MERRILLVILLE (AP) — A state lawmaker has proposed creating a tax increment financing district to help pay for expansion of the South Shore commuter rail in northwest Indiana.

State Rep. Chet Dobis, D-Merrillville, is proposing to divert 12.5 percent of the sales tax money Lake and Porter counties send the state, a move that would generate $30 million a year without raising local taxes. The money is needed to cover a $350 million shortfall in the $1-billion plan to extend South Shore service to Lowell and Valparaiso.

"There's not another penny of new taxes that has to be raised to support this project if we succeed in passing it in this manner," Dobis said.

Dobis' earlier proposals to enact a local gas tax or a wheel tax to pay for the extension foundered, but several members of northwest Indiana's delegation said Thursday they were encouraged by his latest idea because it uses existing tax funds.

"Anytime you get tax revenue flowing back up into northwest Indiana, that's a good thing," said Rep. Earl Harris, D-East Chicago.

The proposal by Dobis could face opposition in the Republican-controlled Senate. Sen. Luke Kenley, R-Noblesville, said the Tax Committee he chairs has turned down three proposals for sales tax increment financing districts around the state in the past three years.

"That's taking away tax revenue from the state. Pretty soon we'd have no sales tax revenue left," Kenley said. "If we approved it for Lake County, we would have people all over the state arguing we needed to approve their requests too."

A spokeswoman said Gov. Mitch Daniels plans to meet with Dobis to discuss the South Shore funding plan.