DISCUSSION PAPER

TRANSPORTATION NEEDS AND PROJECTED FUNDING WITHIN SHASTA COUNTY

INTRODUCTION:

Two events occurred recently that have led to the conclusion that the current system of transportation funding will not meet the needs of Shasta County residents in the future.

The first event was during the preparation of the 2001 Regional Transportation Plan (RTP). Over $680M of transportation projects was identified by four local Agencies and Caltrans to compete for limited State Transportation Improvement Plan (STIP) funding.

The second event is that State and Federal budget deficits have delayed the receipt of revenues needed for highway improvements. As of this writing, it appears that the earliest Shasta County would be able to access new State and Federal STIP dollars will not be earlier than 2008. Even for those projects already programmed, funds may not be allocated until 2005 or 2006. It is apparent that additional revenue sources beyond gas tax revenues will need to be identified to fund projected future needs. To obtain a clearer picture of exactly what transportation funding looks like, it seemed appropriate to expand the work done as part of the Regional Transportation Plan to include maintenance activities performed by the local Agencies and by Caltrans.

The goal is to get a comprehensive view of transportation needs and revenues available to meet those needs.

WHY IS GAS TAX NOT KEEPING UP WITH THE COST OF TRANSPORTATION?

The current gas tax levy is 36.4 cents per gallon. This is not indexed for inflation and has remained fixed since the early 1990’s. This 36.4 cents is broken down into 18.4 cents Federal and 18 cents California State gas tax. On an aggregate basis, the Federal Gas Tax reached its highest point of $21.2B in 1999. This amount decreased to $20.8B in 2001.

Several factors have contributed to this leveling off of gas tax. Cars averaged 14 miles per gallon in 1974; today it is over 28 miles per gallon. Some vehicles are getting 70 miles per gallon. Although more of us are driving more cars more miles, we are buying less gas per miles driven.

The gas tax is not indexed for inflation and as a result, the purchasing power of this levy has declined over time. For example, the California gas tax was 6 cents per gallon in 1957. If this tax had kept up with inflation, it would be approximately 33 cents per gallon today. By comparison, the current tax rate is 18 cents per gallon. Meanwhile, inflation has continued to increase road maintenance and expansion costs.

Although on a Federal level the gas tax has leveled off and has begun to decline, agencies within Shasta County are seeing a slight growth in gas tax. The only conclusion is that this increase is due to the population increase within the area.

The future does not look rosy at all. Technological improvements will create even greater fuel efficiency. Hybrid electric vehicles are currently in production and are getting in excess of 60 to 70 miles per gallon. Fuel cell vehicles are projected to be in production within 10 to 15 years and automakers continue to make more and more use of composite materials, which will make vehicles stronger and lighter, yielding better and better gas mileage. These trends all point towards one unavoidable conclusion; that gas tax revenues will continue to decline. It is predicted that gas tax revenues in California and consequently those allocated to Shasta County should level off in the next few years and then start dropping.

IS THIS PROBLEM ISOLATED TO SHASTA COUNTY?

The quick answer is no. Many other States and jurisdictions are dealing with road maintenance deficiencies in various ways. Our neighbor to the North, Oregon, has adopted an “Oregon Road User Fee Task Force,” which was given the responsibility by the Oregon Legislature, in 2001, to come up with a system to pay for road maintenance in Oregon other than with gas taxes. At the present time, the prime recommendation appears to be headed toward a “vehicle miles traveled fee,” whereby, Oregon residents would pay approximately 1.2 cents for each mile driven. This system is not intended to generate additional revenue for streets and highways; however, it is intended to replace the current revenue stream from the Oregon gas tax.

Seventeen Counties representing over 80% of the population of California have chosen to charge their residents an additional one half to one-cent sales tax. The revenue is dedicated to transportation purposes. The revenue from this source is administered by a separate “sales tax authority,” which makes decisions related to how this sales tax measure money is spent.

Sales tax measures have several characteristics that seem to make them acceptable to voters. These features are direct local voter approval, finite lives (typically 15 to 20 years), specific lists of projects or programs and County control over the revenues raised. These provisions give citizens more direct control over the transportation investments that they pay for than has typically been the case with motor fuel taxes, and their broad tax base enables large amounts of revenue to be raised with relatively low tax rates.

CURRENT CONDITIONS WITHIN SHASTA COUNTY

Staff has worked with local partners and Caltrans to identify various road maintenance costs and facilities needs. The work done as part of the Regional Transportation Plan was used as a starting point for future needed improvements. Road maintenance needs have been developed using various techniques, such as cost per mile and using estimated useful life of various improvements. Costs identified in the base-year 2002, have been escalated by 3 percent per year. Various escalation factors were discussed ranging from 2 percent to as high as 3.5 percent. Three percent seemed to be the most reasonable cost escalation factor. This is identical to the inflation factor used by Redding for planning purposes.

The future needs of the region include road expansion and improvements, new lanes, roads and signals, maintenance and rehabilitation costs associated with keeping the pavement in good condition. An assumption has been made that overlays generally have a ten-year life. Other needs examined include general public transit and transit oriented toward senior citizens.

It should be noted that the transportation system in Shasta County, while under some stress, still functions quite well. The area in and around Redding experiences congestion at predictable locations around major commute times and at lunchtime. However, given our pattern of development and growth, these periods of congestion are predicted to increase in intensity and duration absent improvements. The key question is “Are we willing to fix our transportation problems before they get worse”?

Maintenance needs within the region continue to grow. Generally, the three Cities and the County perform as much road maintenance as the budget will allow. The County has historically used only funds specifically earmarked for road purposes and received no subsidy from the General Fund. Redding has not added a street maintenance worker since 1978, due to limited resources. Street maintenance workers at Anderson and Shasta Lake perform road maintenance as well as maintain water and sewer facilities. These examples are not intended as criticism of these agencies, but are used to present a picture that the transportation network is functioning fairly well; therefore, it is easy to put off addressing problems when there are more pressing priorities.

RESULTS OF THIS STUDY:

Based upon input from the three Cities, Shasta County, RABA, the CTSA and Caltrans, total costs to maintain our road network and to provide transit services will total nearly $4B through 2025. Total resources available total approximately $1.7B, resulting in a deficit of about $2.3B. Although this is a staggering figure, it is consistent with needs studies conducted in other regions throughout the State. For example, Los Angeles County has estimated it will cost nearly $1B per year just to meet new stormwater requirements. Obviously, the Shasta County region will have to deal with less revenue than identified needs. Exhibit A summarizes the results of this study and breaks it down by agency. No attempt has been made to allocate STIP dollars to agencies and/or projects.

The needs for maintenance of the system will continue to outstrip available revenues. With the exception of STIP and Bridge Replacement revenues, most revenue sources are currently dedicated to maintaining the existing system. Maintenance needs outpace revenues by about $2B. Nearly $1B of unfounded maintenance needs is on the State highway system.

Nearly $1.1B in system improvements has been identified. The majority of these needs are expansion projects including signals, additional lanes and interchange improvements. Based upon recent activity it is estimated that the region will be allocated $64M in STIP revenues through 2025. This includes both the regional and the inter-regional programs.

POTENTIAL SOLUTIONS:

Staff has identified several courses of action the Agency could undertake. The first strategy would be to maintain the status quo. In this case, most new facilities within the region would be provided by the developers, and revenues from the State and Federal government. Due to State and Federal government budget problems, it is projected we would see very few new improvements in the region in the next five years and possibly longer.

The second option would be to increase traffic impact fees on development in the area. These impact fees are generally levied by the local Agency, be it City or County. Generally these are used as a way of meeting the needs generated by new development and are levied on specific developments at the time they are approved. Traffic impact fees are generally limited to funding new facilities. In most cases they do not fund 100% of new improvements, and they are not used to address maintenance and operational needs.

The third option is to present the voters of Shasta County with a sales tax proposal. In order to get on the ballot, this would require approval by a majority of the Cities, representing a majority of the County’s population. In other words, it would require the City of Redding and one of the other Cities to approve such a measure. Then it would require approval by the Board of Supervisors. Based upon activity through June 30, 2003, a 1/2-cent increase in the sales tax would generate $11.5M annually.

If this option is adopted by the Agency, it will require a major effort to realize success. Although the locally elected officials at the three Cities and the County can place a sales tax measure on the ballot, it will require a 2/3 vote to implement. Obviously, this measure will require strong support from all segments of our region to achieve success.

If this long-term option is selected by the Agency, two specific actions are suggested. First, a consultant should be engaged by the Agency to conduct an evaluation of the pavement conditions throughout the region. The purpose of this evaluation will be to get an objective evaluation of the condition of our street and road network. To the extent that existing studies exist (such as at Shasta Lake) they would be incorporated.

Second, letters should be sent to the three Cities and the County encouraging them to examine their traffic impact fees, to determine that they are set at levels high enough to support the cost of improvements generated by that development. The Agency should also offer to fund such efforts. The voters of Shasta County likely will not vote for a sales tax increase if they believe it is subsidizing new development.

After these two events are complete, the issue should be brought back for future consideration by the Agency. At that time it would seem appropriate to engage the public in this dialogue, establish a citizens committee to develop an expenditure plan, make a decision on how such a measure would be administered, then present this item to the Cities and the County for their consideration of the measure. Perhaps by then the state will have lowered the approval requirement to something less than 2/3.