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HomeMy WebLinkAboutMINUTES - 11271990 - TC.2 To BOARD OF SUPERVISORS FROM: Transportation Committee ^"t,ra DATE; VasIQ November 19, 1990 County SUBJECT; Report on County's Request to the Transportation Authority for Interst Earnings on "Return-to-Source" Sales Tax Revenue SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND -JUSTIFICATION RECOMMENDATION: Accept report. FINANCIAL IMPACT: None. REASONS FOR RECOMMENDATIONS/BACKGROUND: On August 28, 1990, the Board of Supervisors passed Resolution 90/571 requesting interest earned on the Return-to-Source revenue allocated to local jurisidctions participating in the Growth Management Program. on October 23, 1990, the Transportation Committee reported to the Board .that the CCTA's Administrative Committee considered the County' s request on. October 4. CCTA staff recommended to deny the County's request, and hold any interest earnings for project delivery and/or enhanced planning efforts. The Administrative Committee asked staff to rework the recommendation and bring it before the Administrative Committee in November.. On November 14, the Administrative Committee considered a revised CCTA staff recommendation Under the staff proposal, annual allocations for the July-to-June fiscal year would be made availalbe to the local jurisdictions in April, instead of July. The CCTA would accrue interest on these revenues from July to March, but would be advancing revenues for April, May and June. The CCTA staff report is attached as Exhibit A. The Administrative Committee- approved their staff's recommendation. The recommendation will be considered by the CCTA on December 5. I RIS:SLG: i.nterest.bo. ' arig.dept.CDD Exhibit A: CCTA Staff report CONTINUED ON ATTACHMENT: YES SIGNATURE: h RECOMMENDATION OF COUNTY ATOR RECOMMENDATION 6F BOgR4 C MMyy�m APPROVE /�J/I? // I. Schroder Tom Torlakson SIGNATURE S : ACTION OF BOARD ON November 27 1990 APPROVED AS RECOMMENDED X OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE X UNANIMOUS (ABSENT OAND CORRECT COPY OF AN ACTION TAKEN AYES: NOES. AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. County Administrator CC: Community Development ATTESTED PHIL BATCHELOR. CLERK OF THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR M382/7-83 ,DEPUTY EXHIBIT A CCTA ADMINISTRATIVE COMMITTEE November 8, 1990 SUBJECT: POLICY RELATIVE TO THE PROPOSAL TO ACCRUE AND ALLOCATE°INTEREST RELATIVE TO THE 18 PERCENT LOCAL STREET IMPROVEMENTS AND MAINTENANCE FUNDS RECOMMENDATION: Staff recommends that the Authority take the following actions with regard to the proposal to accrue and allocate interest on the 18 percent local jurisdiction funds: 1. Establish a policy that specifies when the 18 percent funds are due and payable to each local jurisdiction, based on submission of a satisfactory statement of compliance (Option 3 below is recommended by staff); 2. Establish a policy that no interest will be earned on funds held by the Authorityrp for to their disbursement under (1), above; but that interest will be accumulated on funds held more than one month beyond the approved payment schedule, when delays in payment are at the discretion of the Authority; and 3.- Apply the policy for the current and future fiscal years, but approve no interest payments for previous allocations already .made. FISCAL IMPLICATIONS: Compared to an allocation at the end of the fiscal year, if an 18 percent pro rata share of monthly revenues were assumed by the Authority to be earning interest for local street and maintenance improvements, the interest earnings and additional cost to the Authority would be approximately $292,000 for the 1989-90 fiscal year. Under Option 2, the Authority's cost would be approximately $161,000 annually, and under Option 3, approximately $142,000. Costs would grow annually as Authority revenues grow. BACKGROUND: Both the County and the City of Concord have requested that the Authority consider allocating interest potentially attributable to the receipt of eighteen percent funds to the local jurisdictions. At its May 3, 1989 meeting, the Authority indicated that it planned to withhold 18 percent funds for up to three years, pending satisfaction of Growth Management Program (GMP) requirements. At that meeting, also, the Authority indicated it would not allocate any interest earned on funds retained.. Fortunately; significant progress made in defining the Growth Management Program, in large measure due to the contributions of time and effort by- local staff, and the local commitments to comply with the program, made through RKM: ADMIN: INTEREST.3 Page 1 CCTA ADMINISTRATIVE COMMITTEE November 8, 1990 resolutions of intent and other mechanisms, allowed the Authority to release first year monies. The issues surrounding interest earnings on the 18 percent funds are truly a matter of policy and interpretation. If it is assumed that the funds accumulate on a pro rata basis monthly throughout the year, then local jurisdictions could make a strong case .for the interest earnings being allocated to them. In programs without a Growth Management Program component, local jurisdiction funds are typically disbursed each month by the Authority on a formula basis. However, our program is different. The Ordinance indicates that funds will be allocated based .on submission of an annual compliance checklist, .which implies allocations once a year following certification of compliance with the Growth Management Program. This allows latitude for the Authority to treat the allocations as a one-time payment each year, rather than as a pro rata accumulation during the course of the' full year, if such a policy direction were determined to be appropriate. County Concerns and Regional Planning Issues The County has indicated that circumstances have changed since last year _because the Authority is expecting local agencies to fund the cost of providing committee staff to the Regional Transportation Planning Committees (RTPCs) .' The Authority's Regional Planning Funds are limited, necessitating that approach. Sales tax funds for future Action Plan updates are also limited because of the many demands on Regional Planning funds. Furthermore, the Authority has recently accepted responsibility as the Congestion Management Agency for Contra. Costa, and no funding source has been explicitly identified for conducting that program. However, to date the. Authority has been quite generous in funding locally based planning efforts, and we, are attempting to minimize or avoid charges to local jurisdictions for performing the CMP Agency (CMA) function, even though no State funds have been set aside explicitly for those purposes. While we hope that we will have sufficient budget capacity for this, long term funding requirements for planning should be clearer in a year. To date, the Authority has committed up to. $500,000 per region for transportation computer modelling development and Action Plan preparation, a total of approximately $2 million, without asking for local jurisdiction financial contributions to these efforts. Consequently, staff does not believe that the County's arguments are sufficient by themselves to justify the allocation of additional funds to local jurisdictions. Alternatives for Consideration However, there are two primary issues which need to be considered by the Authority: RKM: ADMIN: INTEREST.3 Page 2 CCTA ADMINISTRATIVE COMMITTEE November 8, 1990 1. Timing of Payment. Determine when the payment or payments of 18 percent funds should be made to local jurisdictions; and 2) Interest Earnings. Determine whether the Authority should consider the funds as a prorata share of monthly revenue, and accrue interest accordingly, or. take a policy position that the funds are only 18 percent of annual revenues, payable yearly, without accruing interest. Timing of Payment. The Authority needs to determine when it will make payment(s) of the 18 percent funds to local jurisdiction's. The Measure clearly requires a "finding of compliance" with the Growth Management Program before funds are allocated. However, it would be possible to make such findings at a point in time other than the end of the fiscal year. Option 1. For example, findings and either initial or complete allocations could be made in January. In theory, payment in January for a full fiscal year's receipts would be approximately revenue neutral regarding interest earnings compared with monthly disbursements. However, it would reduce the Authority's cash flow for projects during the second half of the fiscal year by disbursing 18 percent funds in advance of revenues received. Option 2. Alternatively, payment of one-half the amount due for the fiscal year could be made in January, following a finding of compliance, with payments of one-quarter of the amount following approximately April 1 and July 1. Compared with monthly disbursements, the Authority would accrue' some interest earnings, but these would total approximately $131.,000 compared with the $292,000 "base case" for the 1989-90 reference year. Option 3. As a third alternative, full disbursement following a finding of compliance could be made on April 1 of each year. Compared to monthly disbursements, net interest of approximately $150,000 would accrue to the Authority. Other variations. could also be developed. In_ addition, the existing system of making allocations at the end.of the fiscal year could be retained. In any case, a closing payment reconciling actual revenues received with projected revenues would probably be desirable in July. There are two major benefits to disbursing funds prior to the end of the fiscal year. First, compared to an end of year disbursement, local jurisdictions would have an opportunity to put the funds to work sooner and/or earn some interest on them. Second, and perhaps more importantly, significant disbursements in January and/or April would put cash in hand for local jurisdiction use prior to the prime construction season of spring - summer. It would also provide cash during the fiscal year which local jurisdictions could use to pay for planning and engineering. in that same budget cycle. Accordingly, staff recommends that the Authority give serious consideration to one of these alternatives. From a process standpoint, making RKM: ADMIN: INTEREST.3 Page 3 CCTA ADMINISTRATIVE COMMITTEE November 8, 1990 findings of consistency in the January to March time frame probably would work most effectively. Writing two checks (including a reconciliation check) rather than three would. also be administratively easier for staff of the Authority. These considerations suggest a full disbursement in April as an appropriate alternative. However, the Authority may �wish to give some consideration to the January-Ap.ril-July disbursement approach as well . Accrual of Interest Earnings. The Measure specifically states that "eighteen percent of the annual net retail transactions and use tax revenue shall be distributed" (p. 8 of the Expenditure Plan) to the local jurisdictions. In fact, the Authority has adopted the approach of allocating a full , rather than net, eighteen percent, without deducting administrative costs. The only . mention of interest earnings -on the funds mentioned in the Plan or Ordinance states that local jurisdictions receiving the funds shall place them in a separate interest bearing account, and that interest earned on those funds should be spent for the purposes of this Ordinance or returned to the Authority (Ordinance, p. 20, Section 14) . From an overall program standpoint, the. Authority is not accruing interest received on funds held by it to different programs and purposes. Rather, all interest being collected is envisioned to be used for the purposes of the Measure. Staff recommends that the Authority not restrict or allocate a portion of interest earnings for any specific program, but rather use interest earnings as it deems appropriate within the context of the overall program. Staff does believe that one exception to this should be made. In instances ,where the Authority holds. 18 percent funds at its discretion more than one month beyond the agreed upon disbursement time frame, it would appear reasonable to accrue interest on such funds. For example, if the Authority could not process an application because it sought additional information, was reviewing an application and was not ready to consider it, delayed the definition of compliance, or found a jurisdiction out of compliance and asked the jurisdiction to take additional steps to come into compliance, then interest could be accrued on the specific funds held from the point of compliance determination forward. Staff does not believe that any interest should be allocated for prior year allocations already given, but that the above recommended approach be adopted for the current and future years. RKM: ADMIN: INTEREST.3 Page 4