2016, 12-06 Special MeetingAGENDA
SPOKANE VALLEY CITY COUNCIL
SPECIAL MEETING
Tuesday, December 6, 2016
7:30 a.m. — 9:00 a.m.
Spokane Valley Tech
115 S. University
Spokane Valley, WA 99206
Welcome by Chamber of Commerce
Overview: Community Forum, Proposed Utility Tax
Spokane Valley's Transportation and Infrastructure Funding — Utility Tax Proposal
Open Discussion: Q&A
ADJOURN
Special AM Meeting: 12-06-2016
TRANSPORTATION & INFRASTRUCTURE FUNDING
PROPOSED UTILITYTAX
Spokane
jUalley�
COUNCIL DISCUSSION HISTORYAND PROPOSED NEED
Street Operations and Maintenance
• Council discussions related to financing current and future projected deficits in transportation and
infrastructure date back to 2004.
Proposed utility tax ordinance.
Did not advance to a second reading.
■ A 6% telephone utility tax ordinance was approved by Council in 2008 and went into effect in 2009.
Tax is applied to both land lines and the voice portion of cell phones.
■ Conversations about how to adequately address street O&M needs have been a featured discussion in
each budget development cycle.
COUNCIL DISCUSSION HISTORYAND PROPOSED NEED
■ Discussions in 2016:
■ March 15 — Council Workshop
■ May 11 — Mayor's State of the City Address
■ June 14 — Budget Workshop
■ 2017 Budget development discussions —August 9, September 13, September 27, October 11 and October
25.
■ Finance Committee meetings — May 12, September 12, October 10
■ Fall 2016 Hot Topic Newsletter — Mayor's Corner article
Regarding the 6% telephone utility tax we currently have in place:
2009 collections were $3.05 million.
2017 collections are estimated at $2.2 million.
We anticipate they will continue declining into the future.
We estimate our annual revenue need is $2.9 million.
PAVEMENT PRESERVATION
• In 2011 the City began financing a Pavement Preservation program:
■ Crack sealing
■ Grind and overlay
■ Set aside an amount equivalent to 6% of our General Fund
■ In 2017 this is $2.4 million
■ The $2.4 million is a good start but falls short of the $6.8 million we estimate we need to maintain
roads in their current state of condition.
■ We've attempted to fill this need with Real Estate Excise Tax (REET) revenues.
■ But, we find this is impacting our ability to finance street construction projects.
PAVEMENT PRESERVATION
■ Historically we've used REET money as grant match money.
■ Grant financed projects typically require a City match of approximately 20%.
■ $2 of REET money can leverage a $10 project
■ In our case, $2 million of REET money can leverage $10 million of projects
■ Quandary of deciding which activity is the higher priority
■ Pavement Preservation, or
• Street Construction and Reconstruction projects
■ We estimate our annual unmet revenue need is $3.2 million.
Pay now or Pay More Later:
Why Pavement Preservation Matters
Pavement Preservation Program
Council
Establishes
Policy and
Budget for
Program
T
Staff
Implements
Plan
Assess
Street
Condition
and Develop
Plan
Citizens/Council Identify
Good Streets as one of their
Highest Priorities
Council
Approves
Priorities
Plan
Priorities
Presented to
Council
Plan Development
• Pavement ManagementAnalysis Report
• Field Review
• Identify Annual Project List
• Budget Development
ASSESS STREET CONDITION
Scan Street Condition Every 2Years
What we scan for:
• Fatigue/Alligator Cracking
• Wheel path Rutting
• Cracking
• Distortions &Weathering
• Patching & Potholes
• Roughness
PCI i o3ot:vJF
Complete reconstruction
PC465-75: GOOD
Surface treatments to thin overlays
(current condition 71)
Understanding the Pavement Condition Index....
100
90
80
City of Spokane Valley
Pavement Condition Definitions Using
Common Terms
c
O
1; 50
c
O
V
c 40
E
▪ 30
o.
20
10
0
Excellent -Routine and preventative maintenance.
some crack and joint sealing localized repairs
Very Gcod - Surface treatments (slurry, micro surface. chip seals),
PCC Localized remove and replace, crack seal and joirt sealktg
Good - Surface t=eatmeits with toca'ized repair to thin overlays,
PCC sIG[ t panel -ep!acc.rc r
Fair - Thin tr: inn:- Prn7n n?o-�. �. s -..:: � ;.....-.�� remove and
rep a:e. r .. irc:eru,e pare; reY;ave1,-ient
Marginal - Progressively thicker overlays with remove and
replace. PCC extensive panel replacement
Very Poor - Full reconstruction and base stabilization
Poor - Thick overlays to partial reconstruction
(surface removal, compaction, etc.), PCC extensive
panel replacement and grinding
0 5 10 15 20 25 30
Time (Years)
35
40
45
50
Spokane Valley PCI Results for 2015
40
1.
m 30
0
01 20
etc
City of Spokane Valley, WA
Pavement Condition Comparison 2010 to 2015
SV 2010 Pavement Condition Index = 78, Backlog = 296
SV 2013 Pavement Condition Index = 74, Backlog = 596
SV 2015 Pavement Condition Index = 72, Backlog = 10%
Recommendations:
Condition Range of 70-75
Backlog of less than 12%.
Target
Backlog
<I2%
1
Marginal 145 to 551 fair (55 to 65) Good (55 to 75) Very Good I75 to 851 Excellent (mu) 100)
Pavement Condition Using Descriptive Terms
Figure 14 — Network Condition Comparison 2010 to 2015
12
Pavement Quality
Pavement Preservation is more Cost Effective
than Pavement Reconstruction i;,*
Every $
NOT spent on
preservation now
costs $8 to
reconstruct later
Excellent
Very Good
Good
Fair
Poor
Very Poor
A 40% of pavement life
$1 spent now
Costs $8 if delayed
has a 15% drop in quality
15% of pavement life
has a 40% drop in quality
Time
Reconstruction
costs taxpayers
MORE
$$$
Pavement Quality
Pavement Life Cycle Curve
Target Zone for Pavement Rehabiiitation
Increased Pavement Life '•.
Vin'rehabilitated
Pavement i°erforrnance
Time
Roadway
Value
$395M
436 miles
of streets
$906K
per mile
Backlog
IO%
PCI 65-75: GOOD — Surface treatments to thin overlays
(2015 PCI =71)
r
PCI
71
1
PCI
65
Backlog
16.5
Backlog
10%
PCI 55-65: FAIR Thin to moderate overlays
PCI 65-75: GOOD — Surface treatments to thin overlays (current con ition6 7 I )
Additional cost to
restore PCI 71 at
5 years
Backlog
5 Year Total
Cost
$0.00
$18.7M
12%
6.5%
$34M
$43.7M
INVESTMENT, COSTS AND CONSEQUENCES
(IN 2015 DOLLARS)
Annual
Investment
$6.8M
$5M
$3M
Investment over
5 years
$37.4M
Source: IMS 2015 Pavement Management Analysis
$52.4M
16.50%
18
STREET O&M FUND #10I
■ The Street Fund generally accounts for the operations and maintenance of City Streets.
■ Includes street pavement repairs, traffic signals and signs, landscaping and vegetation control, snow
and ice control, etc.
■ 2017 recurring expenditure budget is $4,731,244.
■ Staff = 5.725 FTEs and 2 interns
SERVICES PROVIDED IN STREET O&M FUND #10I
Expenditures include in part:
• $1,500,000 Street Maintenance — pothole patching, asphalt repairs, street surface treatments,
concrete and sidewalk repairs, roadside landscaping, litter and weed control, pavement restoration
• $900,000 for asphalt pavement preservation
• $915,000 Traffic Operations and Maintenance — Maintain and operate 87 traffic signals, electrical
costs, equipment replacement, 32 school zone beacons, signs, striping and pavement markings
• $460,000 Street Lighting — electric bill to light streets, intersections and sidewalks
• $20,000 Street Sweeping — this service is shared with the Stormwater Utility which pays 96% of total
costs which are about $500,000
• $95,000 Public Works Maintenance Shop and Fleet Maintenance — building maintenance,
electricity, water, sewer, trash, common area fees, and vehicle maintenance
• $468,000 Snow Maintenance — plowing, deicing materials, equipment, plow trucks
• $40,000 Bridge Maintenance and Repairs
Note: Budget amounts are rounded and approximate for illustration purposes.
CURRENT FUNDING SOURCES IN STREET O&M FUND #10I
■ Major Revenue Sources in the 2017 Budget:
■ MotorVehicle Fuel Tax - $2,040,300
■ Telephone Utility Tax - $2,200,000
• SVMC 3.70 — Provides for a tax of 6% on telephone services within the City including both
landline telephones and cell phones.
• Has decreased at an average annual rate of 4.92% since implementation.
■ Currently collected $148k less in 2016 than the same period in 2015.
DECLINING REVENUES IN STREET O&M FUND #10I
$4.00
$ 3.00
tn
0
$2.00
$ 1.00
$0.00
Telephone Utility Tax
2009 2010 2011 2012 2013 2014 2015 2016 2017
Actual 2009 to 2015, Budget 2016 and 2017
22
FUNDING CHALLENGES IN STREET O&M FUND #10I
Due to revenue constraints, the City has not historically set aside funds to replace aging traffic signal and signal
detection equipment.
• $240,000 is included in the 2017 Budget for this purpose ($200,000 for traffic signals at one intersection
and $40,000 for signal detection equipment at two intersections).
• The City has 90 signalized intersections.
• Signal poles, foundations, mast arms, and underground equipment has a typical lifespan of 30 to 50 years.
• About 1/3 of these within the City have reached their useful life.
• Traffic signal electronic components have a typical lifespan of 7 to 12 years.
Replacement of electronic equipment is currently funded on a case by case basis as budget allows.
• The City's signal detection equipment is comprised of two types: underground and non -intrusive, and the
non -intrusive equipment has a typical lifespan of 7 to 12 years.
• The City has 29 intersections with non -intrusive signal detection equipment, with 9 of these intersections
having equipment that is greater than 12 years old.
REVENUE OPTIONS
■ The City has identified funding deficits for transportation and infrastructure programs in both the
Street Fund and the Pavement Preservation Fund.
■ Major assumptions in defining revenue needs are:
■ Street Fund —
■ recurring revenues must be equal to recurring expenditures to finance current service levels,
■ recurring expenditures will increase at an inflation rate of 2% annually, and
■ the Street Fund will no longer make contributions to the Pavement Preservation Fund.
■ Pavement Preservation Fund —
• Goal to fund the pavement preservation program maintaining the current average PCI of 71,
• transfers from the General Fund will continue at the $953,200 included in the 2017 Budget, and
• additional revenues consist of $400k in REET and $1 million in grants annually.
STREET FUND PROJECTION WITH
ALTERNATE REVENUE SOURCE
'RECURRING ACTIVITY
Revenues
Actual
2013
Actual
2014
Actual
2015
Amended
Budget
2016
Budget
2017
Projected
2018
2019
2020
2021
Telephone Utility Tax
Alternate Revenue Stream
2,562,722 2,461,060 2,257,184 2,340,000 2,200,000 0 0 0
0
0 0 0 0 0 2,869,965 2,963,969 3,059,853 3,157, 654
Motor Vehicle Fuel (Gas) Tax
Multimodal Transportation Revenue
Right -of -Way Maintenance Fee
Investment Interest
Insurance Premiums & Recoveries
Miscellaneous Revenue
Total Recurring Revenues
Expenditures
Wages / Benefits / Payroll Taxes
Supplies
Services & Charges
Snow Operations
Intergovernmental Payments
Interfund Transfers -out - #001
Interfund Transfers -out - #311 (pavement preservation)
Interfund Transfers -out - #501 (non -plow vehicle rental)
Interfund Transfers -out - #501 (plowreplace.)
Signal Detection Replacement Program
Traffic Signal Replacement Program
Total Recurring Expenditures
Recurring Revenues over (under)
Recurring Expenditures
NONRECURRING ACTIVITY
Excess (Deficit) of Total Revenues
Over (Under) Total Expenditures
Beginning fund balance
Ending fund balance
1,868,055
0
0
2,920
1,790
12,911
1,878,476
0
0
2,037
4,204
5,209
1,935,629
0
0
3,212
4,319
9,649
2,004,900
0
50,000
3,000
0
10,000
2,040,300
98,868
50,000
4,000
0
10,000
2,040,300
98, 868
50, 000
4, 000
0
10, 000
2,040,300
98,868
50,000
4, 000
0
10,000
2,040,300
98,868
50,000
4,000
0
10,000
2,040,300
98,868
50,000
4,000
0
10,000
4,448,398 4,350,986 4,209,993 4,407,900 4,403,168 5,073,133 5,167,137 5,263,021 5,360,822
582,013 681,165 1 738,381 734,604 746,872
108,110 460,844 116,660 111,500 105,000
2,152, 294 2,197, 089 2,052,457 2,132, 754 2,167,151
485,717 0 465,232 430,000 468,000
797,275 876,680 707,967 771,000 796,000
39,700 39,700 39,700 39,700 1 39,700
282,000 282,000 206,618 67,342 67,342
10,777 10,777 12,077 31,000 23,250
150,000 75,000 0 40,000 77,929
0 0 0 0 40,000
0 0 0 0 200,000
761,809
107,100
2,541,994
477,360
811,920
39,700
0
23,250
70,000
40,000
200,000
777,046
109,242
2,592,834
486,907
828,158
39,700
0
23,250
70,000
40,000
200,000
792,587 808,438
111,427 113,655
2,644,691 2,697,584
496,645 506,578
844,722 861,616
39,700 39,700
0 0
23,250 23,250
70,000 70,000
40,000 40,000
200,000 200,000
4,607,886 4,623,255 4,339,092 4,357,900 4,731,244 5,073,133 5,167,137 5,263,021 5,360,822
(159,488) (272,269) (129,099) 50,000 (328,076) 0 0 0 0
(5,716) (85,721) (133,068)
(25,000) (120,000) 0 0 0 0
(165,204) (357,990)1 (262,167) 25,000 (448,076) 0 0 0 0
2,228,438 2,063,234 1,705,244 1,443,077 1,468,077 1,020,001 1,020,001 1,020,001 1,020,001
2,063,234 1,705,244 1,443,077 1,468,077 1,020,001 1,020,001 1,020,001 1,020,001 1,020,001
25
PAVEMENT PRESERVATION FUND PROJECTION WITH
NEW REVENUE SOURCE
Revenues
Actual
2013
Actual
2014
Actual
2015
Amended
Budget
2016
Budget
2017
Projected
2018
2019
2020
2021
Alternate Revenue Stream
0 0
0 0 0 3,245,800 3,245,800 3,245,800 3,245,800
Transfers in - #001 General Fund
Transfers in - #101 Street Fund
Transfers in -#123 Civic Facility Replacement Fund
Transfers in - Real Estate Excise Tax (REET)
Grants
Miscellaneous
Total revenues
Total expenditures
0
282,000
616,284
300,000
35,945
2,800
888,823
282,000
616,284
368,944
2,042,665
1,903
920,000
206,618
616,284
502,098
835,224
3,390
1,237,029 4,200,619 3,083,614
1,387,153 3,077,215 2,400,408
943,800
67,342
559,808
730,572
2,063,000
0
4,364,522
4,550,000
953,200
67,342
0
1,320,958
340,800
0
2,682,300
3,050,000
953,200
0
0
400,000
1,000,000
0
953,200
0
0
400,000
1,000,000
0
953,200
0
0
400,000
1,000,000
0
953,200
0
0
400,000
1,000,000
0
5,599,000
5,599,000
5,599,000
5,599,000
5,599,000
5,599,000
5,599,000
5,599,000
Revenues over (under) expenditures (150,124) 1,123,404 683,206 (185,478) (367,700) 0 0 0 0
Beginning fund balance 948,733 798,609 1,922,013 2,605,219 2,419,741 2,052,041 2,052,041 2,052,041 2,052,041
Ending fund balance 798,609 1,922,013 2,605,219 2,419,741 2,052,041 2,052,041 2,052,041 2,052,041 2,052,041
26
COMBINED REVENUE NEEDS
111 2018
Projected (in millions)
2019
2020
2021
Projected Funding Needs:
Street Fund #I0 I $ 2.9 $ 3.0 $ 3.1 $ 3.2
Pavement Pres Fund #3 I I 3.2 3.2 3.2 3.2
Combined Funding Needs
$ 6.1 $ 6.2 $ 6.3 $ 6.4
REVENUE OPTIONS -TRANSPORTATION BENEFIT DISTRICT
■ Formation
■ A transportation benefit district (TBD) is a separate legal entity.
■ ATBD may be formed by a city or county by ordinance following a public hearing.
■ A city or county may assume the powers of aTBD if it has the same boundaries.
• At the point of assumption, the TBD ceases to be a separate legal entity.
■ Use of Funds
■ Revenues collected by aTBD may be used for transportation improvements included in local,
regional, or state transportation plans.
■ Construction, maintenance, and operation costs are eligible.
REVENUE OPTIONS -TRANSPORTATION BENEFIT DISTRICT
■ Funding sources
■ Vehicle License Fees:
• Vehicle license fees of up to $50 may imposed without a public vote; however, this is limited as
follows:
Up to $20 vehicle license fee allowed from formation
Up to $40 vehicle license fee allowed if a $20 fee has been in effect for at least 24 months
Up to $50 vehicle license fee allowed if a $40 fee has been in effect for at least 24 months
• Estimated annual revenues from vehicle license fees are as follows:
$ I.4 million at $20 fee
$2.9 million at $40 fee
$3.6 million at $50 fee
REVENUE OPTIONS -TRANSPORTATION BENEFIT DISTRICT
Funding sources, cont.
• Sales and Use Taxes
• ATBD may impose a sales and use tax of up to 0.2% for up to 10 years (except to pay for debt service).
• This tax must be approved by a majority of voters.
• The tax is in addition to any other taxes authorized by law.
• The estimated annual revenue from a 0.2% sales and use tax is $4.3 million (based on 2015 gross sales
within the City).
• Excess Property Taxes
• ATBD may levy a property tax in excess of the one percent limitation for a one-year period whenever
authorized by the voters of the district.
• ATBD may pay for the retirement of voter -approved general obligation bonds, issued for capital purposes
only, by levying bond retirement property tax levies in excess of the one percent limitation whenever
authorized by voters of the district.
REVENUE OPTIONS - PROPERTY TAX - BANKED CAPACITY
Banked capacity is the difference between what the City could levy (the Highest Lawful Levy) and
what it actually levies for property tax. Banked capacity can be accessed by the City through the
annual property tax levy ordinance that is adopted by Council.
■ Accessing the banked capacity resets the base upon which the City's future property tax calculations
are made, and it does not mean that the City can go back in time and collect the property taxes that
have been left behind.
• The City's banked property tax capacity for 2017 is estimated to be about $555,000.
REVENUE OPTIONS - REAL ESTATE EXCISE TAX
■ Real Estate Excise Tax (REET) is collected from the sales of real estate within the City.
■ The City is committing an increasing amount of REET revenues toward pavement preservation, which
is beginning to impact the City's ability to match grant funding for other street projects.
This is due to transfers from the Civic Facilities Replacement Fund # 123 ending after 2016.
Contributions of REET to pavement preservation were $368,944 in 2014 and are up to $1.3
million in the 2017 Budget.
REET funds are projected to be exhausted by 2019.
REVENUE OPTIONS - REAL ESTATE EXCISE TAX
Actual 2014 - #311 Transfers In
Transfers in
Civic Facility Replacement
29%
REET 17%
General Fund
41%
13% Street Fund
Budget 2017 - #311 Transfers In
Transfers in
Civic Facility Replacement 0%
REET 56%
General Fund
41%
Street Fund
REVENUE OPTIONS - UTILITY TAX
■ Utility tax rate limited by state law to 6% (without voter approval) for:
■ Electricity
■ Natural gas
■ Steam
■ Telephone
■ Utility tax rate NOT limited by state law for:
■ Sewer/Stormwater
■ Solid waste
■ Water
■ Cable television (cannot be discriminatory)
REVENUE OPTIONS - UTILITY TAX
■ There are no statutory limitations on the use of utility tax revenues.
■ Any changes in the tax rate cannot take effect until the end of 60 days after the enactment of an
ordinance by the City.
■ Taxation of Other Municipalities
■ Clarified through a court case in 2014 that a city may impose utility taxes on other jurisdictions if
they are acting in a proprietary capacity.
UTILITY TAX COMPARISON TO OTHER MUNICIPALITIES
Municipality
Spokane
Liberty Lake
Cheney
Deer Park
Airway Heights
Pullman
Millwood
Spokane Valley - Current
Spokane Valley - Proposed
Electricity
Natural Gas
Telephone
Cable TV
Solid Waste
Water
Sewer
6.0%
6.0%
6.0%
6.0%
20.0%
20.0%
20.0%
3.0%
3.0%
3.0%
3.0%
3.0%
0.0%
0.0%
(1)
(1)
6.0%
5.0%
6.0%
11.0%
11.0%
6.0%
6.0%
6.0%
6.0%
12.0%
12.0%
12.0%
6.0%
6.0%
6.0%
3.0%
10.0%
19.8%
15.0%
8.0%
8.0%
8.0%
8.0%
11.0%
8.0%
8.0%
6.0%
2.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
6.0%
0.0%
0.0%
0.0%
0.0%
6.0%
6.0%
0.0%
0.0%
6.0% (2)
6.0%
6.0%
(1) Rates are 6% for Regular, 4% for Residential Street and 4.75% for Parks.
(2) Solid Waste utility tax just proposed for disposal services (not collection services).
Note: Utility tax rates for other juridictions were taken from the AWC 2015 Municipal Taxes
and Fees Survey, which was obtained at
https://www.awcn et.org/DataResou rces/resou rcesbytopic/TaxandUserFeeSu rvey.aspx
or from the municipal code of the jurisdiction.
UTILITY TAX REVENUE ESTIMATES
1% Utility Tax
2% Utility Tax
3% Utility Tax
4% Utility Tax
5% Utility Tax
6% Utility Tax
Electric Services $762,811 $1,525,621 $2,288,432 $3,051,243 $3,814,053 $4,576,864
Natural Gas Services 261,662 523,325 784,987 1,046,649 1,308,312 1,569,974
Sewer Services 140,827 281,654 422,482 563,309 704,136 844,963
Solid Waste Disposal Services 60,566 121,132 181,698 242,264 302,830 363,396
Water 68,813 137,627 206,440 275,253 344,066 412,880
$1,294,679 $2,589,359 $3,884,039 $5,178,718 $6,473,397 $7,768,077
QUESTIONS
COMMENTS
DISCUSSION