Measure X Ordinance Amendment Public Hearing

1. RECEIVE presentation on the draft Ordinance 2019-01 to revise the Measure X Maintenance of Effort definition;
2. OPEN public hearing on the draft Ordinance 2019-01;
3. RECEIVE public comments; and
4. CLOSE public hearing.

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.

Transportation Agency staff evaluated this year’s process and recommends a few changes to help clarify the maintenance of effort 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 back-filled 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 goal of modifying the Measure X Maintenance of Effort is to meet the Measure X Maintenance of Effort intent without penalizing agencies that make a large one-time investment in transportation.  All jurisdictions must meet the SB 1 maintenance of effort requirement in order to receive state SB 1 maintenance funds.  Staff’s original proposal was to make the Measure X maintenance of effort be the same as the SB 1 requirement.  However, after reviewing the amounts, it became clear that in some jurisdictions, this change would result in a large drop in local funds devoted to transportation.  It was therefore recommended to use the larger of the SB 1 three year period or FY 2016/17 local funds expended on transportation.  

This issue was discussed by the Technical Advisory Committee and the Measure X Citizen Advisory Committee. The Citizen Advisory Committee added a recommendation for an annual inflationary growth factor, resulting in the the following proposal to modify to the Maintenance of Effort section of the Measure X ordinance:

LOCAL ROAD MAINTENANCE, POTHOLE REPAIRS AND SAFETY FUNDS.

B. Maintenance of Effort Requirements

Each local jurisdiction shall expend each fiscal year from its general fund for street and highway purposes an amount not less than the annual average of its expenditures from its general fund during the preceding three fiscal years 2009-10, 2010-11, and 2011-12 fiscal years, but not less than what was expended in 2016-17 (when Measure X passed), as reported to the Controller pursuant to Streets and Highways Code section 2151.  This baseline amount will be indexed annually to the Engineering News Record construction index.

The proposed baseline Maintenance of Effort amounts are shown below, highlighted and in bold:  

If Measure X is amended as recommended, each jurisdiction will have the above-defined baseline Maintenance of Effort that must be met in order to qualify for Measure X funds. The proposed amendment will tie this baseline amount to an annual index for engineering costs (much like a cost of living adjustment), in order to account for incremental increases in construction costs. 

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

1. Review and recommendation from the Citizens Oversight Committee;
2. Provide a 45-day comment period;
3. Hold a noticed public hearing; and
4. Receive approval from the Transportation Agency Board by a 2/3 vote and by a simple majority weighted vote based on population.

Transportation Agency Counsel has reviewed this process for amending the Measure X Ordinance and recommends the Agency follow the above process, if the Board of Directors supports moving forward with the proposed modifications.