RECEIVE an update on the status of the efforts to modify the Maintenance of Effort calculation.

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.  As of August 31, 2019, all jurisdictions are in compliance with the audit requirements for Fiscal Year 2017/18.  The Agency will continue to monitor compliance and will withhold a jurisdiction's share of Measure X funds for any future instances of non-compliance.

Based on the reporting process this past year, Transportation Agency staff recommends a few changes to help clarify the maintenance of effort requirements and avoid reporting delinquencies in the future. 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.  The Citizens Oversight Committee therefore recommended to use the larger of the SB 1 or FY 2016/17 local funds expended on transportation. The Citizen Advisory Committee also 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 - completed July 16, 2019;
2. Provide a 45-day comment period - initiated August 28, 2019; and 
3. Hold a noticed public hearing - held on September 25, 2019; and 
4. Receive approval from the Transportation Agency Board by a 2/3 vote and by a simple majority weighted vote based on population - scheduled for October 23, 2019.