Report to Mayor and City Council
Tuesday, June 21, 2016
Discussion
SUBJECT:
Title
METRO'S PROPOSED TRANSPORATATION SALES TAX MEASURE (CITY COUNCIL)
Body
I. SUMMARY
METRO is considering a ½ cent increase in local sales taxes to fund Transportation improvements. The City of Carson had previously supported the proposed measure. METRO staff has released changes to the funding plan which requires reconsideration of the City of Carson’s prior support of the measure. The METRO Board will consider the expenditure plan on June 23rd and could schedule the tax measure for the November ballot.
II. RECOMMENDATION
Recommendation
The City Council should discuss the lack of funding for local street maintenance programs and other issues with the proposed tax measure and give direction to staff.
Body
III. ALTERNATIVES
The City Council could continue to support the proposed measure or take an action to oppose the measure.
IV. BACKGROUND
The voters have previously approved three local sales tax “overrides” to fund transportation projects. Each of these tax measure added ½ cent to the local sales tax to fund various transportation projects. The revenues are distributed by METRO based on voter approved allocations in these prior measures.
The voter approved tax distribution formula for the three prior sales tax measures was based on a “per capita” distribution of funds. This funding formula favors the City of Los Angeles, who has 40% of the region’s population and is receiving 50% of the funds.
Currently Carson’s population comprises 0.9189% of the County’s total population. Carson generates significant sales tax revenues to the measure - over $36 million annually. The City receives combined sales tax revenue from METRO of $4.2 million (based on 2015 sales tax and population data).
History
Proposition A was the first sales tax measure approved by the region’s voters in 1980. It allocated 25% of all of the collected sales tax funds to the cities to be primarily used to fund transit systems and transit projects, based on the “per capita” distribution of the funds. This local funding component is known as the “local return” program. The City of Carson is estimated to receive $1.7 million in Proposition A funds for 2017 from the local return program.
Proposition C was the second sales tax measure approved by the region’s voters in 1990. The local return is 20% and will result in Carson receiving $1.4 million in 2017. This fund is restricted primarily to transit systems and projects as well.
Measure R is the third sales tax measure approved by the voters in 2008. The local return program is 15% and will result in the Carson receiving $1.0 million in funding. This fund is more flexible than the prior tax measures and allows the cities to perform street maintenance projects.
Carson’s Mobility and Transportation Needs
Carson has tremendous mobility and street maintenance needs. We are currently estimating that Carson will require $14 million annually in terms of street repairs and new roadway water quality requirements. Carson generates $36 million to METRO annually in local sales tax revenues. The proposed sales tax measure, if approved by the voters, would result in Carson generating another $12 million to METRO, for a total of $48 million annually. In terms of comparison, this is more than ½ of the City’s entire General Fund budget.
Carson’s proximity to the twin ports results in thousands of truck trips annually on our City’s street, with the resulting paving damage. Carson is also underserved by the regional transit systems. A light rail line extension planned into Carson is unfunded in the current Measure R2 proposal and will terminate in the City of Torrance.
Roadway Water Quality Issues
The City communicated to METRO in December of 2015 that the City faces over $8 million in annual costs to implement State requirements for diverting and treating water pollution from our local streets (copper in brake pads, zinc in tires, oil and antifreeze) so that it does not enter the Dominguez Channel. We communicated our needs to METRO, along with over 40 cities who expressed their concerns. We also participated in the local METRO workshop held in Carson.
Watershed plans submitted by the cities to the Regional Water Board call for the cleanup of 988 miles of region’s network of highways and streets from polluted runoff from streets. The region will require over $2.495 Billion in funding over the next twenty years in order to comply with the watershed plans. The City of Los Angeles will need to invest $208 million annually in green streets in order to comply with their approved watershed plans. The County of Los Angeles will require $83 million annually. Carson’s expenditure of $8 million annually is the same as the City of Duarte’s. The City of Glendale will require $14 million annually, while the City of Inglewood will require $7 million annually.
Street Maintenance Issues
There is no argument that Carson and all of the 88 communities in Los Angeles County require additional street maintenance funds. Congress and federal official have failed to address the shortfalls in federal gas tax revenues, which have not been increased in decades, despite the growth in the county’s population, the deterioration of the nation’s infrastructure and the impacts of inflation on road repair budgets.
The State has also failed to deal with the financial crisis facing our communities with declining State gas tax revenues. California’s particular issue is that it subsidizes electrical vehicles that do not use gas and do not pay any taxes to use the streets and highways. Recently uncertainty in the “cap and trade” revenues does not bode well for proposals to assist the cities with road maintenance from this fund.
The Council authorized a complete inventory of our street repair needs in March and this inventory is now underway. Staff conservatively estimates that the City will need $6 million annually for our street maintenance program, on top of the $8 million for the green streets program. As a matter of perspective, an overlay of paving for a local street now costs $500,000 per ½ mile.
METRO’s Expenditure Plan for Measure R2
Carson is a member of the South Bay Cities Council of Government (COG). The COG has been actively working with METRO to communicate our collective needs for additional local return funds. The COG has recommended an increase from the proposed 16% in Measure R2 to a minimum of 20%.
METRO staff released a revised expenditure plan on June 10th, which has been reviewed by the COG and our staff. METRO is recommending an increase of 1% to the local return program (to 17%) starting in 2018. The local return program would be increased to 20% in 2040. It is important to note that Carson will generate over $12 million annually to METRO if the new tax measure is approved by the voters. The 16% local return would result in approximately $1.2 million to the City of Carson annually.
The METRO Board will be considering the staff recommendations and whether to schedule the tax measure for the November 2016 election at their Board meeting of June 23rd. Staff is requesting direction from the Council in order to inform the METRO Board of the City’s position.
Analysis:
One of the major concerns with the new tax measure is that it does not honor the voter approved projects in 2008. There is one new “mega project” being proposed by METRO. The project is known as the Sepulveda Pass Tunnel. METRO estimates that the costs of the project are $18.9 Billion. If approved by the voters it would represent over 15% of the funding going to one Westside Project.
The sale tax measure also unfairly distributes sales tax revenues generated by our community and our region. It is estimated that the South Bay cities generate 20% of the entire revenues for Measure R2, yet they will receive only 5% of the funds back. The funding formula and projects approved in Measure R2 will be in place for the 40 year funding period. METRO staff is also proposing that a committee, which does not represent the cities, be able to recommend changes in the projects to the METRO Board every ten years.
Environmental Justice Issues
The Los Angeles Region has the State’s largest concentration of disadvantaged communities. There are number of disadvantaged communities in both the South Bay COG and Gateway Cities COG. Carson is one of these disadvantaged communities. Staff is concerned that the tax measure will mandate that the region’s disadvantaged communities, like Carson; fund the $18.9 Billion Sepulveda Pass Tunnel. The current proposed tax measure raises serious environmental justice concerns, as the region’s poorest communities will be subsidizing wealthier areas.
Local streets and highways are the backbone of our communities. They serve all transportation modes - busses, cars, trucks and bicycles. Local sidewalks serve our children walking to school, our seniors and mobility challenged residents. METRO’s proposed expenditure plan will result in funding a mega project, to the detriment of all of the region’s road and highways.
The COG is recommending that we communicate our concerns to the METRO Board in advance of their June 23rd meeting. The COG believes that the tax measure is premature and divides the region into the “halves and the halve nots.” If the measure is to succeed at the ballot box, METRO will need to address the fundamental concerns of Carson and other communities to be treated fairly. The METRO board has the time to appoint a subcommittee of the Board to meet with the cities to resolve these issues. The METRO Board will be meeting on June 23rd to make a decision on whether to schedule the tax measure for the November ballot. The Board must make a decision by the end of July if they are going to meet the election schedule.
V. FISCAL IMPACT
If approved the tax measure will result in our residents and businesses paying $12 million annually in sales taxes, with a return to the City of $1.2 million.
VI. EXHIBITS
1. “A Rocky Road Looms In Debate on Transit Tax” Pasadena Star News, June 16, 2016 (Pgs, 6 -7)
2. Green Streets, Costs and Miles (Pgs. 8-11)
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Prepared by: Kenneth C. Farfsing, City Manager