Franklin City Council adopts wheel tax ordinance as state law change alters grant eligibility

FRANKLIN, Ind. — The Franklin City Council adopted Ordinance 25-04 on May 5, imposing a municipal wheel tax and a motor vehicle license excise surtax to create a Franklin Wheel Tax Fund and a Franklin Motor Vehicle License Excise Surtax Fund.

City Attorney Lynn Gray told the council that recent changes in state legislation altered earlier assumptions about how county and municipal wheel taxes would interact and warned the city risks losing state-administered road funding if it does not adopt a municipal tax. "If we do not have one, we are undoubtedly not able to apply for the MPO money that's over the $100,000,000," Gray said during the council discussion.

Gray said the version of the state bill the council considered when Ordinance 25-04 was first introduced had included language preventing a county wheel tax from applying to vehicles registered in a municipality that had adopted a municipal wheel tax; that language was removed in the Senate-approved bill. She said the change, together with other timing shifts in the law, makes it possible for both a county and a municipality to impose wheel taxes and for the county to retain distributions it previously passed through to municipalities.

Gray and council members flagged a possible funding gap if the city does not adopt its own wheel tax: she estimated the city could lose roughly $600,000 that it has received in recent years through a county-administered wheel-tax distribution. Gray described the $100 million MPO tranche as a limited pool that will be allocated by lane miles and said local entities without a wheel tax may be ineligible for portions of that funding.

Council members asked whether the county could keep wheel-tax revenues this year or in coming cycles; Gray said she had discussed the matter with county counsel and other local towns but could not predict how the county commissioners would act. She said municipalities that have already adopted municipal wheel taxes include Greenwood and Whiteland.

The council opened a public hearing on the ordinance; no members of the public addressed the council during the hearing. A motion to approve Ordinance 25-04 was made and seconded, and the council voted in favor with no recorded opposition.

Gray said the Bureau of Motor Vehicles would collect the tax and send proceeds to the city if the ordinance is implemented. She also said the city would publish the ordinance and keep the public updated on implementation.

Why it matters: Council members said the municipal wheel tax would help the city secure matching funds for state road grants, including Community Crossings awards that the city has depended on in recent years. Council members and staff warned that the state law changes increase uncertainty about how much revenue the city will ultimately receive and whether the county will retain distributions it has historically passed through.

The council proceeded to other business after the vote; Gray said she would publish the ordinance and provide updates to the council as implementation details are clarified.