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.
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 initially had a rolling three-year average calculation of Maintenance of Effort. This resulted in penalizing jurisdictions that made a large investment in transportation with a higher Maintenance of Effort requirement that was not typical of their regular transportation expenditures. 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).
To address this issue, in October 2019, the Transportation Agency Board approved a modification to the Measure X Maintenance of Effort definition that based the maintenance of effort calculation on the greater of SB 1’s three year period or FY 2016/17 local funds expended on transportation, indexed annually to the Engineering News Record Construction Cost Index. To implement the new indexing requirement, Agency staff had been using the index over the prior fiscal year and applying it to a jurisdiction's Maintenance of Effort to calculate the new requirement for the current fiscal year. Below is an example of this using the City of Carmel:
FY 2019/20 MOE: $564,665
Index (July 2019 - June 2020): x 1.27%
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FY 2020/21 MOE: $571,815
The issue with this approach that was brought to staff's attention by the County of Monterey is that the index is not known until June, with the new fiscal year starting in July, resulting in jurisdictions not having the new Maintenance of Effort requirement early enough to conduct their budgeting. Going forward, staff is proposing to calculate the index using the prior calendar year, rather than fiscal year, and providing the jurisdictions with their upcoming requirement in December to provide ample time to include the new amount in their budgets.
Attached with this staff report is a table showing the updated calculation and Maintenance of Effort requirement for each jurisdiction for fiscal year 2021/22.