Measure X Annual Audit Streamlining:

1. RECEIVE an update on the results of the Measure X annual audit and compliance reporting for 2017/18; and
2. RECOMMEND the Transportation Agency Board of Directors modify the Maintenance of Effort calculation to be consistent with the Senate Bill 1 Local Streets & Roads program.

Approved by 69% of the voters in 2016, Measure X was projected to generate an estimated $20 million annually, for a total of $600 million over thirty years.  Revenues have been collected since April, 2017, and in fact, the receipts for fiscal year 2017/18 totaled $28,026,311. The funding source is a retail transactions and use tax of 3/8 cents. The revenue from the sales tax measure can only be used to fund transportation safety and mobility projects in Monterey County.  A maintenance of effort requirement exists to assure that the cities and county do not use Measure X funding to backfill prior levels of transportation expenditures.  

The Transportation Agency has fiduciary responsibility for the administration of the voter-approved Transportation Safety and Investment Plan (Measure X) funds. Each jurisdiction entered into a tax sharing agreement with the Transportation Agency in order to receive their share of Measure X Local Streets & Roads revenues. In exchange, these agreements require the jurisdictions to submit audit reports annually to the Transportation Agency detailing the steps taken to comply with the implementing ordinance.

In accordance with the Policies & Project Descriptions for the Transportation Safety & Investment Plan, a Citizens Oversight Committee representing a diverse range of community interests was formed within 6 months of voter approval of Measure X. Members and their alternates were nominated by the organization they are representing. Additional members were nominated by the Transportation Agency Board of Directors to assure that a broad range of geographic and stakeholder interests are represented on the committee.

The duties of the Committee as defined in the Policies & Project Descriptions for the Transportation Safety & Investment Plan are as follows:

• Conduct independent audits to assure that funds are being expended in accordance with requirements of the Transportation Safety & Investment Plan;
• Review and make recommendations on any proposed changes to the plan, prior to the Transportation Agency Board consideration; and
• Prepare annual reports regarding the administration of the program, to be presented to the Transportation Agency Board of Directors and available for public review.

In accordance, the Measure X Citizen Oversight Committee established a subcommittee on January 15, 2019 to conduct the independent audit of the revenues and expenditure of Measure X funds. The subcommittee was asked to report the results of the audit to the full committee and to prepare the Measure X Annual Report.

The first full year of Measure X reporting, for fiscal year 2017/18, was due on December 31, 2018. As this was the first year of the independent audits’ requirements, there has been a learning curve for all entities involved. Five out of the thirteen entities were late in submitting their reporting materials. As a result, the review by the TAMC auditors and the Measure X Transportation Oversight Committee was delayed. The oversight committee has requested that jurisdictions redouble their efforts to submit their audit reports on time to allow them adequate review prior to issuing their annual report in late February, for publication in April and delivery in May. In addition, some of the reports were incomplete. As of July 1, 2019, of the thirteen recipient jurisdictions, twelve have fully complied and one has only partially complied with the independent audit requirements. Below is a chart detailing the reporting status of each jurisdiction.

In addition to the local agency audits, TAMC was also audited for compliance with the Measure X requirements. The Transportation Agency for Monterey County financial audit found no instances of noncompliance that are required to be reported under Government Auditing Standards, nor did they note any matters involving the internal control over financial reporting and its operation that they consider to be material weaknesses.

At this time, staff is continuing to work with the non-compliant jurisdictions to ensure all reporting materials are submitted. Staff will then evaluate this year’s process and develop a set of recommend changes to help clarify the requirements and avoid reporting delinquencies in the future. One of the changes staff is recommending is an adjustment to the Maintenance of Effort requirement. The purpose of the Maintenance of Effort requirement is to assure that no funds previously used for transportation are shifted to other uses and then backfilled with Measure X monies - the so-called "bait and switch." Measure X currently has a rolling three-year average calculation of Maintenance of Effort. By contrast, the state's Senate Bill 1 program calculates Maintenance of Effort based on a fixed three years of past expenditures (Fiscal Years 2009/2010, 2010/2011, and 2011/2012). The Senate Bill 1 calculation would meet the Measure X Maintenance of Effort intent without penalizing agencies that make a large one-time investment in transportation.

The Transportation Safety and Investment Plan Policies includes an established process for how the policies may be amended:

• Recommendation of approval of the amendment from the Citizens Oversight Committee;
• Hold a noticed public hearing and provide a 45-day comment period; and
• Receive approval from the Transportation Agency Board by a 2/3 vote and by a simple majority weighted vote based on population.

Agency staff will present the review of the 2017/18 audit reports from the cities and county and requests a recommendation to the Transportation Agency Board of Directors to modify the Maintenance of Effort calculation to be consistent with the Senate Bill 1 Local Streets & Roads program.