HomeMy WebLinkAboutItem B: Road Fund Status
ECC
UGENE ITY OUNCIL
AIS
GENDA TEM UMMARY
Work Session: Road Fund Status and Service System Stabilization Strategies
Meeting Date: September 26, 2005 Agenda Item: B
Department: Public Works Staff Contact: Kurt Corey
www.eugene-or.gov Contact Telephone Number: 682-5241
ISSUE STATEMENT
This work session provides an opportunity for the council to review and discuss the financial status and
forecast for Eugene’s Road Fund and to provide advance input for development of a FY07 budget with
the goal of achieving greater long-term financial stability for the operations and maintenance (O&M)
component of the city’s transportation service system.
On the capital side of the program, the implementation of a 3-cent-per-gallon local motor vehicle fuel tax
in August 2003 (raised to 5 cents in January 2005) has allowed the City to begin addressing the
significant backlog of pavement preservation projects in Eugene. However, the backlog continues to
grow, and additional funding is still needed to reverse this trend and to do the repair work necessary to
ensure the efficient and safe operation of the city’s local transportation system. At the same time, the on-
going operations and maintenance activities for the city’s road system have been hampered by growing
problems related to a structural imbalance with historic funding sources for the City’s Road Fund.
BACKGROUND
In September 2001, the Citizen Budget Subcommittee on Transportation System Funding presented its
Final Recommendation on Transportation Funding Issues which contained among its conclusions the
assertion that “In the face of projected O&M shortfalls and service reductions beginning in FY03,
operation and maintenance activities
ensuring adequate funding for the of the City’s transportation
system is absolutely essential.” Now, four years later, the most significant financial management
challenge for this fund continues to be the ability to generate adequate, sustainable revenue to
appropriately fund the O&M activities for Eugene’s transportation system.
Revenue Trends and Financial Forecast
The Road Fund accounts for operations and maintenance (O&M) of the city’s street system. Resources
are provided from Eugene’s share of State Highway Trust Fund allocations, payments from Lane County
under the County/City Road Partnership Agreement, direct allocations of state Oregon Transportation
Improvement Act (OTIA III) monies, and other small miscellaneous grants, fees and permits.
The majority of the Road Fund revenue comes from Eugene’s share of the State Highway Trust Fund,
which is derived from Oregon motor vehicle fuel taxes as well as state motor vehicle registration fees and
weight-mile taxes. Revenue growth in the State Highway Trust Fund has been relatively flat since FY00,
at which time the City was receiving about $6 million per year in allocations. The projected revenue for
FY07 is $6,240,000, which represents only a 4% growth over the entire seven-year period.
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The second major source of revenue for this fund is the County/City Road Partnership Agreement that
once contributed $2.5 million per year and more recently has been providing about $1.2 million in annual
street maintenance funding to Eugene. The current agreement expires in FY07, and the Board of County
Commissioners recently adopted a five-year Capital Improvement Plan which discontinues the
partnership payments to Lane County cities after expiration of the current agreement. Unless the Board
reconsiders this action and approves continuation of the historic partnership payments, Eugene would lose
over $1 million in annual street maintenance funding beginning in FY08.
The City began receiving a third significant source of road maintenance revenue funding in mid-FY04 in
the form of the OTIA III maintenance monies allocation which is received directly from the State. This
revenue source is expected to generate $850,000 - $900,000 annually through the six-year forecast period.
There have also been active efforts in this fund and in the Public Works Department to identify and
implement opportunities for increased operational efficiencies and cost containment.
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At the request of the Citizen Subcommittee, a respected independent consultant reviewed how
efficiently Eugene’s Road Fund dollars were being spent. His 2001 report suggested several
minor modifications, which were subsequently implemented, but generally found that the City’s
Road Fund operations are efficient when compared to other cities.
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The Public Works Department as a whole went through a rigorous self-assessment process in
2004, resulting in accreditation and recognition as one of the few public works agencies in the
nation conforming to best management practices of the American Public Works Association.
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In FY04, $850,000 in ongoing expenditure and service reductions were achieved in the Road
Fund, primarily through the elimination of the in-house street overlay program and the
organizational restructuring and consolidation of Public Works divisions and work crews,
resulting in the elimination of supervisory positions.
These cost reductions were implemented as a partial remedy for stabilizing the O&M activities for the
city’s road system, with the hope that additional revenue sources for O&M activities would eventually be
realized as an outcome of the council’s ongoing work with transportation funding. However, insufficient
additional resources have been identified to date, while at the same time the fund continues to experience
rapid growth in operating costs (14% health benefits increase and 38% PERS contribution rate increase
for the FY06 budget).
In FY06, the Road Fund is expected to generate a $586,000 operating deficit in the course of providing
basic O&M activities such as street lighting, pothole patching, street tree maintenance, signing and
striping and more. Based on current projections, that annual deficit would grow to nearly $1 million in
FY07 and would stretch to an ongoing gap in excess of $2 million per year by FY08. The attached graph
(Attachment A, Exhibit 1) illustrates what is projected for the fund balance in the absence of either a)
reductions or eliminations in current programs or b) the identification of alternate funding sources for the
continuation of these activities. A second exhibit (Exhibit 2) illustrates what would happen to the fund
forecast if action is taken to close the projected $2 million future annual operating deficit with a set of
solutions implemented in FY07 and FY08.
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Illustrative Effects of Service Reductions
The table below illustrates the types and magnitude of program reductions and eliminations or funding
shifts which would be required if a strategy of service reductions alone were employed to correct the
structural deficiency between Road Fund revenues and expenditures and eliminate the $2 million
projected annual deficit. This list is in no way intended to represent a prioritized list of the specific
services which would be eliminated in a reduction situation but merely provides examples of the types of
service level changes which would be required in order to achieve expenditure reductions of this
magnitude. Attachment B contains additional narrative detail about the service implications of the
example service reductions described in the following table.
Examples of the Types and Magnitude of Service Projected Net Savings Number of FTEs
Impacts in a $2 Million Expenditure Reduction in FY06 Dollars Affected
Street Trees Program –
Moving the funding for
Street Tree Program from the Road Fund to the
General Fund or reducing the level of service $808,000 9 FTE
Residential Street Lighting -
Turn off street lights
along residential streets $357,000 .5 FTE
Arterial and Collector Street Lighting
– Turning
off street lights along arterial and collector systems$331,000 .5 FTE
Street Median Maintenance, Major Arterials –
Eliminate median maintenance along major arterials$215,000 2.5 FTE
Street Median Maintenance, Major Collectors and
Arterials –
Eliminate median maintenance along
major collectors and minor arterials streets$104,000 1 FTE
Non-Regulatory Signs –
Eliminate non-regulatory
sign fabrication, installation and maintenance, $78,000 1 FTE
including street name signs
Special Projects and Studies
– Loss of capacity to
manage any special studies that did not come with
dedicated funding $74,000 .5 FTE
Street Median Maintenance, Neighborhood
Collectors –
Eliminate median maintenance for
neighborhood collector streets, residential medians $42,000 .5 FTE
and traffic calming planters
Neighborhood Transportation Program
– Reduced
capacity to conduct field investigations or technical
analysis related to neighborhood traffic issues;
reduced funding for traffic calming $25,000 .5 FTE
Totals for Illustrative Service Impacts $2,034,000 16 FTE
Potential Alternative Revenue Options
As an alternative to implementing the types of service reductions described above, the council could
consider the implementation of one or more alternative revenue options, such as those that follow:
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Street Light Maintenance Districts – This concept would involve the formation of assessment
districts within which each property owner would be assessed an annual fee (non-property tax) for
street lighting services in proportion to the benefit to that property. The revenue would be
dedicated to paying the cost of maintaining light fixtures, replacing fixtures and parts, and utilities.
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Urban Forestry Fee – In June 2005, the City of Medford, Oregon, established a 31-cent per unit
monthly utility fee to pay for the maintenance of roadside landscaping. This fee is expected to
generate approximately $122,000 per year to help offset the city’s costs of street tree maintenance
and right-of-way beautification projects. Eugene could explore the possibility of implementing a
similar fee to help offset the cost of its street trees program which, even at the current nominal
service level, uses over $800,000 per year in Road Fund resources.
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Franchise Fees on City and Other Utilities – The City has made a significant investment in the
road right-of-way over the years and has historically charged a variety of utility providers for the
use of those rights-of-way. Franchise fees, business license fees and contributions-in-lieu of taxes
(CILT) currently go into the City’s General Fund and are used to support general municipal
services. Other Oregon cities, such as Salem, have for a number of years charged franchise fees
for municipal-owned sewer and water utilities using of the public right–of-way. Recently, the
City of Bend implemented a 3% franchise fee on all sewer and water bills to help fund a shortfall
in the transportation budget. The fee is expected to generate $640,000 annually for this purpose
and will cost the average ratepayer in Bend an additional $2.88 per month. In addition to
franchise fees on city utilities, the council could explore the feasibility of increasing existing
franchise fees or implementing new franchise fees or business license taxes on other categories of
utility providers.
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Support from General City Revenue – The council could designate a portion of City unrestricted
revenue generated from the use of the right-of-way as a transfer to the Road Fund for the purpose
of funding street operations and maintenance activities. Alternately, the council could consider
transferring specific programs which are now supported by dedicated Road Fund dollars to the
General Fund or other appropriate fund, such as Stormwater. One candidate program under this
strategy would be the Street Tree program, with an estimated net FY06 cost of $808,000 and 8.8
FTE. This program was transferred from the General Fund to the Road Fund in the early 1990s in
an effort to reduce budgetary pressure on the General Fund service system. However, it may now
be appropriate to consider returning the financial obligation for certain street tree activities back to
the General Fund or Stormwater Fund.
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Transportation System Maintenance Fee (TSMF) - This funding option was recommended by the
Citizen’s Subcommittee on Transportation System Funding and was implemented by City Council
ordinance but later repealed. While the council most recently has discussed this fee as a dedicated
funding source for the Pavement Preservation Program, a portion of the revenue generated from a
TSMF could be directed by policy to fund street O&M activities. The concept behind this fee is
that the city’s transportation infrastructure is a utility system, not unlike the stormwater utility
system, which delivers transportation service to all users of developed real property throughout the
city. Under this concept, a monthly fee is charged to each user to recover their attributed share of
the overall system cost, including operations and maintenance activities.
If so directed, staff would bring back more comprehensive analysis of these revenue strategies or any
other fund stabilization strategies which the council may wish to further consider.
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RELATED COUNCIL GOALS AND POLICIES
The council’s Vision and Goals Statement with respect to Fair, Stable, and Adequate Financial Resources
reaffirms its commitment to “a government whose ongoing financial resources are based on a fair and
equitable system of revenues and are adequate to maintain and deliver municipal services.” In previous
years, the council has identified specific work plan items to “identify and implement funding sources
(including possible reallocation of existing sources) for operation, maintenance and preservation of the
transportation system.”
Additionally, the City’s Financial Management Goals and Policy, A.4, states that the City’s municipal
service priority Level 2 (second only to the preservation of the public safety system) is to “maintain and
replace the City’s fixed assets, which includes… infrastructure…so as to optimize their life.”
COUNCIL OPTIONS
This is a work session and, as such, the council is not required to take any action. However, it would be
timely and prudent for the council to use this opportunity to provide advance direction to the city manager
and staff to begin working on specific strategies for balancing the Road Fund budget for FY07 and into
the future.
The two principal strategies available for balancing the Road Fund budget are: 1) to reduce the current
service system to the level of existing and projected resources (i.e., $2 million in annual budget reductions
phased in by FY08); or 2) to increase the level of resources to adequately fund the current service system
for FY07 and future years. Regardless of which strategy is selected, it is critical that the council and the
manager continue to pursue efforts to sustain existing revenue sources at or above current levels,
including renewed efforts for continuation of the historic County/City Road Fund Partnership Agreement
and funding.
Options available to the council in providing the city manager with direction for building the FY07
budget are:
Option 1: The council could direct the city manager to build the Road Fund budget based on known,
existing revenue sources, which would require service reductions of approximately $2 million,
phased in during the FY07 and FY08 fiscal years.
Option 2: The council could direct the city manager to develop an FY07 proposed Road Fund budget
based on funding assumption to include new revenue sized to address not only the projected
ongoing operating deficit in street operations and maintenance but which would also generate
additional revenue to be dedicated to the backlog of unfunded projects in the Pavement
Preservation Program.
This funding package could include: 1) funding the Street Trees Program with a combination
of an Urban Forestry Fee and a shift in funding for certain activities to the Stormwater Fund
and General Fund, as appropriate; 2) a proposal for street lighting assessment districts to
provide dedicated funding for street light maintenance; and/or 3) a proposal for reestablishing
the previously-repealed Transportation System Maintenance Fee to shore up funding for the
remaining Road Fund O&M activities and to address the annual funding gap in the Pavement
Preservation Program.
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Option 3: The council could direct the City Manager to do any variation of the above options.
CITY MANAGER’S RECOMMENDATION
The City Manager recommends Option 2.
SUGGESTED MOTION
There is no suggested motion for this item.
ATTACHMENTS
A: Road Fund Forecasts and Fund Balance Projections
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Exhibit 1 – Forecast Scenario 1 - Current Service Levels
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Exhibit 2 – Forecast Scenario 2 - $2 million of Service Reductions or New Revenue Phased in
Beginning in FY07
B: Additional Detail on the Service Implications of the Example Program Reductions
FOR MORE INFORMATION
Staff Contact: Kurt Corey
Telephone: 682-5241
Staff E-Mail: kurt.a.corey@ci.eugene.or.us
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City Council Work Session, September 26, 2005
Road Fund Status and Stabilization Strategies
Attachment A, Exhibit 1 - Forecast with Current Service Levels
Projected vs Target Ending Fund Balance
4.0
3.0
2.0
1.0
0.0
FY06FY07FY08FY09
(1.0)
(2.0)
(3.0)
Projected Fund BalanceTarget Fund Balance
Projected
FY06Forecast FY07Forecast FY08Forecast FY09
Road Operating (Fund 131) Forecast
September 2005
Beginning Fund Balance$3,734,2353,148,119 2,230,119 38,119
Revenues9,067,695 9,014,000 8,061,000 8,024,000
Total Resources12,801,930 12,162,119 10,291,119 8,062,119
Requirements
Operating (current service system)9,073,811 9,256,000 9,555,000 9,853,000
Non-departmental580,000 676,000 698,000 719,000
Total Expenditures9,653,811 9,932,000 10,253,000 10,572,000
Annual Surplus(Deficit)(586,116) (918,000) (2,192,000) (2,548,000)
Projected Fund Balance3,148,119 2,230,119 38,119 (2,509,881)
Target Fund Balance1,608,968 1,655,333 1,708,833 1,762,000
Amount Above/Below Target1,539,151 574,786 (1,670,714) (4,271,881)
City Council Work Session, September 26, 2005
Road Fund Status and Stabilization Strategies
Attachment A, Exhibit 2 - Forecast with $2 million strategy phased in during FY07 & FY08
Projected vs Target Ending Fund Balance
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
FY06FY07FY08FY09FY10FY11
Projected Fund BalanceTarget Fund Balance
Projected
FY06Forecast FY07Forecast FY08Forecast FY09Forecast FY10Forecast FY11
Road Operating (Fund 131) Forecast
September 2005
Beginning Fund Balance$3,734,2353,148,119 3,089,119 3,088,119 2,844,839 2,414,101
Revenues9,067,695 9,014,000 8,080,000 8,092,000 8,189,000 8,285,000
Total Resources12,801,930 12,162,119 11,169,119 11,180,119 11,033,839 10,699,101
Requirements
Operating (current service system)9,073,811 9,256,000 9,555,000 9,853,000 10,181,000 10,545,000
FY07 service reductions (or new revenue)n/a(800,000) (824,000) (848,720) (874,182) (900,407)
FY08 service reductions (or new revenue)n/an/a(1,200,000) (1,236,000) (1,273,080) (1,311,272)
Non-departmental580,000 617,000 550,000 567,000 586,000 608,000
Total Expenditures9,653,811 9,073,000 8,081,000 8,335,280 8,619,738 8,941,321
Annual Surplus(Deficit)(586,116) (59,000) (1,000) (243,280) (430,738) (656,321)
Projected Fund Balance3,148,119 3,089,119 3,088,119 2,844,839 2,414,101 1,757,780
Target Fund Balance1,608,968 1,512,167 1,346,833 1,389,213 1,436,623 1,490,220
Amount Above/Below Target1,539,151 1,576,952 1,741,286 1,455,626 977,478 267,560
ATTACHMENT B
City Council Worksession, September 26, 2005
Road Fund Status and Stabilization Strategies
Attachment B - Additional Detail on Service Implication of the Example Program Reductions
Street Trees Program
($808,000, 9 FTE)
Description of Service Reduction – This reduction essentially represents the complete elimination of the
Street Trees program, which encompasses such activities as street tree removal permits, Urban Forestry
development review, emergency response for tree issues, infill street tree planting; and, hazard tree
inspections and removals.
Service Reduction Implications – Eliminating the remainder of the street tree program would have far
reaching effects, ranging from reduced safety and increased liability, to the City being unable to meet code
and contractual requirements related to tree preservation and removals. Overall, the quality and safety of the
City’s urban forest would be significantly impacted through the elimination of hazard limb and tree pruning
and removals, to a system-wide decline due to likely impacts from development and construction. While
some systems may have the flexibility of being temporarily shut off and restored at a later date, the urban
forest will continue to decline and build a backlog of work that will require significant resources to restore to
a healthy state. The City will be required to respond to tree emergencies that are blocking travel lanes or
threatening life and/or properties.
Residential Street Lighting
($357,000, .5 FTE)
–
Description of Service Reduction This reduction would include turning off street lights along residential
streets, as well as reductions in the ongoing maintenance of street lights, including such activities as
maintaining the poles, fixtures, conduits, changing bulbs, and repairing crash damage.
Service Reduction Implications - By turning off the street lights along residential street system, the streets
would obviously be darker and the opportunity for crime would increase. Streets will be less safe for
pedestrians and cyclists as they will only be illuminated by vehicle headlights. A small cost for removing
hazards within the infrastructure would still exist as the poles and electrical system would deteriorate over
time. Underground facilities will still need to be located when construction activity occurs in the vicinity.
Arterial and Collector Street Lighting
($331,000, .5 FTE)
Description of Service Reduction - This service reduction would include turning off street lights along
arterial and collector systems, as well as reductions in the ongoing maintenance of street lights, including
such activities as maintaining the fixtures, underground conduits, changing bulbs and repairing crash
damage.
Service Reduction Implications – By turning off the street lights along arterial and collector system, the
streets would obviously be darker and the opportunity for crime would increase. Streets will be less safe for
pedestrians and cyclists on these higher speed routes as they will only be illuminated by vehicle headlights.
A small cost for removing hazards within the infrastructure would still exist as the poles and electrical
system would deteriorate over time. Underground facilities will still need to be located when construction
activity occurs in the vicinity.
Street Median Maintenance, Major Arterials
($215,000, 2.5 FTE)
Description of Service Reduction - This reduction would eliminate median maintenance along major
arterials.
Service Reduction Implications – This reduction would result in the abandonment of the landscape
infrastructure along several of the City’s major traffic ways and important entranceways into the City. The
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affected areas would include the median plantings along River and Coburg Roads, Highway 99 and West 11
Avenue and the major landscaped areas along the Ferry Street Bridge corridor and the Chambers Connector.
A total of 17.4 acres of plantings would be abandoned under this option. Removing the existing shrub
plantings, abandoning the irrigation systems and discontinuing regular maintenance in the subject landscaped
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areas will result in these areas evolving from colorful, lush, seasonally dynamic landscaped areas to flatter,
seasonally dry, litter filled, rough grassy areas that will continue to decline.
Street Median Maintenance, Major Collectors and Arterials
($104,000, 1 FTE)
Description of Service Reduction – This reduction would result in elimination of median maintenance along
major collectors and minor arterials streets
Service Reduction Implications - Elimination of the Street Median Maintenance Program along major
collectors and minor arterial streets would result in the “browning out” of 2.7 acres of landscape plantings
along a dozen streets including Barger, Terry, Hilyard and Gilham Streets, Ayers and Gilham Roads and
Amazon Parkway.
Non-regulatory Signs
($78,000, 1 FTE)
Description of Service Reduction – This reduction would result in the elimination of sign fabrication,
installation and maintenance of non-regulatory signs, including street name signs, informational or
directional signs and custom signs.
Service Reduction Implications - Ongoing maintenance of existing non-regulatory signs would be eliminated,
including the replacement of missing street name signs. The majority of signs not required by the Manual on
Uniform Traffic Control Devices are street name signs. Over time, lack of street name sign maintenance and
replacement will result in increased driver confusion when in a unfamiliar neighborhoods and may in rare
cases impact the response time of emergency services.
Special Projects and Studies
($74,000, .5 FTE)
Description of Service Reduction –Engineering staff currently manage many transportation special projects
and studies such as the Central Area Transportation Study, Crest Drive Transportation Study, and the East
University Neighborhood and Agate Street Transportation Study. This reduction would result in the loss of
capacity to manage any special transportation studies that did not come with dedicated funding.
Service Reduction Implications - Under this reduction scenario, the Division would lose all capacity to
conduct special studies unless the studies are specifically funded by external grants or council appropriations.
Street Median Maintenance, Neighborhood Collectors
($42,000, .5 FTE)
Description of Service Reduction – This reduction would entail the elimination of maintenance for medians
along neighborhood collector streets, residential medians and traffic calming planters.
Service Reduction Implications - Elimination of the Street Median Maintenance Program on neighborhood
collector streets, residential medians and traffic calming planters will result in a visible decline in about 1.8
acres of landscape infrastructure. Abandoned areas would include 42 median and traffic circle plantings
along more than a dozen of Eugene’s neighborhood streets including Augusta, Agate, Villard and Patterson
Streets and Bailey Lane.
Neighborhood Transportation Program
($25,000, .5 FTE)
Description of Service Reduction – This reduction would reduce the capacity to conduct field investigations
or technical analysis related to neighborhood traffic issues. It would also significantly reduce funding for
traffic calming
Service Reduction Implications - The neighborhood transportation program will see a reduced level of
service. Staff will still receive requests, but will be limited in the ability to conduct field investigations or
technical analyses. For the development of traffic calming projects all staff time will be charged to the
Professional Services Fund through the establishment of Good Job Numbers. This will reduce the amount of
capital funds available for the construction of traffic calming projects.
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