Item A: FY10 Budget Strategies to Maintain Road Fund Service Levels

Home Browse Search

On November 12, 2008, the City Manager provided the council with an update about the status of the Road Fund as well as his intended interim funding strategies to keep these critical City services funded for FY10 and beyond. At that meeting, individual councilors acknowledged that the Road Fund funding shortfalls could not be found in service reductions alone and that the need to find new sources of City revenue for transportation systems was great. It was suggested that this looming problem would best be met by a combination of cost reductions/reorganizations and new or enhanced revenue sources. The street utility fee continues to have support by the council as part of the long-term funding solution, although there was acknowledgement of the complexities involved in assessing such a fee. Status of the Council Goal and Transportation Initiative In the council committee’s Summary of Recommended Funding Solutions, two new revenue options were Street/Bike Path Lighting Fee specifically identified for funding street O&M—the and a portion of the local motor vehicle fuel tax proceeds from a three-cent increase in the City’s . However, the November 2007 election determined that the council would likely be unable to implement the increase in the local gas tax, as recommended by the committee. A significant challenge in the implementation of a street/bike path lighting fee, similar to the related street utility fee, has been finding an affordable, efficient collection mechanism. Any new revenue sources proposed for an interim funding strategy for street operations and maintenance will need to address the legal and operational barriers illustrated by these challenges. Regardless of the revenue mechanisms and interim strategy adopted to balance the FY10 Road Fund budget, it is critical that the council and the City Manager continue to pursue other potential long-term county-wide vehicle registration fee and/or gas solutions, including regional opportunities such as a taxlegislative remedies , as well as and funding solutions at the statewide level. street The City Manager and staff also continue to look at how we can develop a viable, cost-effective utility fee as part of the long-term funding solution for street O&M services. However, finding an affordable, efficient collection mechanism for these new street fees is complicated by reluctance on the part of EWEB to consider expanding our current billing/collection agreement to include additional City fees, and initial investigations into alternative billing/collection and customer database options appear to be neither readily available nor cost-effective. The City Manager intends to continue moving forward with additional research and investigation of alternative options and also continues to keep the lines of communication open with EWEB management around the City’s strong interest in pursuing an expansion of the City-EWEB billing agreement to include new City fees for roads. Realistically, these challenges would not allow for implementation of this street utility fee in a timeframe which would keep the Road Fund solvent in FY10. Financial and/or Resource Considerations Under the most current projections, with no new revenues the Road Fund is expected to generate a $2.6 million annual operating deficit this current year (FY09), with that annual deficit growing to nearly $5 million in the out years of the six-year forecast. In the absence of deliberate action, the fund will deplete all available fund resources and become insolvent sometime in the fall of 2009. On the other hand, a set of approximately $3.8 million revenue and/or cost reduction solutions implemented by July 1, 2009, would eliminate the projected future annual operating deficits and restore the fund balance to the policy- recommended level. City Manager’s Funding Strategy for the FY10 Road Fund Proposed Budget The City Manager’s strategy for preserving existing street operations and maintenance services in view of ongoing operating deficits is one which employs a combination of cost reductions and realignments as Z:\CMO\2009 Council Agendas\M090218\S090218A.doc