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HomeMy WebLinkAboutChapter 6 - Finance Document newEXHIBIT C ORDINANCE 2012-005 Page 195 of 268 CHAPTER SIX TRANSPORTATION FINANCE PLAN The Plan must balance identified deficiencies, and gaps with the ability to fund improvements to mitigate those needs. The County, along with the State and Federal governments, faces unprecedented funding shortfalls. The County must utilize a wide array of financial strategies to fund these improvements. 6.1 Current Funding Sources The Road Department has the responsibility to design, build, and maintain County roads. The Road Department must budget for all these tasks; increases in the cost of one area means less money to spend in another. Another ripple effect is a decline in revenues means less funding for all tasks. A perfect financial storm that began in 2007 continues to buffet the Road Department: the cost of road materials is increasing; vehicles are more fuel efficient or use alternative fuels which results in less revenues to the Road Department; federal timber funds that historically accounted for approximately 8 to 13 of the department’s budget are disappearing; and people are driving less due to the flattening of the national and regional economies or are not buying vehicles, which again results in less revenue . In 2007 the Board approved a varied approach to stanch the red ink. The strategy resulted in the following changes: • Raised the solid waste tipping fee by $5 a ton, dedicating the revenues to road maintenance • Created a countywide transportation System Development Charge (SDC) Voters in 2008 defeated an option to increase the Transient Lodging Tax (TLT) from 7% to 9% to fund maintenance on roads with high tourist use (Cascade Lakes Highway, for example). Due to the ailing economy, neither the SDC nor the tipping fee has brought in the expected revenues. As construction fell off, so did trips to Knott Landfill to dump debris and materials. Land use applications fell to historic lows. The Road Department needs approximately $5 million annually to fully fund preservation and overlay work. The end result of the economic downturn is the Road Department faces an annual gap of $3 million for funding full road maintenance over the next 20 years. Full road maintenance means all County arterials and collectors are overlaid during the next 20 years and no paved County road falls below a Pavement Condition Index (PCI) of 70. A PCI of 70 is the boundary between good and fair condition for pavement. The State and Federal governments are also experiencing shortfalls. These two entities typically have funded the majority of road modernization projects. Gas taxes account for 40 percent of the State Highway Trust Fund. Historically, the County Road Department has had the responsibility to propose projects, acquire funding, schedule improvements and construct or contract for the construction of transportation projects in the County. Each year, the Road Department has submitted a list of prioritized projects called the Major Roads Capital Improvement Program (MRCIP) to the County Board of Commissioners for approval. The TSP augments the existing MRCIP process by providing a long-term project listing along with the short-term plan in the MRCIP. In the past, the MRCIP has contained five years’ worth of projects. The MRCIP shall continue to be updated and adopted by the County Board of Commissioners EXHIBIT C ORDINANCE 2012-005 Page 196 of 268 each year but it will now only contain three years’ worth of projects. The MRCIP could also form the basis for a special bond measure discussed below. Traditionally, funding for local and state roadway improvements has come from the variety of sources including: Federal Sources: • Revenue from timber sales on federal lands within Deschutes County • Secure Rural Schools Act (programmed to diminish every year before disappearing in 2012) • Grants State Sources: • Vehicle registration fees • State gas tax • Weight mile fees • Grants County Sources: • System Development Charge (SDC) funds In the most recent fiscal year, the Road Department had total revenues of $14.4 million with motor vehicle revenue providing $11.3 million or 79 percent. Forest receipts comprised $1.3 million or 9 percent. By contrast, the Solid Waste tipping fee brought in $285,773 or 2 percent and the transportation SDC garnered $250,000 or 2 percent. Clearly, the Road Department needs a diversified source of funding. In summer 2011 the Board reconvened the advisory committee that worked on the statewide County SDC and added a few additional members. The Board tasked the committee to look at the funding issue for County road maintenance and develop recommendations for the Board. The Road Study Committee expects to have those recommendations by late 2011 to early 2012. The group will look at everything from the road standards themselves to the Road Department’s organization to allowing selected local roads return to gravel. While the committee will focus on funding road maintenance, there is a benefit to modernization and safety projects. Finding ways to either increase funding for road maintenance or decrease the amount needed to be spent on maintenance, means dollars could then be reallocated to modernization or other improvement projects. 6.2 Improvement Costs When looking at the County road budget, an important consideration is the allocation of funds for maintenance projects within the cities, UGBs and the rural area. Current funds have been flexible as to how they are spent. The mix of maintenance operations versus capital projects is largely a policy issue, which could vary from year to year. Historically, the County has been responsible for maintaining (asphalt overlays, plowing, etc.) roads within city limits and UGBs. Bend maintains all roads within the UGB, but the County assists when requested. The cities of Redmond and Sisters have taken over responsibility as annexation has occurred. Ideally, all roads within a UGB would be maintained by the EXHIBIT C ORDINANCE 2012-005 Page 197 of 268 city rather than city limits. A complicating factor in La Pine is that the City does not yet have a public works department. The TSP project list totals $306 million in improvements for the next 20 years with eighteen (18) projects identified as high priority, the thirty-two (32) as medium priority, and the forty-four (44) projects classified as low priority. These costs do not include any County components of ODOT’s $250 million proposed project for US 97 at the north end of Bend. Much of that project exceeds the TSP’s 20-year timeline. Both phases of the Wickiup Junction interchange project on US 97 are included in the estimates. The County anticipates when the La Pine TSP is completed the $104 million project will be removed from the County’s list of identified improvements. The first phase, at $24 million, is a medium priority and the $80-million second phase is a low priority. In terms of costs by jurisdiction, the Highway projects total $350.6 million while County road projects total $61.3 million and County bridge projects total $3.4 million; in terms of mode, bike and pedestrian stand-alone projects are $570,000 worth of sidewalks or trails. High Priority Projects (0-5 years) Total $107,100,000 Medium Priority Projects (6-10 years) Total $75,900,000 Low Priority Projects (11-20 years) Total $123,229,125 Total 20-Year Combined Project Costs: $306,229,125 The ability of the County to fund needed projects is in doubt. If the County only built the nearly $98 million State and County high priority projects over the next 20 years, the financial need would be $4.8 million annually. Granted, the County would be paying a percentage of the costs of projects on the State system, which total $65.4 million of the nearly $98 million. Assuming 10 percent County participation on State projects ranked as high priority, the County would have to pay $327,250 annually for 20 years toward State highway projects. (The County percentage is for discussion purposes only.) Shrinking the project list to just those only on the County system and ranked high, the total is still $32.4 million over 20 years or $1.6 million annually. While more easily achievable from a financial sense, from a transportation system perspective it would be counter-productive to have a functioning County road network coupled to a failing State network. Simply put, the County needs a well-functioning State highway system for both economic and livability reasons. The County would still need to pay nearly $2 million annually for 20 years over the life of the plan assuming only County high priority projects are built and that the County paid 10 percent for high priority State highway projects. Thus even using these conservative estimates, the County has a modernization need of $1.6 million annually, coupled with a maintenance need of nearly $3 million annually. 6.3 Possible Funding Sources There are several potential funding sources for needed County transportation system improvements. These include the transportation SDC, regional gas taxes, the Transient Lodging Tax, exactions, local improvement districts, bonding, special assessments fees and vehicle fees. These are sources that have been used in the past by agencies in Oregon and could be used in combination. There may also need to be more public/private partnerships. EXHIBIT C ORDINANCE 2012-005 Page 198 of 268 Examples of funding sources that generally cannot provide funds for roadways include: property tax, business income or license taxes, and general funds. Although motor vehicle revenues fund many of the State highway, county and city projects within Deschutes County, major transportation projects may need to be brought to a public vote for approval. This would be necessary to supplement existing funding sources, which cannot keep up with growing needs. Specific projects would be defined in a ballot measure, such as the Major Streets Transportation Improvement Program (MSTIP) passed by voters in Washington County. Because of the need to gain public approval for transportation funding, it is important to develop a consensus in the community supporting needed transportation improvements. That is the value of the Transportation System Plan. Based upon current sources of funding, the cost of the needs far exceeds the projected funding over 20 years. Some of the difference can be made up by land use development exactions, where unimproved frontage is built to the TSP standards as projects are implemented. To overcome the projected funding shortfalls in existing revenue sources, and build identified projects from the Transportation Project List, the County may wish to consider the following funding options: State Highway Trust Fund The state currently collects gas taxes, vehicle registration fees, fines and weight/mile taxes. These funds are pooled with a portion returned to individual cities and counties through an allocation formula. As of July 2011 the formula remains: • The state keeps 60 percent. • Cities receive 16 percent, which is apportioned to individual cities based on their population. • Counties receive 24 percent, which is apportioned to individual counties based on the number of vehicles registered in that county. The 2009 Jobs and Transportation Act raised about an additional $300 million annually The legislation allocated $3 million to the Travel Information Council for rest areas, $24 million annually to the State, and the balance distributed as 50 percent to the State, 30 percent to the counties, and 20 percent to the cities. This nickel was the first increase in the State gas tax since 1993. Local Gas Tax The State, cities and counties can provide their basic roadway funding through a tax placed on gasoline. The State gas tax is approved legislatively while local gas taxes are voter-approved. Vehicle registration fees can be enacted by ordinance. State Highway Trust funds are dedicated to roadway construction and maintenance, with one percent allocated to pedestrian and bicycle needs. This tax does not fall under the Measure 5 limits because it is a pay-as-you-go user tax. A local gas tax would require voter approval (ORS 203.055) As part of the recent increase in the State’s gas tax, the Legislature imposed a four-year moratorium on city and county gas tax ordinances and required voter approval of such taxes after January 1, 2014. A 1 cent per gallon gas tax would be expected to raise $800,000 per year, although the County’s portion would depend upon revenue-sharing agreements with the four cities. The State currently taxes gas at 30 cents per gallon and the federal tax is 18.4 cents per gallon. As of this writing, gas is nearing $4.00 per gallon. EXHIBIT C ORDINANCE 2012-005 Page 199 of 268 Of Oregon’s 36 counties, only two have a local gas tax in place. Multnomah County (3 cents per gallon) and Washington County (1 cent per gallon) use a local gas tax for funding road projects. These counties contract with the State Fuel Tax Branch to collect and administer the tax. Gasoline distributors who deliver in those counties submit separate distribution reports along with their state report identifying how many gallons were delivered to each county. The state processes the county forms, calculates the tax revenue, subtracts the administration fee portion, and sends the county its revenue. Multnomah County retains 53% of its fuel tax revenue for road improvements in the unincorporated areas of the County, then distributes the rest to the cities on a per capita basis. Local Vehicle Registration Fee Deschutes County currently has 199,254 registered vehicles. A local biennial registration fee of $15 would yield $1.49 million per year. Under State law, 40 percent of the collected fee goes to the cities within the county, unless they agree to a different percentage. Multnomah County adopted a $38 biennial vehicle registration fee to help fund the Sellwood Bridge replacement. The State’s base biennial registration fee is $86 for passenger cars and light trucks and $48 for motorcycles. Street Utility/Road User Fee Already used in Ashland and pioneered in Oregon in 1985 by La Grande, road user fees are a monthly or yearly assessment charged to residences and non-residential users of County roads. This fee is similar to sewer and water fees charged to users on a monthly basis. In Ashland, the fee varies depending on the type of land use but is $7.71 a month for a single-family home. In La Grande, they charge $2.50 per water meter per month. These fees are not for capacity improvements, but for supporting local road maintenance based upon land use type and trip generation. The exclusive use of the fees for maintenance allows a more uniform distribution of spending and frees up other revenue sources for capacity needs. If a $1 per month fee per dwelling were used in Deschutes County, approximately $750,000 could be generated per year Countywide or $250,000 for the unincorporated areas only. Utility fees could be vulnerable to Measure 5 limitations, unless they include provisions for property owners to reduce or eliminate charges based on actual use. Aggregate Fee (Natural Resources Transportation Fee) The intent is essentially to have a local weight-mile tax for trucks that haul rock and gravel. A fee of 15 cents per ton would generate $300,000 per year based on the State’s estimation of Deschutes County consuming 2,000,000 tons per year. County Service District for Roads A rural tax levy for the unincorporated areas of 53 cents per $1,000 valuation would generate $3 million annually based on Fiscal Year 2010-11 taxable assessed values. Voter approval would be required to form such a district. Washington County currently levies such a fee. EXHIBIT C ORDINANCE 2012-005 Page 200 of 268 Property Tax (Local Option Tax) A countywide tax rate of 18 cents per $1,000 valuation would generate $3 million annually while a rural- only rate of 53 cents per $1,000 valuation would generate $3 million based on Fiscal Year 2010-11 taxable assessed values. The tax must be approved by voters and can only be authorized for five (5) years, or, if for a capital project the expected useful life of the project up to a maximum of ten (10) years. County Road Bonding Act The annual revenue would be set by the governing body, but authority to issue the bond must be decided in an election. The funding and interest is added to the general levy of taxes for all taxable property within the County. Money raised by the bond must be used for construction and maintenance of permanent roads in the County. Exactions Development exactions and contributions often pay for portions of many roads in and through new developments. The road, or improvements to a road, are many times paid for or built by a developer to County standard, then deeded to the County as a development condition of approval. This practice has been modified by Oregon case law over the years, but will continue to be used throughout the state. Developers of sites adjacent to improvements identified as SDC projects can be credited the value of their frontage work, which is included in the SDC project-list cost estimate. Rural System Development Charge (SDC) System development charges are authorized by state law, and have been used in Oregon and throughout the United States. The County adopted an SDC in 2006 for the purpose of constructing four traffic signals in the then urban unincorporated community of La Pine. The SDC was assessed only for developments in South County, which was defined as from La Pine State Rec Road south. In 2008 the Board adopted the current countywide SDC. The basic principles in development of SDCs are that: 1. There must be a reasonable connection between growth generated by development and the facilities constructed to serve that growth (generally determined by level of service or connectivity); and 2. There must be a general system-wide connection between the fees collected from the development and the benefits development receives. Charges are typically developed based on a measurement of the demand that new development places on the street system and the capital costs required to meet that demand. SDCs do not require a vote of the public. The SDC amount is assessed at the time of development approval or building permit issuance and based on the anticipated number of trips generated by the proposed land use. The charge is a means of requiring new developments to pay an equitable portion of the capital costs of improvements needed to accommodate growth. Charges to recently developed properties can be used to recover past and/or EXHIBIT C ORDINANCE 2012-005 Page 201 of 268 future growth-related improvements. However, they may not be used to recover costs for improvements to serve existing users and residents. By law, the funds must be used for capital improvements only and are not eligible to be used for operations or routine road maintenance. Like all road SDCs, a countywide road SDC is not adequate for complete project funding but forms an important financing component for new capacity-enhancing projects. Following adoption of the TSP and its project list, the County will need to recalculate the SDC based on new project costs. Grants From time to time, grant funding becomes available. Grants are most often funding matches, whereby the local jurisdiction must contribute a percentage of the funds to complete the project. Often, the local contribution is an “in-kind” pledge of resources for planning, engineering and design services or materials from the local jurisdiction. However, some grants are 100% awards. Most grants are only to be used for capital improvements or planning studies, not maintenance. The County should be prepared with eligible transportation projects that can be plugged into a grant category on short notice. Often these projects will not have alternate funding sources, and therefore must rely on grants, to be completed. Recent direction by the Oregon Transportation Commission (OTC) is to offer significant amounts of grant monies for non-highway projects such as the Tumalo Trail. Special Road Districts Special road districts provide a means for funding specific improvements that benefit a specific group of property owners. These districts require owner approval and a specific project definition. The residents forming the district agree to pay property taxes to support the special district. Road District Commissioners are appointed by the Deschutes County Board of Commissioners to operate the district. Local Improvement District (LID) Local residents can petition the County Board of Commissioners to form an LID to get their road improved. Previously, once a public dirt or gravel road was improved under the LID process, the road was accepted or “established” as a County road to be maintained by the County. After the federal timber program began to diminish in 2006, the Board passed a moratorium on accepting any new roads into the County system save for a few already in process. In 2009 the Board amended the moratorium to have the discretion to accept new arterials or collectors into the County system. Property owners agree to pay for road improvements made under an LID. The tradeoff is that as LIDs form, the County becomes responsible for more miles of road maintenance, which spreads limited funds even thinner over the long term.