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, which includes a requirement for “maintenance of effort.”
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." The Measure X implementing ordinance was recently amended to revise the maintenance of effort calculation from a rolling three-year average to the higher of a jurisdiction’s Senate Bill 1 Maintenance of Effort amount or the amount of general fund expenditures on transportation in the 2016/17 fiscal year, adjusted annually for inflation.
The process that was used to amend the Measure X implementing ordinance was as follows:
- Review and recommendation from the Citizens Oversight Committee;
- Provide a 45-day comment period;
- Hold a noticed public hearing;
- Receive approval from the Transportation Agency Board by a 2/3 vote and by a simple majority weighted vote based on population;
- Provide for a 30-day waiting period before the ordinance amendment went into effect; and
- Receive approval from each jurisdiction on an amendment to the tax sharing agreement reflecting the change to the maintenance of effort calculation.
On March 19, 2020, Governor Gavin Newsom issued Executive Order N-33-20 directing all individuals in the State of California to stay at home or at their place of residence, in order to protect the health and well-being of all Californians due to the State of Emergency resulting from COVID-19 pandemic. The order will stay in effect until further notice. The resulting economic downturn related to the pandemic have left many jurisdictions across the State with decreased revenues while also diverting existing revenues to address emergency relief projects.
With the State of Emergency, planned local transportation projects may not be moving forward, and jurisdictions may be diverting local funds for emergency relief or public health projects. To address this, Agency staff is reviewing potential temporary modifications to the Measure X Maintenance of Effort requirement. Given the severity of some jurisdictions’ budget shortfalls, one option could be to temporarily suspend the maintenance of effort requirement for fiscal year 2019/20. Another option could be to allow for a percentage reduction from a jurisdiction’s maintenance of effort amount. The California League of Cities recently requested that the Senate Bill 1 Road Maintenance and Rehabilitation Act Maintenance of Effort be reduced by 25 percent to account for the reduction in spending during the fourth quarter of the fiscal year, as a result of the State of Emergency.
Transportation Agency staff will present this issue at the June Technical Advisory Committee meeting and seek feedback from the Committee members on how the State of Emergency is affecting their spending on local transportation projects.