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HomeMy WebLinkAbout02/05/2013 14 Car Tab Fee Election/Alternative Options 0 r W r N 7 " BUSINESS OF THE CITY COUNCIL YAKIMA, WASHINGTON AGENDA STATEMENT Item No. i 1 1 For Meeting of: February 5, 2013 ITEM TITLE: Car tab fee election /alternative options SUBMITTED BY: Tony O'Rourke, City Manager CONTACT PERSON /TELEPHONE: SUMMARY EXPLANATION: See attached memorandum Resolution Ordinance Other 0 (specify) Contract: Mail to: Contract Term: Amount: Expiration Date: Insurance Required? No Funding Phone: Source: APPROVED FOR SUBMITTAL: City Manager STAFF RECOMMENDATION: BOARD /COMMISSION RECOMMENDATION: ATTACHMENTS: Click to download ❑ memo S MEMORANDUM To: Honorable Mayor and Members of the Yakima City Council From: Tony O'Rourke, City Manager Date: January 28, 2013 RE: Car Tab Fee Election The City of Yakima maintains 820 lane miles of roadway. The current average pavement condition index (PCI) of city roads is 54 on a 100 -point scale. If no action is taken to overlay and reconstruct existing roads, in ten years the average PCI of City roads will fall to 19. A street with a PCI of 25 or Tess is considered to have failed. The cost to mill and overlay a road with two inches of asphalt is approximately $2.50 per square foot or $175,000 per lane mile. By deferring needed maintenance, the cost to reconstruct a failed road is approximately $7.50 per square foot or $500,000 per lane mile. On December 11, 2012, the City Council, acting in its capacity as the Transportation Benefit District Board, authorized a $30 car tab fee to be placed on the April 23, 2013 ballot. The annual $30 would be dedicated to road improvements and would generate approximately $1.5 million annually. The City Council has since withdrawn the proposed ballot measure from the April 23 special election and is considering an August 6, 2013 as an alternate election date. The proposed ballot measure had also included a "sunset" provision that would require a public vote to reauthorize the car tab fee after ten years. If the car tab fee election was successful, the City Council could either use the annual $1.5 million for "pay -as- you -go" road improvements (5 to 8 lane miles per year) or issue an $18 -20 million 20 -year term bond to improve approximately 65 lane miles. Since the City Council action on December 11, 2012, two significant financial factors have materialized that offer an alternative to a car tab fee to fix our City streets. First, I was informed in the past week that the 20 -year bond to construct the Dick Zais Center for Law & Justice and pay for the City's matching share of the I- 82/Yakima Avenue interchange will be fully defeased in December 2013. This 20 -year bond required annual debt service payments of $515,000. The source of these debt service payments consists of $400,000 annually from cable television utility tax and $115,000 annually in gas tax revenue. Consequently, this $515,000 in combined revenue sources can now be pledged to other City needs, such as road improvements. Second, the FY 2013 General Fund sales tax revenues were projected to increase 1.5% over FY 2012 year -end sales tax projections. In the August 2012 adopted Five -Year Financial Plan, staff projected that sales tax revenue would grow between 1.5% and 2.0% annually between FY 2012 and FY 2016. During the FY 2013 budget process, staff informed the City Council it was beginning to see a rebound in sales tax revenue growth, after four stagnant years of sales tax growth. At the time, we were not sure if the sales tax uptick was an aberration or a sustainable trend. Now, staff feels confident that current and projected sales tax growth will be stronger than 1.5% to 2.0% annual growth projected in our Five -Year Financial Plan. We forecast future sales tax growth between FY 2013 and FY 2017 to average 3.0% annually. As a point of reference, sales tax growth prior to the start of the recession averaged 3.2% annually between FY 2003 and FY 2008. The result of revising sales tax revenue growth is a projected net surplus of General Fund revenues of $1.2 million in FY 2014, $1.4 million in FY 2015, $1.9 million in 2016, and $1.9 million in 2017. Combining these forecasted annual General Fund surpluses between FY 2014 and FY 2017, with $515,000 in available debt service funds starting in FY 2014 ($400,000 cable TV revenues and $115,000 gas tax revenues), results in the following revenue sources being available for road improvements. When the Five -Year Financial Plan is updated this spring, we expect other positive revenue projections to increase based on the economic recovery. FY 2014 FY 2015 FY 2016 FY 2017 $1.7 million $1.9 million $2.4 million $2.4 million Given these two new financial factors, the City Council has another option for consideration to pay for road improvements. The Council can either: 1) pursue a ballot measure to support a $30 car tab fee to generate $1.5 million annually for road improvements or; 2) dedicate the forecasted sales tax revenue, cable TV utility tax, and gas tax revenue available starting in FY 2014. Based on discussions with Council members Ensey and Bristol, the staff would recommend the latter option because it is not constricted by a 10 -year sunset provision. It could be coupled with a proposed August 6, 2013 ballot measure to amend the City Charter requiring the City to invest and earmark a minimum of $2.0 million annually in General Fund revenues starting in FY 2014 for street overlay and reconstruction improvements. This additional $2 million in road investment would be in excess of the City's current $1.8 million expenditure for street maintenance, or $350,000 in annual debt service payments related to the FY 2013 $5 million bond for road overlay and reconstruction improvement of 28 lane miles. If the City Council approves a City Charter ballot measure proposition earmarking $2 million annually for road overlay and reconstruction, staff also recommends the ballot measure include a consumer price index (CPI) escalator provision to ensure the $2 million annual earmark is annually adjusted for cost of living and construction inflation. The annual $2 million dollar road fund could overlay and reconstruct 10 to 15 miles of road per year, or service the debt service on a $25 million bond, which could repair 80 to 90 miles of road. By pursuing a more aggressive strategy to improve the City's roads and increase the average PCI rate of 54, the City would actually save more money in the long run given the cost to overlay a street is almost one -third the cost of reconstructing a failed street. The clock is running on the viability of our city streets, so the sooner and more aggressive the City addresses the issue the Tess it will have to invest in the long term. At this time, we would recommend the City Council give staff direction on what option it would like to pursue to fund needed Tong -term road improvements. Distributed at the Meeting j -j . BALLOT PROPOSITION AMENDING CITY CHARTER ARTICLE VI, SECTION 8. (To Be Added As A New Section) There shall be a dedicated street overlay and reconstruction fund, reserved for the enhancement in quality and value of City street infrastructure, of no less than Two Million Dollars annually in the City's General Fund budget. This dedicated fund base amount of Two Million Dollars shall be adjusted annually in accord with the annual change in the June U.S. Department of Labor, Bureau of Labor Statistics Consumer Price Index for All Urban Consumers (CPI -U) West Region. The City Council shall make no other use of this fund than as is provided in this Section.