By Dan Carson
For the first time in decades, there is a growing bipartisan consensus in the California Legislature to significantly bolster funding for state and local transportation needs. Depending upon which combination of measures are ultimately approved in an ongoing legislative special session, the outcome could be as much as $3 million per year in additional state funding for the City of Davis for its program to maintain city streets and bike paths.
Under one scenario reportedly now under negotiation among state legislative leaders and the Governor’s office, a transportation package reaching as much as $6 billion annually – split evenly between the state and localities — could be approved by the Legislature this fall. State constitutional changes to lock up some of the new funding for transportation purposes could be sent to statewide voters for ratification sometime next year.
Given its ongoing shortfall of funding to maintain and fix parks and civic buildings, the additional state help is unlikely to end current discussions about a June 2016 local utility users tax measure aimed at improving City of Davis infrastructure.
For one thing, the amount of additional state aid coming to Davis could well turn out to be less than $3 million annually. For another, the exact amount of additional city funding that the city will need to support its road and bike path rehabilitation program is still in flux. City staff is still working on an update of its 20-year cost projections for the pavement program. Prior city projections were that $7 million annually would be needed for road and bike path maintenance, but those estimates could be reduced if more reasonable inflation assumptions are adopted to reflect future paving costs.
In any event, an injection of $3 million annually in state money within a few years would make a huge difference in the situation. The city currently has committed just under $4 million in General Fund and special funds on an ongoing basis to its pavement program. Adding other one-time grants into the mix, a ramp-up of additional state aid over a few years to $3 million could provide the city enough money to carry out a robust pavement repair program.
Such substantial additional help from Sacramento could lessen the burden on local taxpayers on dealing with these problems. If a local utility users tax measure still moves ahead next June, as is now contemplated, the state action could free up local resources from a new local tax measure to meet other infrastructure needs, including other transportation and park projects.
In the alternative, a big influx of state transportation aid could also potentially reduce the magnitude of the utility users tax, or allow it to be applied to fewer types of utility bills than might otherwise be the case. Of course, the tradeoff in any event would likely be higher state levies – increases in the gas tax, vehicle license fees, or other types of taxes and fees – that Davis taxpayers and motorists would also pay.
A strong signal of imminent state action came when Governor Jerry Brown formally called the Legislature into special session on June 19. The Governor declared in his official proclamation that he wanted lawmakers to “enact pay-as-you-go, permanent and sustainable funding” to address the estimated $59 billion shortfall in funding over the next decade to maintain and fix state highways. However, the Governor opened the door in his proclamation to help to local agencies with their transportation funding needs. The Governor has yet to outline what specific measures he would like to see enacted.
The Legislature has been actively working on the issue since early this year, and has been heavily focused on addressing both state and local transportation funding shortfalls. A analysis funded by local government groups reported last fall that local government agencies across the state face its own combined $60 billion shortfall of the money they need to fix potholes and deteriorating bridges.
Lawmakers are working on a wide range of proposals that would reduce, but not eliminate, the state and local transportation gaps:
— Senate Bill 16 by Sen. Jim Beall could raise about $3.5 billion annually that would be split fairly evenly between the state and local agencies by increasing taxes on gasoline and diesel fuel and increasing vehicle license and registration fees for five years.
— Assembly Speaker Toni Atkins has offered a $2 billion proposal that includes establishing a new flat annual fee to access the road system and accelerating the repayment of loans from transportation funds that were used after the recession to bail out the state General Fund.
— Senate and Assembly Republicans are offering alternative plans (providing up to $6 billion annually, mostly on a one-time basis) to shift funding from cap-and-trade fees on fuel, truck weight fees, and the state General Fund to the state highway account. They would also reduce excess staffing positions at Caltrans and in other state agencies to free up money for transportation projects.
My recent discussions with knowledgeable legislative aids and Capitol lobbyists suggests that new state transportation assistance for localities is highly likely to enacted by the time the Legislature adjourns on September 11. However, what form that assistance could take, and in what amount, is still up in the air, especially since the Governor has not officially made his preferences known. Some combination of many of these proposals is likely.
Ordinarily, tax increase measures are dead on arrival in the Legislature because they require two-thirds approval that legislative Republicans are unwilling to provide. But, on rare occasion, Republicans have made exceptions for measures financing highways and roads, as when a legislative package increasing the gas tax and truck weight fees was sent to voters for their approval in 1990. Moreover, some Republicans are said to be indicating privately that they would be willing to vote this time for a comprehensive transportation package including higher taxes if some of their favorite policy proposals, such as renewing authorization for new toll roads and modifying environmental review process, are also adopted.
One intriguing proposal still in play in Sacramento would make it easier for local agencies to tax themselves to raise the money they need for transportation purposes. Assembly Constitutional Amendment 4 by Assemblyman Jim Frazier would lower, from two-thirds to 55 percent, the “yes” vote needed for local voters to impose sales taxes earmarked for local transportation projects. The measure, co-authored by hometown state Sen. Lois Wolk, could provide an alternative or a fallback solution to the general tax increase now under discussion at City Hall, especially if the amount of state aid coming from Sacramento in a new transportation package turns out to fall short of city needs.
A general tax, such as the utility users tax now under consideration, or like the Measure O sales tax increase approved by voters last year, cannot legally be restricted to specific purposes. However, a sales tax approved as an ACA 4 special tax would be locked up legally for transportation purposes and could not be used for anything else. Under ACA 4, that special tax would require a 55 percent “yes” vote, rather than the straight majority vote needed for a general tax. But the certainty that any new money would go to a popular concern – fixing the roads – could nonetheless actually make it easier to pass muster with Davis voters than a general tax.
To sum up, the burst of legislative activity now occurring in Sacramento holds great promise of helping Davis address its transportation problems. That help is unlikely to be a cure-all for our city’s infrastructure needs, but could bring us much closer to having the money needed to pay for maintenance of roads and bike paths. Accordingly, city leaders will need to pay close attention to developments in Sacramento as they fashion their strategy for a 2016 city ballot measure to catch up on deferred maintenance and capital improvements.
Given the difference that action in the State Capitol on a transportation funding package could make for this city, this is a good time for Davis citizens to encourage our leaders in Sacramento to take significant actions to help us keep our roads, and thus our economy and communities, running smoothly.
Dan Carson worked for 17 years in the Legislative Analyst’s Office, a nonpartisan fiscal and policy adviser to the California Legislature, retiring in 2012 as deputy legislative analyst. He now serves as vice chair of the city’s Finance and Budget Commission. This commentary reflects his views only and does not represent the position of the commission on this issue.