for painting of structures and objects or law enforcement. Rather, local governmental units must use at least 50 percent of their distributions on construction, reconstruction and maintenance of roadways. The last word in this description is notable because additional legislation passed just this year changed maintenance to preservation.

The legislation also called for changes to the Annual Operations Report (“AOR”) for Highway and Street Departments for cities and towns with a population of 20,000 or more. The AOR population threshold also was lowered from 20,000 to 15,000. This will result in a handful of cities and towns in the 15,000 – 20,000 population range filing an AOR for the first time in early 2019. As for the 50 percent use restriction, it will be tested at audit (for now) and could eventually become an annual test.

Updates are still being made to the AOR and the prescribed forms issued by the Indiana State Board of Accounts (SBOA) last year. There will be more to follow on these new reporting requirements as the information becomes available.

For more information on this topic, or to learn how Baker Tilly municipal specialists can help, contact our team.

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