Loading...
HomeMy WebLinkAboutItem B: Comprehensive Transportation Funding Solutions and a Street Utility Fee ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Work Session: Comprehensive Transportation Funding Solutions and a Street Utility Fee Meeting Date: July 15, 2009 Agenda Item: B Department: Public Works Staff Contact: Kurt Corey www.eugene-or.gov Contact Telephone Number: 682-8421 ISSUE STATEMENT The purpose of this work session is to provide the council with an opportunity to discuss the concept of a street utility fee as one potential component of a comprehensive, locally-controlled funding package to support operations, maintenance, preservation and reconstruction of Eugene’s transportation system. The council is being asked to provide direction on the questions of whether or not to pursue further development of a street utility fee at this time, and if so, under what basic fee design assumptions that effort would move forward. BACKGROUND Previous Council Action and History In December 2002, the council adopted a trip-generation-based street utility fee. Before it could be fully implemented, the council repealed the ordinance in September 2003. In May 2007, the Council Committee on Transportation Funding recommended a street utility fee based on parking spaces as one component in a package of transportation funding solutions. In November 2007, the council was presented with an update on the efforts to develop a parking-based street utility fee. Since 2007, staff, council and the community have made progress on a number of transportation funding efforts, including the following: ? In November 2007, voters rejected a proposed three-cent increase in the local gas tax. ? In January 2008, the council approved a three-year extension to the two-cent portion of the local gas tax. ? In spring 2008, the Eugene Budget Committee recommended and the council approved a two-time, $1.0 million annual allocation of resources for enhanced street repair services in FY09 and FY10. ? In November 2008, voters approved a five-year, $35.9 million street repair bond measure. ? In April 2009, the council endorsed the use of $1.4 million in FY10 local gas tax revenue to fund an FY10 projected budget deficit of $2.8 million in street operations and maintenance services. ? In April 2009, the council approved the use of $500,000 in FY10 stormwater and wastewater funds to help address the projected budget deficit in street operations and maintenance services for FY10. ? Also in April 2009, the council adopted an ordinance directing the City Manager to consider as one of the factors in setting future wastewater and stormwater user fees the value of the use and occupancy of the City’s right-of-way by those local systems. Z:\CMO\2009 Council Agendas\M090715\S090715B.doc ? In June 2009, the council considered but voted not to adopt a surcharge on solid waste fee collections to generate resources for street operations and maintenance services. Financial Considerations Fiscal Year 2009-2010 With recent council actions to identify short-term resources as a “stop-gap funding solution” for FY10, the council was able to adopt a balanced annual budget for the FY10 Road Operations Fund, although $900,000 of the enhanced pothole repair budget had to be tapped to accomplish this, and the projected fund balance at the end of FY10 is far lower than the targeted two-months’ operating expenditures. The FY10 pavement preservation capital program will receive the remaining estimated $1.4 million revenue from the local fuels tax, along with $6.5 million from the street repair bond, and $3.0 million in one-time federal stimulus funding for pavement preservation projects. However, the City still lacks adequate ongoing funding for major street repair projects, and the backlog of needed street repairs has grown to over $170 million. The Council Committee on Transportation Funding Solution recommended an annual revenue target of $7.5-$9.0 million to fully fund the annual overlay program and another $9.0- $11.0 million per year to begin to make significant progress on the backlog of needed street reconstruction projects. Fiscal Year 2010-2011 Prior to the passage of the state transportation bill, the annual deficit for street operation and maintenance services in the Road Fund was projected to exceed $3.0 million in FY11, growing to over $4.0 million by FY13. However, with the new state transportation bill, the City could eventually expect to receive $2.0- $3.0 million in additional state highway funding each year. Together with the ability to charge right-of- way use fees on City utilities, Eugene may, for the first time in many years, have the ability to stabilize funding for street operations services such as street lighting and signals, street signage and striping, and pothole patching and crack sealing. However, the City still lacks adequate funding for major street repair projects, and the backlog of needed street repairs has grown to over $170 million. While the five-year street repair bond approved by Eugene voters last fall will fund 32 projects that will repair an estimated 70 lane-miles of streets and three miles of off-street bike and pedestrian paths, the City still has not resolved its long-term street repair funding problem. Development and implementation of a street utility fee could be one more component in a package strategy endorsed by the council to ensure a stable, locally-controlled revenue stream to allow the City to continue to make progress on that $170 million backlog of needed street repairs. The next sections outline the main design elements and implementation challenges for a street utility fee in Eugene and also suggest next possible steps, should the council decide today to move forward with development of this fee concept. Design Options The two principal high-level design options which the council has explored over the past several years are trip-generation basisparking-unit basis the and the . In December 2002, the council adopted a trip- generation based street utility fee. A property which generates a relatively high share of trips would pay a higher fee than a property which generates a relatively low share of trips. In September 2003, the council voted to repeal the ordinance adopting that fee in the face of opposition by both the Lane County Commissioners and the Eugene business community. Z:\CMO\2009 Council Agendas\M090715\S090715B.doc In November 2007, the council held a work session on two potential transportation fee concepts, one of which was a parking-space-based street utility fee. The underlying premise of this fee is that a property with a relatively large number of parking spaces is associated with a higher use and benefit of the transportation system and would pay a relatively higher street utility fee for the upkeep and repair of that system. Both designs would require the compilation of total-system units (total trips, or total parking units), and the development of a rational basis for assigning each property a fair share of units. Unlike some Oregon cities which have implemented street maintenance fees, Eugene has no business licensing or business registry requirement, so it lacks an existing database or registry of Eugene businesses based on commercial category. Attachment A is a November 2007 memo which outlines some design considerations related to a parking-based street utility fee. Administrative Efficiency and Billing Issues The May 2007 Council Subcommittee report identified key criteria with which to evaluate revenue alternatives, two of which relate to administrative efficiency: ? “Efficiency and Cost-Effectiveness: The revenue sources included in the funding strategy should have low to moderate costs for administration, relative to the total revenue generated. ? Administrative Effort: The revenue sources included in the funding strategy should be practical to administer. There should be practical sources of tax-related or fee-related data, and the implementation and ongoing program management should not be overly complex.” New transportation utility fees would require an administrative infrastructure similar to that used for calculating and billing City stormwater and wastewater user fees. In order to meet the “efficiency” criteria, the City would administer the program in-house and optimally would contract with EWEB for billing and collections services, as initial analysis has concluded that developing a stand-alone City street fee billing and collection system would be cost prohibitive. The overall cost of program management, billing and collection would depend partly on the complexity of rate structures in the fee design. While EWEB is required under the City Charter to bill and collect for sewer fees, EWEB is not obligated to collect City street utility fees. Staff from the City and EWEB have had preliminary discussions about the concept of expanding the existing EWEB-City billing agreement to include collection for a new City street utility fee, but to-date the board has not indicated its support for such an agreement. The lack of an available, cost-effective billing and collection mechanism for a Eugene street fee presents a significant constraint to moving forward with the implementation of such a fee. In fact, staff research has revealed that, of the 22 Oregon cities which have adopted some sort of street maintenance fee, 20 of them have done so with the benefit of a City-owned and controlled municipal utility billing infrastructure. One city which lacked the billing infrastructure had been able to negotiate a billing agreement with the local water district, and one small city never returned staff’s calls. In summary, Eugene faces a unique but significant challenge among Oregon cities in that Eugene’s municipal utility billing system is within the control of a separately-elected board with a separate management structure, and the City cannot compel the board to bill this potential new City fee. Z:\CMO\2009 Council Agendas\M090715\S090715B.doc If the council wishes to pursue a street utility fee, it will be critical for the City Council members to initiate outreach efforts with their counterparts on the EWEB Board to begin discussions as to what it would take to secure board endorsement for the use of EWEB’s billing infrastructure for a City street utility fee. Timing The “stop-gap” funding solutions for FY10 fall far short of a long-range, comprehensive transportation funding solution for Eugene. If it is the desire of the council to continue with the development of a street utility fee as part of the long-term transportation funding solution, it is essential that the council commit to the time and effort associated with developing this alternative, while also acknowledging that it will not be a universally acceptable solution. RELATED COUNCIL GOALS AND POLICIES The goal of the council Transportation Initiative is to “Develop mechanisms to adequately fund Eugene’s transportation system for cars, trucks, bikes and pedestrians, including maintenance and preservation and capital reconstruction.” COUNCIL OPTIONS The City Manager is seeking clear direction from the council as to whether or not to move forward with development efforts for a Eugene street utility fee. The council has two basic options: Option 1: Direct the City Manager to continue work on development of a street utility fee, including returning with a proposed budget for additional staffing and program needs for this effort. ?Provide direction to the City Manager as to which metric should be used as the basis for calculating and billing this proposed fee (trip-generation, parking spaces, other). ?Provide direction to the City Manager and staff to work with EWEB leadership to coordinate a joint elected officials meeting where the primary topic of discussion would be the potential for use of EWEB’s billing infrastructure for a City street utility fee. Option 2: Direct the City Manager to cease efforts to develop a street utility fee until instructed otherwise by the council. ?Further direct the manager to develop an alternative five-six year transportation funding strategy, relying on known and projected resources for transportation funding from all sources. By fall, the City Manager would inform the council of this mid-range funding strategy and advise them regarding his budget strategy for developing the FY11 transportation services budget within existing sources of revenue. CITY MANAGER’S RECOMMENDATION The City Manager recommends that the City Council proceed with Option 1. SUGGESTED MOTIONS ?Move to direct the City Manager to continue work on development of a street utility fee, including returning with a proposed budget for additional staffing and program needs for this effort. Z:\CMO\2009 Council Agendas\M090715\S090715B.doc ?Move to direct the City Manager to develop the street utility fee using {trip-generation data, parking spaces, other} as the metric for measuring relative use of the system and allocating the costs between user categories. ?Move to direct the City Manager to work with EWEB leadership to coordinate a joint elected officials meeting where the topic of discussion would be the potential for use of EWEB’s billing infrastructure for a City street utility fee. ATTACHMENTS A. Memo to Mayor/Council Re: Street Utility Fee Alternatives, Dated November 5, 2007 FOR MORE INFORMATION Staff Contact: Kurt Corey Telephone: 682-8421 Staff E-Mail: kurt.a.corey@ci.eugene.or.us Z:\CMO\2009 Council Agendas\M090715\S090715B.doc ATTACHMENT A Public Works Administration City of Eugene MEMORANDUMMEMORANDUM 858 Pearl Street Eugene, Oregon 97401 (541) 682-8421 (541) 682-6826 FAX Date: November 15, 2007 To: Mayor Piercy and City Council From: Kurt Corey, 682-5241 Public Works Director Subject: Street Utility Fee Alternatives This memorandum presents information to the City Council related to methodological options for determining the fee structure and rates for a proposed street utility fee. The fee as proposed by the Council Subcommittee on Transportation Funding Solutions (subcommittee) was generally defined as using parking as a measure of system usage, with a number implementation details to receive further definition and refinement through development of an implementing ordinance and methodology. A range of alternatives exists for development of the fee and are presented in this memorandum. Staff seeks further council direction on these alternatives prior to developing a draft ordinance implementing the fee. Background The intent of a street utility fee is to provide a utility based funding mechanism to pay for benefits to City residents and businesses provided by the City’s transportation system. The fee would be established by ordinance to be paid by all customers having possession or control of premises in the city with the purpose of providing funding for operation, maintenance and preservation of the transportation system. The council has expressed support in the past for a utility-type fee as a part of a package of transportation funding mechanisms. Previous proposals for a similar fee relied on vehicle trip generation estimates to measure customers’ usage of the transportation system. Through the work of the subcommittee, the potential for use of parking as a basis for a street utility fee was identified and emerged as a favored option. Key factors for favoring a parking-based street utility fee included: ?Parking spaces as a measure of transportation system usage has a rational basis in that vehicles must use the system to get to and from parking spaces; in general, the greater the number of parking spaces at a site, the greater potential for the number of vehicles using the transportation system to come and go from the site. A,SUF P17 ATTACHMENT TREET TILITY EE AGE OF ?The amount of parking at a site can be directly observed and measured and is probably easier to understand as a basis for the fee than are average trip generation rates. ?Amount of parking provides a relatively simple basis for the fee. Once an estimate or inventory of parking units in the community is established, a parking-based fee could be relatively simple and less costly to administer and maintain than a trip generation methodology. ?A parking-based fee may provide some incentive for development of fewer parking spaces and more efficient use of developable land. ?A parking-based fee can be somewhat flexible; a more detailed fee methodology can be developed, reviewed by council and refined to address specific needs and concerns. Key Consideration for Fee Structure and Rates Through the work of the subcommittee and subsequent review by staff, several key considerations for the fee structure and rates have been identified. These factors and assumption will need to be further developed and refined to enable drafting of an implementing ordinance and methodology and include the following: ?Inclusion or exclusion of on-street parking; ?Treatment of sites with limited or no on-site parking relying on public parking structures and other shared parking for a significant portion of parking needs; ?Methods of measuring or estimating parking quantity at customer’s sites; ?Treatment of areas available or used for parking without delineated (marked) spaces; ?Establishing rate structure for residential customers – assumptions about the number of parking spaces associated with residential customer sites; ?Develop criteria and allowances for adjustments, credits and reductions; and, ?Determine final revenue requirements, uses and limitations on funds derived from fee; Each key factor is further discussed below. Parking Types to Include in the Basis for the Fee (on-street & shared parking) Discussion of the fee structure with the subcommittee suggested that off-street parking only should be included in the basis for the fee. This is appropriate from the perspective that the amount and availability of on-street parking in not directly controlled by customers of the utility. Staff recommends that on-street parking be excluded from parking areas allocated to customers by the street utility fee. Another factor to consider is treatment of shared parking, both commercially- and publicly-owned surface and structure parking. Within parking-exempt areas such as Downtown and West University areas, a majority of customers rely on shared parking to account for their site’s vehicular parking needs. Allocating this portion of parking to the appropriate customers requires additional consideration beyond measured on-site parking areas or delineated spaces. Charging a public or private entity providing parking services not associated with an onsite use would not be consistent with the principle that parking is used as the measure of transportation system usage. A shared parking site is not a destination itself and as such not the generator of the use of the system, rather other customer’s sites are the destination generating parking demand and usage of the system. Not accounting for these parking areas and the associated customers’ use of the system would shift costs to other customers or result in significant under-collection of the target revenues. A,SUF P27 ATTACHMENT TREET TILITY EE AGE OF Staff recommends a fee structure providing for inclusion in the utility of shared parking within parking exempt areas, with all available parking in these areas allocated proportionately to customer’s sites. Non-Residential Rate Structure, Methods for Measuring Parking In a street utility which relies on parking as the measurement unit for gauging usage of the transportation system, establishing parking units and methods for measuring customers parking are critical steps. These factors are interdependent with the resulting rate and fee structure; decisions about measurement methods can influence the fee structure and vice versa. These factors are most relevant to recommendations on options for non-residential rate structure, as residential parking is generally easier to estimate and average. Measurement of parking spaces and/or capacity at sites can be complicated and potentially subjective. This is because many sites contain parking areas without formally delineated (marked or signed) parking spaces. Determining whether an area without delineated spaces is both available and used for parking, or not considered available or used for parking can be difficult and open to contention. Conversely, counting only delineated spaces is directly observable and objective, but may significantly under-account for actual available parking at a site. As such, a method for estimating available parking based on more readily measured site characteristics is often employed. Estimating methods considered by staff include using: ?Minimum code-required number of spaces per building floor area ?Sampled ratio of parking spaces to gross building floor area ?Sampled ratio of parking spaces to total impervious area ?Sampled ratio of parking spaces to impervious area available for parking Each of these methods has advantages and disadvantages which require further evaluation to determine a preferred method having an appropriate balance of equity and administrative feasibility. A potential disadvantage in terms of complexity for any estimating method is inclusion of factors accounting for the variability of the ratio of parking to measurement units by land use type. Distinguishing parking density by land use may improve equity of the rates but introduces additional complexity and administrative costs since land use for each customer must be established and tracked over time. A final factor to consider in selecting a measurement method is the desire to allow for reduction in the fee related to reductions in the amount of land area used for parking. Staff recommends preparing a draft ordinance allowing administrative flexibility as to the methods of measuring or estimating the amount of parking at customer sites. Residential Rate Structure As with non-residential sites, measuring parking at individual residential sites could become complicated and costly. As such, the rate and fee structures for residential customers should utilize an estimated average number of parking units per dwelling unit. Options range from a single fee charged to all residential units across all dwelling types to rates which attempt to account for complex variability in the amount of parking and use of the system per dwelling unit based on housing or site characteristics. Several challenges with the latter approach include availability of data to support distinctions, increased complexity in billing, and potentially excessive administrative A,SUF P37 ATTACHMENT TREET TILITY EE AGE OF costs. A mid-range approach would be to vary estimated parking spaces within broad residential categories such as single-family houses and multi-family dwelling units. Staff recommends further developing the fee structure assuming an average number of parking spaces associated with residential customer sites and varying the assumed number based on broad residential categories, e.g. single-family and multi-family housing. Adjustments, Credits and Reductions In addition to specifying minimum distinctions between categories of residential and non-residential uses, the rates may include a variety of factors to adjust or reduce the fee for categories of customers. The basis for providing adjustments and credits is to recognize customers’ achievements to reduce usage of the transportation system. Rate methodology options range from providing no adjustments or reductions to establishing administrative programs providing complex and individualized adjustments. Credits may provide additional equity to the fee and provide a potential incentive for customers to reduce demand on the system. However, complex credit and adjustment provisions may provide marginal benefit to customers while significantly increasing administrative costs. Conceptually, two forms of adjustments may be considered: direct reductions resulting from a lower number of measurement (parking) units at a customer’s site; and, other administrative adjustments for demonstrated reduction in use of the transportation system. Depending on the unit of measure for parking spaces, an inherent reduction may be allowed based on reducing number of parking units at a site. For example, if size of available parking area were the unit of measure, reduction in areas developed or used for parking could result in a fee reduction while potentially providing an incentive for reducing the amount of land consumed for parking purposes. Other administrative reductions allow for recognition of reduced usage or demand on the transportation system. For example, in implementing the rate methodology, reductions in fees could be allowed for customers locating in nodal development areas or for businesses implementing transportation demand management strategies. Staff recommends preparing a draft ordinance allowing administrative flexibility for incorporating adjustments, credits and reductions to fees associated with customer’s reduction in transportation system usage. Revenue Requirements, Uses of Fee Revenues The subcommittee recommended a net annual revenue target of approximately $6 million with $150,000 of the revenue generated to be earmarked for neighborhood traffic calming projects. This revenue target was estimated to result in an average household fee of $4.50 to $5 per month. Upon considering the subcommittee recommendations, council determined not to pursue one of the package components, the solid waste collection surcharge, and shifted half of the revenue target for that component to the street utility fee, resulting in a net revenue target of $6.5 million for the street utility fee. A,SUF P47 ATTACHMENT TREET TILITY EE AGE OF While potential uses of street utility fee revenues are broad, the subcommittee identified priorities for use of revenues to include: 1)Operating and maintaining the existing transportation system, including on-street and off- street bike and pedestrian pathways; 2)Fully funding the annual pavement preservation overlay program, to avoid more streets falling into the more expensive reconstruction project category; 3)Beginning to buy down the backlog of reconstruction street projects at a reasonable level and time frame; 4)Acknowledging the importance of alternative modes of transportation by including funding for a reasonable amount of enhancements and extensions to bike and pedestrian facilities, including preserving and expanding the sidewalk system and expanding the local on-and off- street bicycle system; and 5)Respond to priority funding needs related to other components of the transportation system, specifically neighborhood traffic calming projects (total annual funding of $150,000 recommended from street utility fee). Staff recommends using these priorities as guidance in developing draft ordinance provisions related to use of funds being dedicated to the operation, maintenance, preservation and repair of the transportation system. Council may direct a different net annual revenue target or use of revenues depending on the outcome of efforts to implement other funding package elements. Staff has evaluated estimated example rates and fees contained in this memorandum based on the previous council-specified revenue target. Billing and Collections As reflected in discussion of other fee implementation factors, a street utility fee based on parking has the potential for relative simplicity or significant complexity and administrative costs. Administrative and contractual billing costs have not yet been determined but will depend significantly on the complexity of the fee structure and its billing requirements. When establishing new fees, a key consideration is that administrative and billing costs tend to increase in proportion to complexity of rate and fee structures. At a minimum, a new street utility fee will require an administrative infrastructure similar to that currently used for stormwater and wastewater user fees. Under this configuration City staff would provide customer service, account management, and staff support for the annual fee setting process and the city would contract for billing and collections, as is done now with EWEB. A multi-layered, variable fee, especially one which requires a new unit of measurement, would require more resources (City and EWEB) to develop and implement than a simpler fee. The trade off between complexity needed to achieve policy objectives and the simplicity needed to minimize administrative costs is a common element in city fee setting. Assuming the Board remains supportive, we will continue to collaborate with EWEB staff to find efficient and effective ways to implement council policy direction. If, during the development of the administrative infrastructure, we identify significant barriers to implementing a specific policy A,SUF P57 ATTACHMENT TREET TILITY EE AGE OF direction, staff will bring information back to council, in order to weigh the policy value against the administrative cost. In this early stage of fee development, precise trade offs are unknown; however, in general, some policy objectives increase the need for complexity and likely increase administrative expense. For example: ?A fee that requires a new unit of measurement in the billing system (e.g. building square footage as an estimating unit for parking spaces, along with land use types by customer) would require more resources to implement than one which is tied to a current unit (e.g. impervious area associated with existing stormwater accounts); ?A fee that requires new customer categories would require more resources to implement than one which corresponds to a current category; ?A fee that allows for variability based on changeable customer characteristics or behaviors requires more resources than one which remains fixed for a site across time. Staff recommends implementing a fee structure that best meets policy objectives while achieving a balance with administrative efficiency. Example Rate Structure and Fees While a rate and fee structure incorporating requisite data and all applicable rate factors and assumptions has not yet been established, staff has prepared example rates and generalized fees using a rate model based on broad assumptions and the best currently-available data. Based on this preliminary rate model, using a target revenue of $6.5 million and estimating approximately 240,000 parking spaces being billed within the utility results in a monthly rate of about $2.25 per parking unit (space). Table A provides an example of a simple rate structure’s customer categories and rate per unit of size for each category. This is purely an example to provide context for the various options and factors considered in this memorandum. Table A – Example Draft Customer Categories and Monthly Fee per Unit of Measure Category Description Unit of Estimated Fee per Measure Parking Unit of per Unit Measure of Measure Residential Single-family home on an individual lot is one Dwelling 2.0 $4.50 Customersdwelling unit. Duplexes, triplexes and apartments Unit (assuming a single treated as multiple dwelling units. category) Non-residential Example based on sampled ratio of parking spaces 1000 Sq. 2.1 $4.75 Customersper 1000 square feet of available parking area Ft. (assuming a single across a variety of non-residential customer types. Available category) Parking Area A,SUF P67 ATTACHMENT TREET TILITY EE AGE OF Next Steps The major work elements for implementation of the street utility fee include: ?Prepare draft ordinance reflecting proposed rates and fee structure for council review; ?Refine rates, factors and adjustments to include in the proposed rates; ?Prepare proposed ordinance and hold public hearing; ?Work with EWEB to identify billing needs and options; ?Gather and evaluate data necessary to implement the rate methodology and establish fee amounts for all customers; ?Implement billing systems and modifications to enable billing; ?Conduct additional public outreach to customers and customer groups; ?Give notice of proposed fee, prepare methodology and administrative order implementing the fee. Summary Utility fee rate methodologies in general and transportation system fees in particular by their nature rely on assumptions to allocate costs and estimate usage in both an equitable and administratively feasible manner. A number of methodological assumptions and approaches are technically and legally feasible. Along with equity considerations, consistency, complexity and administrative cost are factors to consider when selecting methodological approach and assumptions. Staff has prepared a range of approaches and related sets of assumptions for consideration in preparing a draft ordinance implementing a street utility fee. Staff seeks council direction on preferred approach and assumptions. If you have questions regarding the information in this memo, don’t hesitate to contact me at 682-8421 or kurt.a.corey@ci.eugene.or.us. A,SUF P77 ATTACHMENT TREET TILITY EE AGE OF