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 second year of Measure X reporting, for fiscal year 2018/19, was due on December 31, 2019. For this year's independent audits, there has been a marked improvement in compliance by the jurisdictions from the previous reporting period. All of the jurisdictions, with the exception of Greenfield, submitted their complete reports by the December 31, 2019 deadline.
For Pacific Grove, due to unanticipated project delays and the change in the Maintenance of Effort calculation methodology, the City did not make enough project expenditures to meet their Maintenance of Effort requirement. For the City of Salinas, their annual report indicated that Measure X funds were spent on a project that the City had been informed by the Transportation Agency was ineligible. In both instances, the cities have repaid the funds to their Measure X accounts from non-Measure X sources as remediation. The Transportation Agency Board approved at the February 2020 meeting that this course of action brought the cities back into compliance with the Measure X implementing ordinance and funding agreement.
At the April 2020 meeting of the Measure X Citizens Oversight Committee, committee members requested that Transportation Agency staff return with potential options for additional actions that may be taken with jurisdictions that are not in compliance. Currently, the Measure X ordinance and funding agreements establish a clear procedure for the enforcement of policies. The ordinance calls for funds to be withheld for up to two years until a jurisdiction rectifies the issue and is back in compliance. After two years of non-compliance, the withheld funds will be re-distributed to the remaining jurisdictions by formula. Agency staff is proposing additionally to deposit any interest earned on withheld funds in the Measure X regional account as payment for the administrative costs of withholding funds.
Looking ahead to future Measure X annual reporting periods, there is a possibility that due to the on-going COVID-19 pandemic that jurisdictions may not be able to meet their maintenance of effort requirements. 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.
However, 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 significantly lower revenues while also diverting existing funds to emergency relief.
To address this unusual circumstance, the Agency has been asked to consider temporary modifications to the Measure X Maintenance of Effort requirement. Transportation Agency staff presented this issue at the June Technical Advisory Committee meeting and received feedback from the Committee members that the State of Emergency is affecting spending on transportation projects differently for each jurisdiction. Several reported that they had cancelled all or some of their planned projects, while others stated that they would be moving forward with projects as planned and budgeted, in some cases due to the maintenance of effort requirement. One option would be to set a new, lower maintenance of effort requirement on a temporary basis. Given the varied local budget situations, however, Agency staff proposes to address requests for temporary modifications to the maintenance of effort requirement on a case-by-case basis, if there is sufficient supportive data provided by the jurisdiction.