HomeMy WebLinkAbout08 - OCTA Gas Tax Fund ExchangeCITY OF NEWPORT BEACH
OFFICE OF THE CITY MANAGER
DATE: October 28, 1996 C �
TO: Honorable Mayor and City Council Members
FROM: Peggy Ducey, Assistant to the City Manager
SUBJECT: OCTA Gas Tax Fund Exchange
Agenda Item 8
--BY THEcrnT E60N
CITY OF NEWPORT BEACH
OCT 2$ ;
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BACKGROUND
A key provision of the final Orange County bankruptcy recovery plan, originally
proposed by.the Orange County Division of the League of California Cities, is to
annually divert $38 million from the Orange County Transportation Authority
(OCTA) bus service budget to the County of Orange to finance the bankruptcy plan
of adjustment. This proposal was put forth at a time when the County's consultants
were circulating plans to divert property or sales tax revenues from cities.
The diversion of $38 million from OCTA represents a 50% reduction in the current
annual budget for bus service. To partially offset this revenue loss, the County will
shift $23 million of its $33 million in gas tax funds to OCTA for a 15 year period.
However, gas tax funds cannot by law be used to fund public bus operations. The
State Legislature also added to the final bankruptcy recovery plan a provision that
OCTA cannot reduce the level of existing bus services despite their loss of a net $15
million and the shift of $23 million in gas tax revenues. Consequently, OCTA must
find a way to finance public bus services within the gas tax spending restrictions.
DISCUSSION
OCTA has proposed that several Orange County cities exchange general fund
revenues for OCTA's gas tax monies. Currently, cities are required to invest funds
in road projects as a condition of receiving Measure M funds. This "Maintenance of
Effort" or MOE is often financed with general fund revenues. OCTA has proposed
that cities with the largest MOEs exchange general fund financed MOE for OCTA gas
tax revenue. OCTA can then use city general fund monies to maintain public bus
service, and cities can use gas tax funds to finance their gas tax eligible road
maintenance programs.
OCTA proposed that Newport Beach exchange 50% of its $8 million annual MOE for
gas tax revenue. This percentage can be changed every year, depending on the
financial needs of the City and OCTA. Under the proposed plan, OCTA will forward
gas tax funds to the City on a monthly basis. The City will reimburse OCTA with
general fund revenues on a quarterly basis, allowing us to earn interest on the gas
tax funds before reimbursing OCTA with MOE monies. The estimated Newport
Beach exchange of $4 million will earn the City approximately $20,000 in annual
interest. The term of the proposed plan, fifteen years, coincides with the
bankruptcy -related fund transfer between the County and OCTA. However, either
party can terminate the agreement with six months written notice.
OCTA has asked cities with the largest general fund MOE to approve the exchange.
At this time, Anaheim, Santa Ana, and Orange have approved the exchange and the
issue is agendized for Irvine (October 22nd City Council meeting), Mission Viejo
(October 28th City Council meeting), Costa Mesa (November 4th City Council
meeting). Metrolink has also approved an exchange agreement. Huntington Beach
is still discussing the issue at a staff level.
On August 12th, the City Council Finance Committee reviewed the OCTA proposal.
At that meeting, Committee members asked for follow-up to the following
questions:
• What alternatives can OCTA explore other than the gas tax exchange to fund bus
operations (e.g. further reduce bus operational costs or other OCTA programs or
expenses)?
OCTA responded that forty administrative positions have been eliminated, a
new labor agreement was negotiated that saved $2.5 million annually, and
wherever possible, funds were shifted from capital projects to the bus operations
account.
• Can the City/OCTA legally exchange gas tax funds for general fund revenues?
OCTA provided a legal analysis of the exchange which concluded that it was
legal. The City Attorney's office reviewed the analysis and concurred with its
conclusions.
• Can a review of the City's MOE be a provision of this agreement?
OCTA is willing to review the City's MOE under the provisions established by
Measure M, but not as a provision of the exchange agreement. Staff has had
initial discussions with OCTA regarding our MOE level and will continue to
follow-up on this issue.
On September 23, 1996, the Finance Committee concluded its review of the
exchange, recommending that it be forwarded to the City Council for action.
However, they required that a "most favored nation" clause be included in the
agreement so if any other City negotiates a better agreement, Newport Beach would
get the same benefits. This provision is included in Section 13 of the agreement.
Since the Finance Committee met, OCTA has added Section 14 to the agreement
which provides that if at some later date, the gas tax exchange is determined to be
legally invalid, that OCTA would reimburse the City all general funds revenues
exchanged and will cover any legal costs and liabilities which may occur from the
exchange.
P4
OCTA would like the same agreement for all cities cooperating on the exchange.
Since final Council action is still pending with four cities, changes may still be made
to the current agreement included in this action. It is recommended that the City
Council authorize the City Manager to execute the final master agreement,
including authorization to approve minor final changes to the agreement.
RECOMMENDATION
Authorize the City Manager to execute an agreement with the Orange County
Transportation Authority for an annual exchange of OCTA gas tax revenues for City
general fund revenues, beginning July 1, 1997.
7
SENT BY:UCTA PLA:NNI;NG/DEVLPMT ;10-17-96 ; 9:34AN
1 AGREEMENT
BETWEEN
714 560 5794-
3 ORANGE COUNTY TRANSPORTATION AUTHORITY
714 644 3U2U #, 2/ 7
4 AND TH CITY OF NEWPORT BEACH FOR.FUND EXCHANGE
5 THIS AGREEXENT is made and entered into this day
6 of , 1996 by and between the Orange County
7 Transportation'Authority, a public corporation of the State of
8 California (hereinafter referred to as "AUTHORITY"); and the
9 City of Newport Beach, a public corporation (hereinafter
10 referred to as . "CITY") .
11
RECITALS:
12 WHEREAS, the County of Orange and other local
13 jurisdictions within the county, including CITY and AUTHORITY,
14 entered into a Joint Agreement for Resolution of Claims Against
15 the County of Orange ("JOINT AGREEMENT"); and
16 WHEREAS, the JOINT AGREEMENT includes provisions
17 supporting legislation to provide funds to finance an
18 acceptable plan of adjustment in the County of Orange
19 bankruptcy case; and
20 WHEREAS, State legislation provided the shift of
21 $38,000,000 per year of Bradley -Burns sales tax revenues, used
22 by AUTHORITY to pay for public bus services, to the County of
23 Orange commencing July 1, 1996 and ending June 30, 2011; and
24 the shift of $23,000,000 per year of fuel tax revenues to
25 AUTHORITY from the County of Orange commencing July 11 1997 and
26 ending June 30, 2013; and
27 WHEREAS, the $23,000,000 of fuel tax revenues shifted to
28 AUTHORITY may not be used to pay for public bus service
10/16/96
SENT BY:OCTA PLANNING/DEVLPMT ;10-17-96
; 9:34AM
714 560
5794-
714 644 3020;m 3/ 7
1 operations as defined
by
Article
XIX of the
State
Constitution;
2 and
3 WHEREAS, CITY annually appropriates general fund or other
4 local revenues for Article XIX authorized transportation
5 projects, and said local revenues may be used to pay for public
6 bus services; and
7 WHEREAS, AUTHORITY and CITY jointly desire to sustain
8 public bus service levels in Orange County through a
9 cooperative effort; and
10 WHEREAS, AUTHORITY and CITY desire to exchange AUTHORITY
it fuel tax revenues for CITY local revenues beginning July 3o,
12 1997 to sustain public bus service levels in orange County;
13 NOW, THEREFORE, it is mutually understood and agreed by
14 AUTHORITY and CITY as follows:
15 1. Prior to March 1 of each year AUTHORITY will provide
16 CITY written notification requesting an exchange of AUTHORITY
17 fuel tax revenues for CITY revenues that may be used to pay for
18 bus services (hereinafter referred to as "local revenues") for
19 the fiscal year commencing the following July 1.
20 2. Prior to April 1 of each year CITY will provide
21 AUTHORITY an estimate (hereinafter referred to as "ESTIMATE")
22 of local revenues CITY anticipates spending for Article XIX
23 authorized transportation projects during the following fiscal
24 year.
25 3. Prier to May 1 of each year AUTHORITY and CITY will
26 agree on an amount to be exchanged and AUTHORITY will provide a
27 confirmation letter to CITY establishing the amount of fuel tax
28 revenues to be exchanged for local revenues (hereinafter
2 ,.
10/16/96 r-1
SENT BY :0CFA PLa`N 1 NG/UtVLPb1T ;10-17-O6 ; J: J3 M 714 560 5794 114 b44 JU2U ,,;;. 4/ 7
1 referred to as "EXCHANGE AMOUNT") during the following fiscal
2 year. The EXCHANGE AMOUNT may be equal to or less than the
3 amount of the ESTIMATE provided by CITY to AUTHORITY.
4 4. Beginning July 31, 1997, and or the last working day
5 of each month thereafter, AUTHORITY shall deposit one -twelfth
6 of the EXCHANGE AMOUNT in fuel tax revenues in a CITY account
7 as directed by CITY.
8 S. Beginning September 30, 1997, and on the last working
9 day of December, March, June and September thereafter, CITY
10 shall deposit 25 percent of the EXCHANGE AMOUNT in local
11 revenues in an AUTHORITY account as directed by AUTHORITY.
12 1 6. The EXCHANGE AMOUNT may be adjusted upward or
13 downward during the fiscal year as agreed to by both parties.
14 Corresponding adjustments may be made to remaining or future
15 quarterly and monthly deposits.
16 7. AUTHORITY agrees that the fuel tax revenues received by
17 CITY and expected by CITY and expected by CITY shall be used
18 toward satisfying CITY's Measure M maintenance of effort
1.9 requirement.
20 8. CITY agrees that the fuel tax revenues received from
21 AUTHORITY shall only be used as authorized by Article XIX of
22 the California Constitution, and applicable California law, and
23 that the local revenues received by AUTHORITY shall be used to
24 pay for public bus service operations.
25 9. AUTHORITY agrees to fund any reasonable costs CITY
26 may incur due to additional audit requirements caused by this
27 exchange of local revenues for fuel tax revenues. Any
28 additional audit costs will be mutually agreed to by both
3 -
10/16/96 tr
SENT. LY:OCTA PLAiNN1iNG/DEVLP;MT ;10-17-96 ; 9:35INI 714 560 5794 714 b44 JU2U;m 5/ 7
1 parties, and corresponding adjustments will be made to monthly
2 deposits by AUTHORITY to CITY to account for the additional
3 audit costs.
4 10. Nothing in this AGREEMENT will limit the CITY's
5 ability to
request
a review
of its Maintenance of Effort level
6 consistent
with the
Measure
M Ordinance.
7 il. This AGREEMENT shall be effective on the date of full
8 execution and continues each fiscal year thereafter unless
9 either party provides the other party with no less than six
10 months written notice of the effective termination date. This
11 AGREEMENT shall terminate effective July 1, 2013.
12 - 12. AUTHORITY acknowledges that the estimate provided by
13 CITY to AUTHORITY pursuant to Paragraph 2. of this Agreement is
14 merely an estimate by the staff of CITY. Any amounts to be
15 exchanged by CITY pursuant to the AGREEMENT are subject to and
16 limited by the appropriation of such amounts by the City
17 Council in the annual budget of CITY which budget is not
18 necessarily adopted by CITY until July 1st of each calendar
19 year or thereafter.
20 13. This AGREEMENT will be amended at the request of CITY
21 should AUTHORITY approve or amend a gas tax exchange agreement
22 with any other city to include provisions which CITY believes
23 are more favorable than the terms of this AGREEMENT.
24 14. If as a result of (a) a final judgement with respect
25 to this AGREEMENT (or any substantially identical agreement of
26 AUTHORITY with another city), (b) Legislation or (c) any
27 administrative regulation or order, it is determined that the
28 exchange of revenues provided for herein is invalid for any
-4-
10/16/96
SENT BY:OCTA PLkNNING/DEVLPMT ;10-17-96 ; 9:36A�19 714 560 5794 714 644 3020;m',6/ 7.
1 reason whatsoever and that CITY must make restitution to
2 AUTHORITY of any or all fuel tax revenues which it has received
3 hereunder, AUTHORITY shall return to CITY as soon as
4 practicable the amount of funds which had been tranferred by
5 CITY to AUTHORITY pursuant to this AGREEMENT. in the event
6 CITY's funds have been expended for bus service or any other
7 expense of AUTHORITY, AUTHORITY shall reimburse CITY from any
8 other available funds. Should CITY itself be the subject of
9 any judicial, legislative or administrative challanges to the
10 AGREEMENT, AUTHORITY shall upon demand by CITY indemnify and
11 hold harmless CITY from any and all claims, damages, losses,
12 liabilities, costs or expenses whatsoever which CITY may incur
13 by reason of or in connection with this AGREEMENT.
14 15. Notification and mailing addresses:
15 Any notices, requests and demands made between the parties
16 pursuant to this AGREEMENT are to be directed as follows:
17 If to AUTHORITY:
18 550 S. Main Street
19 P.O. Box 14184
20 Orange, CA 92863-1584
21
22 If to CITY:
23 City of Newport Beach
24 P.O. Box 1768
25 Newport Beach, CA 92658-1768
- 5 -
10/16/96
3L\1 by ; UCl A PLANK 1 NCi/DEVLP�IIT ;10-17-96 ; 9 : 36A�IM ; 714 560 5794- 714 644 3020;# 7/ 7
1 IN WITNESS WHEREOF, the parties hereto have caused this
2 AGREEMENT to be executed on the date first above written.
3 CITY OF NEWPORT REACH
4 By
5 Kevin Murphy, City Manager Date
6 APPROVED AS TO FORM
7 BY
8 Robert Burnham Date
9 City Attorney
10 ORANGE COUNTY TRANSPORTATION AUTHORITY
13. By
12 Stan Oftelie, Chief Executive Officer Date
13 APPROVED AS TO FORM
14 By
15 Kennard R. Smart Date
16 General Counsel
17
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