Introduction
When the Indianapolis City-County Council considers the budget of the Indianapolis Public Transportation Corporation (“IndyGo”) it should question the requested special levy of $15,392,000 “in addition to the Maximum Levy set under IC 6-1.1-18.5-1.”
IndyGo’s pretext for thus evading the levy maximum is the following section of the Indiana Code:
IC 36-9-4-49 Insufficient funds; special tax levy
Sec. 49. (a) For each year in which it is anticipated that the total amount available to a public transportation corporation will be insufficient to defray the expenses incurred by the corporation, the board of directors of the corporation shall levy a special tax upon all the property within the taxing district of the corporation at the rate required to defray such expenses. The tax must be based upon the budget formulated and filed by the board under this chapter.
(b) The county treasurer shall collect the tax levied under this section in the same manner as other taxes are collected. As the treasurer collects the tax, the county treasurer shall remit it to the controller of the public transportation corporation.
Now, the fact that IndyGo intends to spend $342.2 million in 2025—which will probably come to over $45 per bus ride—may indeed seem to support the proposition that the “total amount available” to IndyGo will likely be “insufficient to defray the expenses incurred.” But in due course we will see that previous years’ results cast doubt on this proposition. In light of the story IndyGo told in order to obtain Council approval of a transit income tax, moreover, the Council should question why so great an expenditure is necessary in the first place (and, incidentally, why IndyGo is withholding the level of budget detail it provided in previous years).
IndyGo’s Transit-Tax Story
IndyGo has undertaken an expansion of its operations, and the transit tax’s purpose is to cover the resultant expense increase. This expansion is also attracting a large amount of additional federal money. But that federal money was not a sure thing in 2017, when the Council was considering whether to impose the transit tax.
So in order to obtain such a tax IndyGo assured the Council that, with a little delay and some adjustments, the transit tax could still fund the proposed expansion even if the planned federal-assistance increase didn’t materialize. This raises a question. How is it that IndyGo’s “expenses incurred” will exceed its “total amount available” when IndyGo could have managed the expansion even without the torrent of additional federal funds it has ended up enjoying?
To explore that question we’ll start by considering the table IndyGo employed for the purpose of telling the Council how failing to obtain the added federal funds would affect construction of three major expansion components, namely, the Red, Purple, and Blue Line bus-rapid-transit (“BRT”) routes:
Now, the “With Federal Small Starts” column is the schedule that IndyGo told the Council a transit tax would make possible if IndyGo also received the planned federal help. And IndyGo is indeed in the process of receiving such help. Yet the expansion that IndyGo portrayed at the time was considerably more extensive than IndyGo is actually implementing.
Specifically, the table’s “Extension” entries refer to BRT components that we now know the actual Red and Blue Lines won’t include: those that were to have occupied extensions north of 66th Street, south of UIndy, and west of Holt Road. As envisioned at the time, moreover, the Blue Line was to employ expensive electric buses instead of the lower-cost hybrid buses that the Blue Line will actually use.
Less aggressive than the “With Federal Small Starts” schedule is the “No Federal Small Starts” schedule, which IndyGo told the Council it could meet even if the federal support fell through. From the federally supported $137.6 million Purple Line buildout the expansion without federal support would omit $28.8 million worth of embellishments that the actual expansion will include but the Purple Line wouldn’t really have needed. Without that support the expansion was also to omit the Blue Line extension and the Red Line extensions’ BRT features, but it turns out that the actual expansion will, too.
Except for those unnecessary Purple Line embellishments, that is, the expansion that IndyGo is actually implementing with federal help is essentially what it told the Council it could accomplish without the federal help. So what is it doing with all that extra money? Whatever it’s doing, we’ll argue below that enough is left to “defray the expenses incurred.”
Fare and Service Shortfalls
Before we do, though, let’s dispose of a minor detail: the fact that fare revenue has fallen short of the projection that IndyGo gave the Council when it lobbied for the transit tax. Comparing actual fare revenue with what IndyGo projected under the “No Federal Small Starts” scenario, the plot below shows that IndyGo’s projection was wildly optimistic.
Of course, some of the shortfall was caused by the pandemic, which no one could have predicted. But a shortfall had been developing even before the pandemic struck in 2020. As we explained in “Inelastic Ridership,” moreover, there was ample reason for IndyGo to doubt that the projection it gave the Council was realistic. And IndyGo has worsened the shortfall by having failed since 2004 to adjust its fare structure for inflation. Such an adjustment would have increased the fare price by about 50%.
Avoidable or not, recent shortfalls are roughly the size of the special levy. Some observers might therefore argue that they necessitate it. But the plot above suggests that in all probability the fare-revenue shortfall was completely or mostly offset by savings from a service shortfall.
In both of the last two years IndyGo has fallen short of its no-federal-funds service projection by more than 200,000 service hours. This means it avoided the omitted service’s cost in additional drivers, dispatchers, mechanics, fare inspectors, fuel, etc. Although we don’t know exactly how much IndyGo thereby saved, something in excess of $70 per omitted service hour seems plausible, and such savings would have made up for the fare-revenue shortfall.
Awash in Cash
Even if they hadn’t, though, IndyGo’s annual reports tell us that the “total amount available” to IndyGo still was not “insufficient to defray the expenses” it incurred. Yes, we would expect that some of the funds have been absorbed by the expansion in capital assets such as land, buildings, vehicles, and shelters. But the solid black curve below shows that beyond such assets the cash and other current assets IndyGo has amassed have ballooned since IndyGo started receiving the transit tax and its recent deluge of federal funds.
Although the Council has been imposing the special levy ever since about 2013, IndyGo’s current assets initially remained fairly steady, in the neighborhood of $40 million in 2023 dollars. But they swelled when IndyGo started collecting the transit tax in 2018, and after the federal floodgates opened a couple of years later they shot up to about six times the pre-transit-tax level.
That’s totally out of proportion to the modest increase in IndyGo’s operations. The red and green curves show that the number of buses on the streets has increased only slightly, while the number of riders in the seats has actually declined. Moreover, the illustrated current-asset level doesn’t include the federal funds IndyGo expects to receive when Blue Line construction starts.
So it’s hard to imagine that IndyGo couldn’t function without the special levy. Indeed, the dashed curve shows that current assets would have been four times their pre-transit-tax level even if instead of routinely perpetuating the special levy the Council had terminated it when IndyGo began collecting the transit tax in 2018.
Conclusion
“IndyGo Is Overfunded” showed that even by the standard of IndyGo’s own consultant IndyGo is squandering resources on unproductive routes. Despite doing so it is awash in cash.
IndyGo just doesn’t need the special levy.
Government is a criminal enterprise. Everything that Indygo has been doing over the last decade was a brazen attempt to get bigger by stealing more money. As I told many people, the best that could happen is that they double ridership - under perfect conditions - and that would have no impact on anyone else beyond the deleterious financial and infrastructure expansion (future maintenance headaches intended to extract more money from the unrealized gains of property owners. I ride Indygo and know it well. It is an option only because of where I live - four bus routes are within 1/4 mile of my house so I used it for work and occasionally when stranded (car breaks down, etc). Their "expansion" was always going to be nothing more than a boondoggle - in addition to being a pain in the rear to motorists who use the same routes.