2016, 12-06 Special MINUTES
SPOKANE VALLEY COUNCIL
SPECIAL MEETING
Spokane Valley Tech School
115 S University
Spokane Valley,Washington 99206
December 6,2016 7:30 a.m.
Alien dance:
Councilmembers Staff
Rod Higgins,Mayor Mark Calhoun, City Manager
Arne Woodard, Deputy Mayor Cary Driskell, City Attorney
Pam Haley, Councilmember Chelsie Taylor, Finance Director
Mike Munch, Councilmember Eric Guth,Public Works Director
Ed Pace,Councilmember Mike Stone,Parks&Rec Director
Sam Wood,Councilmember John Hohman, Comm&Eco. Dev Director
Erik Lamb,Deputy City Attorney
ABSENT: Steve Worley, Capital Imp. Program Mgr.
Caleb Collier, Councilmember Greg Bingaman, IT Specialist
Carolbelle Branch,Public Information Officer
Christine Bainbridge, City Clerk
Mayor Higgins called the meeting to order at 7:30 a.m. and asked that the City Clerk note those
Councilmembers present.
Spokane Valley Chamber President/CEO Ms. Katherine Morgan introduced Mr. Ben Small, Chamber
Chairman, who then welcomed everyone to the meeting and to Spokane Valley Tech, which he said is a
collaborative effort of four school districts: Central Valley,East Valley,Freeman and West Valley Schools.
Mr. Small introduced Mr. Greg Repetti,Executive Committee Chair Elect. Mr.Repetti said that he would
he emceeing today's meeting;said the idea today is to get together to discuss revenue sources;that Spokane
Valley City Manager Mark Calhoun will give a PowerPoint presentation,then the floor would be opened
for free flowing, constructive dialogue.
City Manager Calhoun welcomed everyone; and said today he and staff will attempt to condense thirteen
years of transportation and infrastructure information into a thirty-minute presentation; and that after the
presentation, there would be an opportunity for question and answer. Mr. Calhoun went through the
PowerPoint explaining some of the history and proposed need as it relates to deficits in transportation and
infrastructure;he mentioned the number of times Council met to discuss the issue;the also explained some
of the aspects of pavement preservation,including the City's set aside amount,which he said is a good start
but falls short of the estimated $6.8 million need to maintain roads in their current condition; he explained
REET(real estate excise tax)purpose and uses, and noted that we estimate our annual unmet revenue need
will be $3.2 million. Public Works Director Guth explained the process of the pavement preservation
program, how the plan was developed, the process and frequency for scanning the streets, what the PCI
(pavement condition index)looks like for poor,fair,good and excellent pavements,and showed some charts
and graphs to help provide a better understanding of the PCI results; he also explained some of the cost
associated with pavement reconstruction,and mentioned PCI and backlog and how they relate to each other;
and went over investments,costs, consequences, and related backlog.
Finance Director Taylor went over the structure and purpose of the street O&M (operation and
maintenance) fund #101, and sited examples of some expenditures associated with that fund, including
street maintenance, lighting, traffic operations and maintenance, snow maintenance, and bridge
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Approved by Council: 12/20/2016
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maintenance and repairs.Ms.Taylor also talked about the current funding sources in the street O&M Fund
including motor vehicle fuel tax of about $2 million, and telephone utility tax of about $2.2 million, and
showed a graph depicting the telephone utility tax's declining revenues; she also explained some of the
funding challenges with the street O&M fund, such as aging traffic signals.Ms. Taylor stated that the City
has identified funding deficits for transportation and infrastructure programs in both the Street Fund and
the Pavement Preservation Fund, and noted some major assumptions in defining revenue needs, such as
expenditures increasing at an inflation rate of approximately 2% in the street fund, and transfers from the
General Fund to the pavement preservation fund.After briefly going over the street fund projection with an
alternative revenue source as shown on slide 25, and the pavement preservation fund projection with new
revenue source as shown on slide 26,she showed the combined revenue needs for years 2018 through 2021.
Ms. Taylor went over some of the revenue options such as a Transportation Benefit District, property tax
banked capacity, and utility tax, and also compared the City's projected 6%utility tax with utility taxes of
other municipalities, and noted projected utility tax revenue estimates for each utility service,with a 1, 2,
3, 4, 5, and 6% tax. fCouncilmember Wood left the meeting at approximately 8:05 a.m.] Mr. Repetti
thanked the City staff for their informative presentation to help people understand the need, and he opened
the floor for questions.
Q: Why have an extra$1.7 million?
A: The discussion among the Council Finance Committee was, the extra would be for the City to finance
one of the grade separation projects. [Mark Calhoun]
Q: Is it 6%total or 6%on each utility, and if on each, then that's well over the 6%that doesn't need to be
voted on,but that the whole thing adds up to a 24 or 30%tax.
A: it would be 6% on each utility. [Mark Calhoun]
Q: I am. on retirement and disability, and wonder how much more will be needed to maintain my budget;
and there is a large retirement community here.
A: An estimate would be about $6 a month more for electrical; and no decisions have been made on this
and this is just for discussion purposes. [Chelsie Taylor]
A: Council has heard from the community and this issue has been taken off the table for action; Council is
going to work in a type of re-start of this discussion in 2017; we need to do a variety of stakeholders'
meetings in getting this stogy out to the public;Council and the community will need to determine whatever
PCI will work, and at which level of condition will the streets be maintained and funded, if ally; and to
discuss how to deliver the highest level of service possible with the existing funds; and include discussion
about possibly replacing the phone tax with some reliable source, again, from a Council and community
standpoint. [Mark Calhoun]
A: A utility bill of$100.00 with a 6%tax equates to $6.00;the tax would be 6% on each and not a total of
24% but rather a 6% on each, which does not equate to a 24% tax; I don't like taxes either but there are
times when they are necessary as we don't want streets like Spokane; they work on their roads, but they
will never get caught up. [Deputy Mayor Woodard]
A: If there are five separate utility bills of$100.00 each, with a 6% tax on each of those, that would be
$6.00 for each one, or$500.00 in total bills and a total of$6,00 for each or$30.00 total tax,which equates
to 6%, as $30.00 divided by the $500.00 equals 6%. ]Mark Calhoun]
Statement: When they talk about projections for the highway, it looks to me like we'd be better off going
to a higher number, because you'd spend less money because you'd go to a less number of approval, we'd
spend a ton more money; when it talks about increasing the vehicle tax for licensing; if I already pay
$100.00,to pay another$20.00,that is 20%;we need clarity and a better explanation;there are discrepancies
in the graphs there of where it was presented; you should have presented that this is what we have to do to
maximize it, and this is how much money you're going to save, because if we don't, you're going to pay
this much more.
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Approved by Council: 12/20/2016
Statement: it shows here that under current funding that you're getting $2 million from the motor vehicle •
tax, and then the 2 plus 2 for the telephone tax; if you get rid of the telephone tax, you'd want to go to a
utility tax,but you're still going to get the$2 million from the motor vehicle tax,so if you want$6.1,you're
still getting$2 million, so that means you only need $4.1 million more. [Diana Wilhite]
A:It's looking at the street O&M versus the pavement preservation separately,so we can walk you through
each of those charts again,we talk about $2.9 million in the street O&M fund, but in 2009 that generated
$3 million, so what we're proposing would be to replace and re-set that amount; in 2009,the first year of
that telephone tax, our street fund budget was$4.6 million; in 2017,the street budget is $4.7 million, so in
that eight years, the street fund rose on average .275% annually, so Council and staff did a good job of
controlling those costs. [Mark Calhoun] [Deputy Mayor Woodard left the meeting at approximately 8:35
a.m.]
A: In examining slide#25 and looking at the street fund projection, that $2 million for motor vehicle fuel
tax is included and is taken into account in coming up with the$2.9 need for the street fund. [Chelsie Taylor]
Q: I am a representative on the Transportation Commission for the State, and am also connected with the
Spokane Area Good Roads Association, a 108-year old transportation advocacy organization; those
organizations look at long-term use and the Transportation Commission constantly recommends to the state
legislature to put more money in maintenance and preservation; most of Iast year's tax package went to
capital construction and very little to maintenance and preservation; starting next year that $2 million gas
tax revenue will start declining as cars become more efficient;regarding utility taxes,most cities that charge
a utility tax, the tax is used mostly, for their general government operations; by charging a utility tax,you
are charging one utility to pay for another; the legislature authorized about twenty years ago,for entities to
use the TBD(Transportation Benefit District);there are different methods for charging a tab fee, from$20
to $40, or more, up to 2/10ths of 1% sales tax; that would be charging the users of the roads for the
maintenance of the roads [Joe Tortorelli]
Q: You say more money goes over to Olympia; why not pass something that keeps more of the money
here?
A: Obviously the money is spread throughout the state; we got $867 million to build the north Spokane
corridor;which has been sixty years in the process;plus several other projects around here;for those people
who have been over on the west side; would you want those kind of problems here? There is a great need
for maintenance and preservation on state roads, including the maintenance of bridges. [Joe Tortorelli]
Q: I think the approach for road preservation is going in the right direction; and the question is,how to get
there. Have all the funding sources been explored; and are there combinations of some of those sources?I
agree with the previous statement of having those sources funded by those users.
A: In discussions with the City's Finance Committee, the TBD and taxing the car tabs is a viable source
and even up to $50.00,that would generate about $3.7 million; but the conclusion from those discussions
was that those funds fell short of the total need if we wanted to achieve the$6.1 million; with a TBD and a
voter-approved increased sales tax of 2/10"'$ of 1%; with the current sales tax across the county of$8.7,
and that additional sales tax would take it to 8.9%, and the conclusion was that would put Spokane Valley
out of step with the sales tax rate across the rest of the County, and would chase businesses into other
communities; concerning the idea of property tax banked capacity,that's$555,000; it would be helpful but
wouldn't really do it; at this point the City of Spokane Valley has gone for eight consecutive years without
imposing the 1%property tax increase authorized by state law and we'd like to stay away from that; there
is not a direct correlation between utility taxes and transportation and infrastructure;Mr.Tortorelli is correct
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Approved by Council: 12/20/2016
in that utility taxes are generally tied to government services, but we very responsibly manage our general
fund and we don't need the money there;but could use it on the transportation and infrastructure; and again,
this will ultimately be a Council and community discussion. [Mark Calhoun]
Q: I'd like to know who prepared the survey of the streets; why don't you divide those street preservation
funds into maintenance,repair and capital so taxpayers know what they are paying for those services; with
the utility tax, when the City was a city of homeowners, the utility tax being proposed might have been of
benefit and fair; but now,with the City being a city of renters, it is not a fair tax and shouldn't be enacted;
when we had money, a few months ago, I think it was Ed Pace, made a motion to give $270,000 back that
we had in grant money,totally incompetent. [Lynn PIaggemeier]
A: Regarding the comments related to pavement preservation, we contract with IMS, a consultant for
infrastructure management services out of Tempe,Arizona;they do this work across the nation,they collect
the data, they have a software program, and they develop the outputs from that program and that goes into
this report; then we take the report and do field investigation on top of that report, to set the priorities;
regarding the differences between maintenance, repair and capital, it identifies everything from
reconstruction which is the most costly, all the way up to just maintenance activity like backfilling; so all
these segments are evaluated; and what comes out of that is a score and a recommended rehabilitation for
that segment; so that gets put into various pots of money; we have money allocated for maintenance, for
pavement preservation, and for reconstruction;we typically try to get grant money for reconstruction, we
haven't done a lot of reconstruction projects with our pavement preservation program;we also have a capital
program which we use REET money to go after grants; the City has been very aggressive and very
successful in getting grants for capital projects,but there are matching dollars that have to go toward those
grants;the REET is being depleted by pavement preservation so that leaves us without matching fluids for
those million dollars in grants. [Eric Guth]
Q: Concerning the funds in grants, these are almost the same numbers we had back in the budget retreat;
grant money is also people's tax dollars so we are getting our own money back; that $1 million in grant
match seems low. [Brenda Grassel]
A: We were asked how much money annually could be contributed to pavement preservation related to
grants; we have grants that help us with bridges, like the Sullivan Bridge, which is a $12 million project,
and roughly 80% of that is paid for by grants; grants typically come from two sources, the federal
government and the state government, which is all tax money, but in the federal case, that's tax money
across the nation; and the state money is all across the state; so we are a percentage of that. Regarding the
$1 million, we were trying to roughly identify how much grant money can be applied to pavement
preservation. As Joe Tortorelli mentioned, a lot of state and federal funding is moving toward pavement
preservation grants; historically they were not that way and were more related to reconstruction, larger
projects,roads and bridges;with the declining federal and state budgets,they have now gone to a pavement
preservation perspective. They still fund large projects, like bridges and highway safety projects, but they
also have a portion of funding now going toward pavement preservation; so we estimated that $1 million.
[Eric Guth]
A: There were years where we don't have any grants for pavement preservation, so that amount would be
zero;and there were other years where we'd have a$1.5 to a$2 million grant for projects, so we are trying
to pick a middle ground that would work for any annual estimate. [Chelsie Taylor]
Statement: Commenting on Mr. Plaggemeier's comment, I assume you're talking about the $270,000 for
the Blake sidewalk project, I guess it was me that made the motion, but we did vote to turn it back, it was
federal money.The reason we turned it back was because the people who live in the area along Blake didn't
want it; we represent you all. Something to think about on federal money is, if we get a federal grant, it's
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Approved by Council: 12/20/2016
not necessarily your tax dollars coming back to you, `cause what's happening to our national debt, it keeps
going up; so a lot of what we get back in tax dollars is funny money, I mean grant money is funny money;
it's not really your tax dollars. [Councilmember Pace]
Q: Regarding the REET tax,the definition says it is based on the sale of homes?
A: That's correct [Mark Calhoun]
Q:That's kind of like you know, let the mouse come in to live there,then chase him out after twenty years.
What about the idea of, and this was proposed many years ago, start looking at our contractors and people
who are buying new houses,new construction,and they start looking at absorbing some of that cost through
their access and roads, sewers,septic,power, and gas,because people say they don't want to pay that extra
money when they buy that house; it might cost an extra$1,000,but after twenty years if you sell that house,
and you live there for forty years for free based on that, you'll get your money back when it sells, and I
think those are some things and ways to look at revenues.
A: That is something that the City of Spokane Valley has not considered, that it is somewhat unique to the
west side of the Cascades and not typically a funding source used east of the Cascades; regarding the real
estate excise tax,you have a good point; real estate excise tax very closely tracks with the economy and is
one of the standards and can be a predictor of upcoming recessions. For instance, the high point that we
received the REET was in 2007 when the City received$2.7 million;but that figure dropped in the recession
to about$900,000 over a couple successive years;we are now back up in the neighborhood of$2.2 million;
it's very valuable, but is predictably unpredictable. [Mark Calhoun]
Statement: I work with a homeless programs, and a lot of decisions in the homeless department are based
on utility costs and where people choose to live; and I was thinking about the energy assistance program
and people of low income who come to us and a lot of times they can't currently afford to pay their bills;
we help about 20,000 people with their utility costs, so they are having to budget already to try to get by
and this additional cost could create problems. For the seniors, we see a lot of times that they don't rack
up bills they can't pay, they just keep turning down the heat, and ultimately sometimes have to decide to
heat or eat; and that I don't know if that's the kind of community that we want; but I don't like driving over
potholes either.
Q: My question would be on the paving quality; Mr. Guth and I have had conversations before. We have a
new way of doing our paving to get a longer life out of it, it's thicker. By using the conditioned index,the
85-100 figure is a perfect road by the picture; it says it is excellent. If that road is excellent,how long of a
life span is for that road, right here on Sprague Avenue,before you have to go back into it? [Dan Allison]
A: "It depends" is my quick answer. Actually, it depends on the classification of that road's usage on it;
how many trucks you have on it, what is the average daily traffic on it; we do a design of the asphalt to
accommodate the traffic and it includes an analysis with a percentage of trucks;for example,that road may
carry 30%trucks;and we actually do weight load counts,and do lab work on the asphalt and there are areas
where DOT (Department of Transportation) has 24-hour trucks and cars to drive around the track just to
test the asphalt.All the asphalt that we specify in the city is all WSDOT,DOT-specified asphalt.The asphalt
mixes that we put down generally mimic highway interstate asphalts. As far as the comment that asphalt is
not as good as it once was, or being putting down like it was once; we've actually improved all the new
asphalt specifications; in the old days,there was a rule of thumb based on classification; so if it was a local
road, it got three inches of asphalt over six inches of road base; if it was an arterial,it got four or five inches
of asphalt on top of eight inches of road base; now we actually do a computation based upon what I just
talked about, on the loading and average daily traffic,etc., and put it into an equation that accounts for life
of pavement, and the reading on that pavement, and we come up with a specific pavement design for each
of our streets. We do that on every one of our projects. Now, that does not necessarily translate into
pavement preservation activity, so the top course, that's different, that's putting a Band-Aid, that's
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Approved by Council: 12/2012016
extending the life of the pavement. As far as your comment about the life of the pavement and when you
have to get into it, we are dealing with mother nature and weather, so the sun bleaches out the asphalt and
that's when they turn gray; depending on the loading and the mix and other things that happen over time,
it's not going to be perfect and every circumstance of pavement won't look the same. We typically like to
get into that brand of pavement in five years and do a crack-seal and a seal-coat,and rejuvenate that asphalt.
It gets brittle, it gets older and starts to show its wear, and that seal-coat helps rejuvenate that asphalt and
put oil back into it. [Eric Guth]
Q: My follow up question is this particular picture of road, which is east of Conklin looking west on
Sprague, that's scheduled for a re-pave sometime within the next few years, yet it's rated as an excellent
road. Why are you going to do that when it is excellent as it is today? [Dan Allison]
A: Very good question which I do not have an answer for right now. We do have anomalies occasionally
in the program. That's why we review it and go through it. I've got engineers who review this document.
We also go out and do field investigations, and many times we change what the report says;this is again a
scanning of the road of the top surface of the road, and its put into to a program that evaluates that and
comes out with a database of everything we've got out there. So it's a very large scale problem that gets
put into a digestible annual budget. You're probably aware of this, this past year we changed two or three
projects that were identified in the report and we felt there were roads that were more needy;and there were
others on the list too, as an example, could be moved up a year. Your specific example, I'd have to look
into it.
Q: What I don't see in this whole process, is the funding of the projects. Is it funded with debt or funded
with cash flow from our revenue?
Mayor Higgins: in the interest of protocol, since we have an open meeting with the Spokane Valley City
Council, which was scheduled to end at 9:00 a.m., I don't want the meeting to end but we have to adjourn
the meeting, and then can continue on informally after we adjourn the meeting. It was moved by
Councd,nember Munch, seconded and unanimously agreed to adjourn. The meeting officially ended at
8:55 a.m.
Informal discussion continued:
A: In response to the question regarding our street O&M fund, the $2.9 million of our need, and the
pavement preservation the$3.1 million of our need,collectively the$6.1 million,the idea would be that we
would cash finance all street O&M and pavement preservation activities if the Council and the community
collectively decided it was worth imposing the 6%utility tax,that$7.8 million,the difference between the
$6,1 and the $7.8, that additional $1.7 million, that would be money that would serve as debt to make
pavement on a bond issue where we'd borrow money for the railroad overpass project, but if we didn't do
that,the idea would be to cash finance all activities.
Q: My follow-up question would be then you'd be using that debt financing,would you just be committing
future funds that could be used for road preservation,and you'd be back here in another five years with an
additional tax increase?
A: I don't see that. Based on our evaluation, and looking at this over the next five years, in our opinion,
we'd continue to finance this well into the future. (A question came from the floor about the individual
preferring to keep his costs from going up.) From this point, this is off the table; neither staff nor Council
is pushing this forward.What we need to do from a staff level,is for Council and the community to go back
to the foundation of this,which is the street report,and make sure everyone understands and is comfortable
with the report; and then the discussion is, what level, what pavement condition index, what PCI does the
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Approved by Council: 12/20/2016
Council and the community want and how much are they willing to pay to do that; and at a staff level,we
will figure out how to comply with the wishes of the Council.
Mr. Repetti thanks Council and staff for the dialogue,and extended thanks to Mr. Small,who also expressed
thanks to everyone. It was noted that these discussions will likely continue in the future as needed. The
meeting ended at 9:00 a.m.
d(la -"P\
All S L.R.Higgins,Ma•0
rristme Bainbridge, City Clerk
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Approved by Council: 12/20/2016