To: Honorable Mayor and Members of City Council
From: Julie B. Lucido, Public Works Director
Prepared By: Julie B. Lucido, Public Works Director
TITLE:
Title
Expenditure Plan for the Proposed Napa Valley Transportation Improvement Act (Measure U)
LABEL
RECOMMENDED ACTION:
Recommendation
Consider adoption of a resolution approving the Napa Valley Transportation Improvement Act Expenditure Plan, as proposed by the Napa Valley Transportation Authority-Tax Agency to implement the Napa Valley Transportation Improvement Act “Measure U” amending and replacing a transaction and use tax expenditure plan and determining that the actions authorized by this resolution are exempt from CEQA.
Body
DISCUSSION:
Summary
The Napa Valley Transportation Authority-Tax Agency (NVTA-TA) is a local transportation authority with member agencies including Napa County and all incorporated municipalities (cities and town) within the county. NVTA-TA has been developing a potential ballot measure to amend and replace the Napa Countywide Road Maintenance Act, Ordinance No. 2012-01, known as Measure T. This potential ballot measure, referred to as Measure U, would extend the sales tax duration but would not increase the sales tax rate. The NVTA-TA Board has approved the release of the proposed expenditure plan for consideration by each member agency. Upon approval of the expenditure plan by the Napa County Board of Supervisors and the city councils for municipalities representing both a majority of the population of incorporated areas of the county as well as a majority of the member agencies of NVTA-TA, Measure U could be presented to the voters for consideration on November 5, 2024, ballot.
The top objectives of the proposed measure are to modify the tax measure requirements to include expenditures for three regionally significant congestion relief projects and a highway operations/emergency evacuations program, and to allow bond financing of projects with the tax revenue. The proposed Measure is projected to raise $1.2 billion countywide over 30 years. This report includes a summary of the components of the proposed Measure U and issues for consideration.
Background
In November 2012, the voters of Napa County approved a ½-cent sales tax increase known as Measure T, which was implemented on July 1, 2018 with a sunset date of June 30, 2043. Measure T funding is used for paving, maintenance, and reconstruction of streets and transportation infrastructure within the public right-of-way including but not limited to sidewalks, curb and gutters, curb ramps, lighting, traffic signage, striping, and local roadway drainage.
The total countywide revenue distribution under Measure T is based generally on returning revenue to the member agency that generated the revenue and considers miles of roadway to maintain. Per the expenditure plan, the total revenue is distributed in the following manner, with 99% of the funding allocated to the cities/town/county member agencies:
• Napa Valley Transportation Authority (NVTA) Administration - 1%
• City of Napa - 40.35%
• County of Napa - 39.65%
• City of American Canyon - 7.7%
• City of Calistoga - 2.7%
• City of St. Helena - 5.9%
• Town of Yountville - 2.7%
The City of Napa currently receives approximately $10 million annually from Measure T. This funding is used exclusively for the maintenance and improvement of street infrastructure, including complete streets components to support walking, biking, and traffic safety for all users. Some of the projects this funding has supported include segments of Jefferson Street, Trower Avenue, Trancas Street, Freeway Drive, Soscol Avenue, the Westwood Neighborhood, Automated Traffic Management System (ATMS), along with other street improvement projects.
Measure T requires agencies to continue to invest their general fund budget on street maintenance activities at an established minimum level. This is to ensure that the Measure T revenues augment member agency work and the special tax funds are not used to supplant expenditures. Measure T also includes a minimum level of investment countywide on Class I bike facilities utilizing funding obtained from eligible sources other than Measure T. The existing Measure T ordinance specifically disallows the use of funds for the purpose of capacity and congestion relief projects and disallows bond financing through Measure T revenues. An independent tax oversight committee reviews the expenditures to ensure funds are managed in compliance with the ordinance.
Proposed Tax Replacement Measure
On February 21, 2024, the NVTA-TA approved the release of a Sales Tax Replacement Measure Draft Ordinance and Expenditure Plan, for potential inclusion on the November 5, 2024 ballot. NVTA-TA, in coordination with the related NVTA Joint Powers Authority (NVTA), have developed a proposed ordinance and expenditure plan that would replace Measure T, the Countywide Road Maintenance Act, passed in 2012. The new measure would be referred to as Measure U.
NVTA staff is requesting that each member agency approve the expenditure plan, after which it will go back to the NVTA-TA Board for final approval and then would be submitted to the County Board of Supervisors to place on the November ballot. The proposed sales tax replacement measure has been discussed extensively by the NVTA-TA Board of Directors and technical steering committees made up of public works staff members from each member agency. In addition, the Napa Area Manager’s group made up of city/town managers and the county executive have been regularly briefed on the proposed measure.
NVTA supplied the following list of the key points of the proposed sales tax replacement measure:
• No tax increase, the sales tax measure would remain at ½ cent
• The measure would be a 30-year measure, from 2025-2055
• Generate an estimated amount of $1.2 billion in transportation funds
• Jurisdictions have the opportunity to bond, to bring revenues forward to complete long-awaited maintenance projects
• 90% of revenues will be dedicated to fund Local Streets and Roads (LSR) countywide
• The LSR distribution formula will be recalculated in 2025 and updated every five years to account for actual sales tax revenue generation
• No jurisdiction will receive less than 3% of LSR funds
• There will be some flexibility within a jurisdiction’s LSR revenue to use funds on other transportation improvements, including capacity
• Administration costs will be capped at 2%
• The measure requires local jurisdictions to make investments in bike and pedestrian infrastructure, indexed to 7% of measure revenue, but using other eligible fund sources
• To ensure funds are spent locally and responsibly, an Independent Taxpayer Oversight Committee will have oversight of the measure
Proposed Expenditure Plan-The replacement measure would modify the expenditure plan to allow expenditures on specified regional projects managed by NVTA, increase the administration allocation to NVTA-TA, and alter the distribution of revenue to the local agencies. Measure U is anticipated to generate $1.2 billion over 30 years. The sections below discuss the proposed distribution of the revenue. Each 1% of the revenue equates to approximately $12 million over 30 years. The 3 main categories of expenditures are:
• Regional Projects and Associated Bond Debt (approximately 7.3% of total revenue)
• NVTA-TA Administration (2% of the total revenue)
• Local Streets and Roads Maintenance (approximately 90%+ of the total revenue to be allocated to the member agency cities/town/county)
Regional Projects-The proposed expenditure plan would include project costs up to $56 million plus additional debt financing costs for the following projects/program:
• Intersection Improvements at State Route 29, Jameson Canyon/Airport Road, and State Route 12/Kelly Road (SR 29-SR12)
• Operation Improvements on State Route 29 between Napa Junction and American Canyon Road (SR 29-American Canyon)
• Intersection Improvements at State Route 29/Carneros Highway (SR29-SR12/121)
• Highway Operations and Emergency Evacuations (may include highway system adaptive messaging signs and Vine Transit emergency evacuation operations, or other transportation projects related to emergency evacuation routes)
NVTA Administration-The replacement measure would amend the allocation of funding dedicated to administration. The percentage of revenue dedicated to administration would double (from 1% under existing Measure T to 2% proposed under Measure U) and is estimated to generate $25 million for NVTA administration over the 30-year life of Measure U.
Local Streets and Roads-The regional projects listed above, and the administration component would be allocated “off the top” on an annual basis, and the remaining funding would be shared by the member agencies for local streets and roads.
Based on NVTA’s financial modeling, the regional projects ($56 million) with the additional debt financing costs (an additional $35 million to $40 million based on estimates from the NVTA financial model) and the administration allocation ($25 million) are anticipated to require approximately 9.3% of the total revenue generated from the half-cent sales tax. The remaining tax revenue of approximately 90%+ would be allocated to the cities/county/town for street maintenance work.
There is an important distinction in the way the existing Measure T expenditure plan and the proposed Measure U expenditure plan are presented. Measure T reports the allocation percentage for each member agency, including the NVTA administration, based on the total revenue generated. Measure U reports the allocation percentage to the member agencies for the funds remaining after the administration and regional projects are funded first (or “off the top”).
For example, the City of Napa receives 40.35% of the total Measure T funds. The City of Napa is projected to receive 40.2% of the funds allocated to the member agencies (as described below). After the funds are allocated to the regional projects and administration “off-the-top”, the City of Napa’s actual share of the total revenue is estimated to be 36.5%. The NVTA financial modeling projects this will be a reduction in average annual funding to the City of Napa of $1.4 million through 2043, which is the sunset date for Measure T.
Measure T established the distribution of the sales tax revenue based on constant percentages for the life of the ordinance, which were set in 2012. The distribution was largely based on the jurisdictions’ proportions of revenue generation and street miles but there was no mechanism to recalculate or adjust the figures over the 25-year life of Measure T based on modifications in revenue generation or growth patterns within the county.
The updated distribution formula for the member agencies (after the regional projects and administration components are allocated) is based on the proportion of tax revenue generated in each member agency and includes an additional modifier for the County based on their proportion of countywide roadway miles within the unincorporated area. The modifier for the County is to reflect that unincorporated roads act as regional connectors and the County has responsibility for the largest portion of the countywide road miles.
The actual allocations would be calculated in 2025 if the Measure passes, based on updated audited financial data and then updated every five years. The regional projects, the associated debt service costs and administration components would all be allocated first (or “off the top”) and the agencies would proportionally split the remaining revenue.
The member agency cities/town/county will each receive a portion of the Local Streets and Roads (LSR) portion of the proposed Measure U per the expenditure plan and ordinance. Based on current estimates, approximately 90%+ of the total revenue will be dedicated to LSR. In the estimates provided by NVTA based on fiscal year data for 2020/2021, 2021/2022, and 2022/2023, the local member agency split of the portion of the revenue dedicated to LSR is: City of Napa - 40.2%, County of Napa - 38.8%, City of American Canyon - 8.0%, City of Calistoga - 3.0% (based on the ordinance stating no member agency will receive less than 3%), City of St. Helena - 6.6%, and Town of Yountville - 3.4%.
The actual allocation rates for the total revenue will be dependent on factors including actual revenue growth, bond ratings and rates, and project schedules. Based on the NVTA financial model and their current assumptions, the future allocations of the total revenue are estimated below. The existing Measure T allocations are included for comparison.
|
Member Agency |
Existing Measure T |
Proposed Measure U |
|
City of Napa |
40.35% |
36.5% |
|
County of Napa |
39.65% |
35.2% |
|
City of American Canyon |
7.7% |
7.2% |
|
City of Calistoga |
2.7% |
2.7% |
|
City of St. Helena |
5.9% |
6.0% |
|
Town of Yountville |
2.7% |
3.1% |
|
NVTA Administration |
1.0% |
2.0% |
|
NVTA Regional Projects |
N/A |
7.3% |
Maintenance of Effort (MOE)-The proposed Measure U will continue to require member agencies certify that the sales tax revenue is augmenting street work and not supplanting expenditures. The proposed Measure U will require that member agencies certify that general funds are expended in an amount that equals at least 20% of the amount of Measure U funds allocated to a member agency. The MOE requirement will increase at 2% each year.
Bicycle Facility Investments-The proposed Measure U will require investment in bicycle facilities. The type of eligible facilities will include both Class I (separated) and Class IV (“protected” by parking, delineators, or hardscape) bicycle facilities. The obligation will be equal to 7% of the Measure U revenue but must originate from other eligible funds, including specific grant programs. The expenditures are to be reached collectively by all agencies, including NVTA.
Considerations
Addition of Regional Projects-NVTA has worked to develop plans to be able to deliver large regional transportation projects for the Napa communities. Additional local funding is necessary to initiate project planning and to compete for substantial state and federal transportation grant funding. The proposed Measure U ordinance, if passed, would designate Napa County as a “self-help” county by generating local funds that are restricted to specified transportation projects. The “self-help” designation benefits the project efforts by capping the costs charged by Caltrans for oversight and administration and increasing NVTA’s level of competitiveness on grant applications. The total project cost estimates for the regional projects exceed $400 million. The $56 million available as part of Measure U for the regional projects is anticipated to leverage grant funding but is not expected to be sufficient to advance all of the projects.
Bond Financing-The proposed draft Measure U ordinance states that “pay-as-you-go” financing is the preferred method for funding programs and projects, but bond financing may be used if “pay-as-you-go” financing is infeasible due to the scope of the planned expenditures. NVTA plans to utilize bond financing for regional projects, and some of the local member agencies have also expressed a desire to utilize bond financing for street maintenance projects.
If the Measure advances to the ballot and is approved by voters, City staff will analyze bonding opportunities. The financial evaluation will need to determine the extent financing debt can advance the City’s infrastructure improvement plans for the street network and ensure that investments in the near term do not leave the City without future maintenance funding due to long term debt and financing costs. The City of Napa incorporates components for new and improved pedestrian, bicycle, and traffic safety facilities, in addition to the pavement, sidewalk, and drainage maintenance. It is likely that some limited bonding could benefit the City plans for infrastructure improvements. If bonding is pursued, it will be important to ensure that bonds are issued during favorable market conditions to reduce the amount of tax revenue required for debt financing costs.
Funding Availability for Other Priority Transportation Projects-The proposed Measure U ordinance would allow member agencies to expend up to 5% of their funding on other priority transportation projects. Because this funding is derived from a local sales tax measure, the priority project(s) that receive funding would qualify under the “self-help” state regulations. This designation caps the amount of oversight and administration fees Caltrans charges member agency projects on state highways. For the City of Napa, this could specifically reduce project costs for the Five-Way Intersection (at the intersection of Silverado/Coombsville/East/Third). The City is in the preliminary phase of planning, design and environmental review on the project. Allocating a limited amount of Measure U funding would result in reduced project costs for Caltrans charges, which can be substantial. The City would also have the option to complete internal funding swaps to leverage the “self-help” designation while not impacting maintenance funding levels.
Revised Option Approved By NVTA-TA Board After City of Napa Comments-The expenditure plan as presented by NVTA and described within this report was proposed after City staff shared concerns related to significant reductions in funding for local street paving, sidewalk repair, and ADA requirements. The original proposal had a greater impact on the local funding.
If the proposed Measure U is passed, NVTA’s financial model anticipates approximately a $0.5 million reduction to the City of Napa in each of the first few years and up to a $2 million in fiscal year 2042/2043 (when Measure T is set to sunset), with an average annual reduction of $1.4 million. Estimates indicate the proposed expenditure plan would be approximately a 10% reduction in revenue to the City of Napa from the special sales tax.
To put the annual average funding reduction into perspective, two of the paving projects completed last year were each just over $1.4 million. These are the Freeway Drive Project from First Street to Laurel Street and the Jefferson Street Project from Trower to Sierra. These projects included minor concrete repair, repaving the street surface, and traffic safety improvements through modified striping.
Measure T is set to sunset in 2043. The estimated funding to the City of Napa under Measure T from 2025 through the sunset date is $253 million. If approved by two-thirds of voters, Measure U would begin generating funding in 2025, sunset in 2055, and would replace Measure T. Over the 30 years of Measure U, the City of Napa is estimated to receive $465 million.
Next steps-NVTA staff is presenting the proposed tax measure at meetings for the City Councils of Napa, American Canyon, St. Helena, and Calistoga; the Town Council of Yountville; and the Board of Supervisors for Napa County.
The City of Napa City Council must approve the expenditure plan for the Measure to be considered by the NVTA-TA Board for inclusion on the November ballot. If the City of Napa and other required local member agencies approve the expenditure plan, the NVTA-TA Board will consider approval to place the ballot on November 2024 ballot as part of their May Board Meeting. The proposed Measure U is a special sales tax and requires two-thirds voter approval.
FINANCIAL IMPACTS:
As discussed in the sections above, the proposed ordinance and expenditure plan must be approved by voters. If approved, the proposed expenditure plan will modify funding designated for the City of Napa street paving, complete streets, and traffic safety work. The information provided within this report is based on NVTA’s assumptions for tax revenue growth, bond rates, and regional project timing.
A summary of the impacts are:
• The average annual funding levels from the special tax through fiscal year 2043 are estimated to be reduced by approximately $1.4 million (as compared to the existing Measure T expenditure plan).
• After the sunset date of Measure T, from 2043 through 2055, $239 million is the estimated funding for City of Napa local street paving, other maintenance, and complete streets projects through the proposed measure.
• The City of Napa would have the option to obtain bond financing for projects.
• The City will continue to be required to certify funding levels from the City general fund meet the Maintenance of Effort requirements.
• The City will be required to continue to invest in bicycle facility projects, in conjunction with other agencies throughout the county.
• Although not a direct financial impact to the City budget, funding in the amount of $56 million plus debt financing costs would be available to advance regional transportation projects and programs and leverage state and federal grant funding, to be managed through NVTA.
CEQA:
City staff recommends that the City Council determine that the Recommended Action is exempt from CEQA for the reasons set forth in the attached resolution, pursuant to CEQA Guidelines Sections 15301, 15061(b)(3), 15145, and 15378(b)(4).
DOCUMENTS ATTACHED:
ATCH 1 - Resolution approving the proposed Napa Valley Transportation Authority Transportation Improvement Expenditure Plan
ATCH 2 - Draft Ordinance
NOTIFICATION:
None.