Measure X Funding Agreement

1. APPROVE the Measure X Local Funding Agreement, pending legal counsel approval; and
2. DISTRIBUTE to the cities and the County of Monterey for their adoption.

With the passage of Measure X by the voters of Monterey County, Transportation Agency staff has been working to develop the organizational frameworks and agreements necessary to implement the measure in advance of revenues being available by September 2017.  As required by the implementing ordinance, each city and the County of Monterey must enter into a funding agreement with the Transportation Agency.  That agreement is to include enforcement procedures, designed to reassure the public that tax revenues are spent in accordance with the ballot language. The draft agreement is included as a Web Attachment.

For example, the expenditure of Measure X revenues by the cities or the County will be subject to verification and an annual independent audit reviewed by the Transportation Agency for Monterey County. Failure by a jurisdiction to meet any of the conditions will result in the suspension of the distribution of funds to the deficient city/county. Resumption of funding distribution to the deficient city/county will resume only after full repayment for any misuse, and confirmation of compliance with the funding agreement by the Transportation Agency for Monterey County.

In order to confirm compliance with the tax sharing agreement, each jurisdiction will submit a package of documents by December 31st of each year, starting December 31, 2018.  The documents will then be reviewed by Transportation Agency staff and the Citizens Oversight Committee, as well as be presented to the Transportation Agency Board. That package of documents include:

• Annual Independent Audit: The local jurisdiction shall complete an independent audit of the jurisdiction's financial statements for the prior fiscal year ended June 30th of Measure X funds received and expended.
• Annual Program Compliance Report: The Annual Program Compliance Report describes the efforts taken by the jurisdiction to comply with the requirements for the receipt and use of Measure X funds by detailing the expenditures and transportation improvements that occurred the prior fiscal year.
• Maintenance of Effort Report: A report to be adopted by each jurisdiction verifying that Measure X funds received by the reporting jurisdiction have been used to augment, and not supplant, local resources spent in the fiscal year.  The first report will be due by August 31, 2017.
• Measure X Five Year CIP: A Capital Improvement Program looking forward for the next five (5) years that specifically references projects anticipated to be funded by Measure X.  The first report will be due by August 31, 2017.
• Pavement Management Report: A report on the pavement conditions of the local jurisdiction, using the standardized Pavement Condition Index.

The draft funding agreement was circulated to the cities and the County for review and comment, and was also presented to the Executive Committee. The comments and feedback received have been incorporated into the agreement as appropriate and reviewed by Agency counsel.  However, there are a few issues raised by the jurisdictions that staff will present to the Board for policy direction:

• Financing of Local Shares: In order to ensure the highest possible rating for any potential future bonding of both local and regional projects with Measure X funds, the Agency will need to demonstrate sufficient coverage of funds with the entirety of Measure X revenues. Agency staff recommends that any jurisdiction seeking to finance their local share should receive Transportation Agency approval to ensure coordination between the cities and County while maintaining overall coverage compliance.
• Indirect Costs: Agency staff is proposing that indirect costs be eligible for funding provided that the jurisdiction has a Caltrans-approved Indirect Cost Allocation Plan (or equivalent) established.
• Dispute Resolution Process: To address any disagreements over the use of the local share of Measure X funds and the enforcement policies in the draft agreement, staff is recommending a dispute resolution process whereby the jurisdiction notifies the Transportation Agency in writing of the disputed policy.  If there is no resolution of the matter at the staff-level, the issue would be brought to the Measure X Citizens Oversight Committee for review and recommendation to the Transportation Agency Board of Directors for final resolution.

Measure X Funding Agreement