Back in July, Dan Carson first reported that the state was making inroads on a transportation package that might have been able to provide the city of Davis with about $3 million annually in roads funding. In early August, it appeared a bipartisan consensus was emerging with the California Chamber of Commerce, joining with unions to support a funding mechanism.
As Dan Carson put it, “A proposal backed by a coalition of business, labor, and local government organizations would have provided $6 billion a year for this purpose for a decade, split between the state and local governments. The League of California Cities estimated that the package could have bolstered funding the City of Davis could use for road maintenance by $3 million annually.”
However, the governor undercut this proposal by proposing a smaller compromise package that was quickly endorsed by the League of California Cities, the California State Association of Counties, and other organizations that had originally lobbied for a bigger effort.
That package still would have delivered $1.1 million annually for ten years.
But Mr. Carson writes this weekend, “Passage of any measure in the state Capitol at all this session is now very much in doubt. Legislative Republican leadership welcomed the start of negotiations over the Governor’s proposal and praised some of its specific provisions, such as one to use $500 million in ‘cap-and-trade’ revenues for roads or to reduce excess Caltrans staffing and shift the monies to highway projects. But Republicans rejected the administration’s proposal to provide part of the funding with a new $65 a year ‘highway user fee’ and a 6 cents per gallon gas tax increase, contending no new tax revenues are needed by the state.”
We’ll stop the recap right here. Mr. Carson, who is generally more optimistic about such things as I am, suggests that this series of events “have turned efforts to bolster roadway funding into an uphill fight.”
Back in 2013, we ran a data analysis on where the city received the bulk of its funding for pavement contracts 2000 through 2012. During that time, the city only used $577,862 from local general funds. It received $1.86 million from State Transportation Funds, $5.5 million from Federal/State Highway funds, $1.37 million from Prop 1B, and $1.3 million from the stimulus package.
In short, over 12 fiscal years ending in 2011-12, the city spent $10.6 million, and just over $10 million came from the state and federal government.
Since that time, funding from the state and federal government has been cut off. As a result, the city’s roadway conditions have dropped perilously, moving from generally in good shape to on the brink of failure in many critical locations.
By 2013, estimates for cost were staggering – over $150 million if we acted soon, and approaching half a billion if we continued to wait. The result was that over time the city, starting in 2011, started funding road maintenance from the general fund – first at $1 million and now at $4 million a year.
A good portion of the city’s structural deficit has been created by the transfer of money to fund roadways. But part of our previous criticism of the city budget was it failed to reflect in any meaningful way unfunded liabilities and deferred maintenance, which would hold costs at the current budget line but at a significantly increased hit down the line.
The failure of the transportation package – if it indeed fails, simply re-affirms our belief from earlier this summer. The city must move forward with its own local funding package regardless of what the state does.
Sometime this fall, city staff will come back to the council with a proposal for a utility user tax that could fund city infrastructure. There are a lot of concerns about a utility user tax. In part that is because the tax would fund construction that, in general, would be far afield from what the funds would go toward.
There is also the fact that utility user taxes have a very low passage rate.
Staff believes there is some advantage to a utility user tax over a parcel tax. For one, a parcel tax would require a two-thirds vote.
The UUT would be based on actual usage of utilities like water, electricity, phone, cable, cell, etc. Whereas the parcel tax is the same whether you have a $200,000 home or a $2 million home, the UUT is a percentage of actual bills.
Staff argues that it is “a durable tax that is more consistent than the city’s most significant general taxes. UUT inflates with time and it tracks with growth in consumption of the elements that are subject to the tax. It is less susceptible to economic downturns than property tax and sales tax, though it must be acknowledged that effective resource conservation may have some impact upon future consumption patterns. In a city such as Davis, which is largely built-out, a UUT would provide needed stability to the general fund budget.”
On the other hand, the council would have the ability under a parcel tax to delineate exactly how the tax is to be used. With a utility user tax, it is a general user tax and, therefore, the money would go into the general fund and could be spent on anything.
Right now, the city is looking at the state average of 5.5 percent, raising approximately $5.3 million annually.
That amount combined with the $4 million that the city is currently spending should give us enough to fund road repairs and may give us enough to maintain other existing infrastructure. The city should not rely on state money for road repairs, regardless of whether or not funding actually passes.
For one thing, a $1.1 million funding package is only a small supplement to what we need. A $3 million package would be more substantial but it seems extremely unlikely. Time to move forward with the best possible local plan, and, while I have doubts about a Utility User Tax – the city needs something.
—David M. Greenwald reporting