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Local Innovative Financing, Transportation Funding and Fiscal Diversification for a Regional Transportation Agency in Boise, Idaho

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, Transportation Funding and Fiscal Diversification for a Regional Transportation Agency in Boise, Idaho By: Kathryn A. Levihn, Donald L. Kostelec and Sabrina Bowman This paper examines the methods by
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, Transportation Funding and Fiscal Diversification for a Regional Transportation Agency in Boise, Idaho By: Kathryn A. Levihn, Donald L. Kostelec and Sabrina Bowman This paper examines the methods by which a regional transportation agency, the Ada County Highway District (ACHD), has diversified its funding programs and created new initiatives to address the growing funding gap for transportation infrastructure that has proliferated at national, state and local levels. ACHD is a unique agency in that it has jurisdiction over the local public highway system within six cities and the county in Ada County, Idaho, and manages aspects of the state highway system within its jurisdiction. The multi-jurisdictional role of ACHD has fostered numerous financing strategies and partnerships among state and local government entities, as well as the private sector, to address local transportation needs in an innovative and productive manner. A series of policy statements developed by ACHD in the mid-1990s serve as the impetus for these programs, which locally projects the philosophy and intent of innovative financing programs established through Federal transportation bills. INTRODUCTION The Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users (SAFETEA-LU) continues the precedent set by the Federal government for innovative financing through previous transportation reauthorization bills by extending programs to encourage utilization of non-traditional mechanisms for financing transportation infrastructure. Throughout most of the programs identified in SAFETEA-LU, the bill stresses innovative financing mechanisms and processes for such funding as alternatives to the historical grant-driven methods of finance. (SAFETEA-LU 2005) Lawmakers for the Ada County Highway District, a regional transportation agency in the Boise, Idaho, region, have instituted their own set of innovative financing measures in the spirit of Federal measures. Despite the establishment of innovative financing programs at the Federal level, the financing of transportation infrastructure is facing a crisis as the efficacy of traditional user fees continues to erode the buying power of transportation agencies. This problem is perpetuated by disproportionate growth in vehicle miles traveled when compared to the addition of lane miles. (Wachs 2006) The State of Idaho and the Boise region have been subject to growth rates since the early 1990s that are among the fastest in the United States. In 2006, Idaho was ranked as the 3 rd fastest growing state and the Boise region as the 7 th fastest growing urban area in the country. The growth has impacted the amount of vehicle miles traveled in Idaho as there has been a 104% increase in vehicle miles traveled and a 93% increase in registered vehicles since Ada County, the most populous county in the six-county Boise region, has experienced a 35 percent increase in vehicle registrations since (ITD Forum 2006) The Boise region, with a population of more than 500,000, constitutes more than one-third of the state s population and serves as the governmental, financial and cultural center for the state. The City of Boise, as well as the cities of Eagle, Garden City, Kuna, Meridian and Star, are located within Ada County, which is served by the Ada County Highway District (ACHD), a unique governing body within the state of Idaho and the United States. Ada County has a population of 383,000, a growth of more than 86% since 1990 (COMPASS Population 2006) Idaho s population is predicted to grow by 56 percent through 2030 twice the national average with the Boise region expected to absorb nearly 70 percent of statewide growth (COMPASS Communities in Motion 2006). State and local governments in the United States have assumed responsibility for the construction and maintenance of a majority of the almost 4 million miles of the public highway system, which has stressed the nation s surface transportation network to the point that available funding can no longer address the scope of needs (DeSimone 2003). Since 1990, ACHD has responded to the challenge by embarking on numerous innovative financing mechanisms and techniques at the local level. These include assessing impact fees on new development, establishing local vehicle registration fees, supporting greater flexibility of Federal funds through coordination with the Idaho Transportation Department and the region s Metropolitan Planning Organization, and pioneering unique funding partnerships among the entities such as cities, private developers, utility companies and redevelopment agencies. Funding programs established since 1990 by ACHD account for more than $25 million or 26 percent of the agency s $95.68 million fiscal year 2007 revenues (ACHD FY2007 Annual Budget 2006). Projects for which ACHD has been able to obtain supplementary funding outside of these and other traditional source range in size from $10,000 to $20 million, and in scope from neighborhood sidewalk improvements to new multi-lane river crossings. Non-Federal contributions from partnering agencies, companies or coalitions have ranged from $1,000 to $4.5 million. The partnering contribution types have also varied from outright cash, to grants requiring match, to up-front payments with reimbursement contingent upon future impact fee collections. This paper will discuss how ACHD addresses funding challenges similar to those experienced by many transportation agencies nationwide. The unique role of ACHD is outlined below followed by a discussion of funding programs and initiatives, as well as the relationships that allow for innovative financing at the local level. Six project case studies are outlined to demonstrate the breadth of projects and financing arrangements undertaken through local innovative financing. This concludes with a discussion of steps and efforts to further utilize existing financial partnerships as well as development of new funding arrays. The paper is a revision and extension of previous published work by Levihn, et. al., (2006) for the Transportation Research Board. WHAT IS THE ADA COUNTY HIGHWAY DISTRICT? The Ada County Highway District (ACHD) is a unique transportation agency with full jurisdiction over all city and county roadways within Ada County, Idaho. ACHD was created by a county-wide referendum in 1971 due to inequities in maintenance between the five cities and the county roadway system, the desire to realize more efficient use of resources, and to plan on a more regional basis. The ACHD Board consists of five Commissioners, elected by sub-district. ACHD is tasked with planning, constructing, and managing the transportation needs of Idaho s Capital City (Boise, population 211,000), and five other communities (Meridian, pop. 66,000; Garden City, pop. 12,000; Eagle, pop. 20,000; Kuna, pop. 13,000; and Star, pop. 5,000) and the unincorporated areas of Ada County (pop 56,000). The total population served by ACHD is estimated to be 383,000. This unique responsibility requires daily coordination with the six city governments, county government, the development community, the Metropolitan Planning Organization, three city urban renewal development agencies, the state department of transportation and the regional public transportation authority. ACHD initially concentrated on routine maintenance work such as filling potholes. Over time, major new roadway projects or capacity (widening) projects were planned and built. Besides roadways, other work was done to meet ACHD s charter under state code to ensure a complete system including: Construction and maintenance of more than 300 bridges, necessary because of the need for roads to cross irrigation delivery and drainage systems as well as to cross the Boise River, a major feature running through three cities Traffic signals, signage, truck routing and operations encompassing the Idaho Transportation Department s system signals within ACHD s area of jurisdiction 2 Intelligent Transportation System utilization providing fiber optic communication in a loop around the region and tying into a traffic management system, providing current status, updates on traffic conditions, and immediate response to changes in the system Rights-of-way acquisition Commuteride, a vanpool and carpool matching department promoting multi-occupancy vehicles and providing support services such as Guaranteed Ride Home, employer support services, and park-and-ride facilities Drainage systems for roadway surface conveyance that also address water quality requirements Community programs including sidewalks, bike lanes, and safe routes to school efforts FUNDING CHALLENGES FOR THE ADA COUNTY HIGHWAY DISTRICT The Ada County Highway District (ACHD) is funded roughly in thirds by local property taxes, the highway distribution account (motor fuels and other vehicle related taxes) and other revenues such as impact fees, partnerships, and federal funds and/or grants. ACHD s budget for 2007 is $95.68 million, with 55.9 percent allocated to capital projects and 44.1 percent allocated to operations and maintenance. ACHD operates with a general goal of operations and maintenance costs not constituting more than half of the annual budget. (ACHD FY2007 Annual Budget 2006) In 1995, the ACHD Commission established three policies to address balanced funding for maintenance and improvement projects, allocation of funds to expand the local system and prioritization of highway and bridge improvement projects. These policies profoundly drive the budgetary goals of ACHD, including its innovative financing programs and associated prioritization and cost share policy initiatives. The Balanced Funding for Highway Maintenance and Improvement Projects (1995) policy established a goal of a split in operations/maintenance and capital funds by acknowledging: Funding is not sufficient to maintain the highway to an acceptable overall condition The rate of deterioration of the system exceeds the agency s financial capacity Therefore, the Commission s policy is that all maintenance and improvement funds be allocated to uniformly address the deficiencies of principal components of the system Figure 1 illustrates the proportion of ACHD expenditures for capital and operational/maintenance in terms of amount of expenditures and percentage of expenditures in relation to the agency s overall budget since the 1995 policy statement on balancing funding. This characterizes the predicted convergence of capital and operational/maintenance needs in approximately These projections set the basis for ACHD s innovative financing practices aimed at reducing the discrepancy between the two to achieve the uniformity desired in the balancing funding policy. The Allocation of Funds to Expand the Local Highway System (1995) policy set the tone for ACHD s innovative financing practices. It stated the agency would consider the expansion of the system, both new roadways and addition lane miles to existing roadways, only if development impact fees are available or if funds are matched by a significantly larger proportion of funds from other sources. The other sources identified were Federal funds, cost sharing with other agencies or the private sector and local improvement districts, a mechanism by which the agency bonds for specific improvements and assesses beneficiary properties for the cost of such improvements. Recognizing the backlog of needed improvements, the Prioritization of Highway and Bridge Improvements (1995) policy ordered the backlog be arranged by priority of importance to the community. The prioritization policy now serves as the basis for ACHD s prioritization procedures outlined later in this paper. 3 Figure 1: Ada County Highway District Comparison of Capital vs. Operational/Maintenance Expenditures ( ) Millions $ Total Budget Total Budget Projected Capital Budget Capital Budget Projected Operational and M ainenance Operational and M aintenance Projected % 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% Capital, % of Total Budget Capital Projected, % of Total Budget Projected Operational and M aintenance, % of Total Budget Operational and M aintenance P rojected, % of Total Budget P rojected 0.0% Significant growth in population in Ada County and the Boise region, combined with associated growth in vehicle miles traveled and miles of congested roadways, have stretched ACHD s resources to the brink such that maintaining the split is becoming increasingly difficult. In 1999, the Metropolitan Planning Organization for the Boise Urbanized Area, in cooperation with ACHD, commissioned an analysis of local roadway finances to assess needs and resources, and determine the level of ACHD s annual revenue gap. 4 The Financial Analysis for Local Roadway Needs in Ada County report (1999) concluded ACHD costs had risen at rates equal to the rate of economic growth plus inflation, or in some cases, higher. Conversely, revenues from sources such as the State Highway Distribution Fund and development impact fees grew at the rate of economic growth without an inflation adjustment. Therefore, it was predicted that the District would be losing ground without some revenue enhancements or adjustment to revenue sources to account for inflation. The funding gap was measured to be $7.1 million per year. Recommendations to address the gap included tying revenue sources such as impact fees and local registration fees to inflation, taking measures to continue the local registration fees beyond a sunset year of 2010, implementing revised development impact fees that better reflect the cost of capital projects as identified in ACHD s Five-Year Work Program and considering the revival of local improvement districts, a mechanism not employed by ACHD in more than a decade. (Ada Planning Association 1999) The Idaho Forum on Transportation Investment reported dramatic increases in the price of concrete, asphalt, steel and fuel have driven construction costs up- an estimated 11 percent in 2004 and another 16 percent in Idaho is the third (as of 2006) fastest growing state in the country. This growth created an increased strain on ACHD s highway system and its limited revenue sources. FEDERAL GOVERNMENT AND FUNDING The Ada County Highway District (ACHD) is acutely aware of Federal limitations in terms of funding, the mercurial nature of Congress in its appropriation of funds and the desires of donor states to re-coup their share of contributions to the Highway Trust, as Idaho historically rates as a donee state as recognized in the Forum on Transportation Investment (2006). Additionally the Community Planning Association of Southwest Idaho (COMPASS), as the Metropolitan Planning Organization both for the Boise Transportation Management Area and the Nampa Urbanized Area, is re-organizing the manner in which it allocates its share of the Surface Transportation Program (STP) for improvements within the Boise region. Despite these developments, the agency recognizes that funds are still available for improvements to the local highway system, as distributed through the Boise Metropolitan Planning Organization s status as a Transportation Management Area, the Idaho Transportation Department formula for the Surface Transportation Program and other programs. The US Department of Transportation cites that transportation spending is divided as follows: Federal Expenditures 10 percent Federal Grants 18 percent State and Local Expenditures 72 percent (DeSimone 2003) The role of the federal government in transportation financing is declining. Wachs (2006) states the building of the Interstate Highway System is now supplemented by scattershot system maintenance, while other transportation needs in terms of capacity, alternative modes, mitigation and federal leadership has waned. This is consistent with the findings of the Financial Analysis for Local Roadway Needs in Ada County (1999) and ACHD s policy statements of With Federal funding identified as a manner by which to fund system improvements for ACHD through the 1995 policy statement for funding allocation, the agency continues to pursue and maximize Federal funds available through the Metropolitan Planning Organization, state DOT-administered grant programs and earmarks. To this end, the ACHD 2007 to 2011 Five-Year Work Program includes 27 projects that have secured $41 million in Federally-funded projects across seven Federal programs, including: Surface Transportation Program Urban, as defined by the Idaho Transportation Department Surface Transportation Program Rural, as defined by the Idaho Transportation Department Transportation Enhancement 5 Congestion Mitigation/Air Quality Federal Transit Administration Section 5309 Federal Highway Administration Scenic Byways Earmarks Figure 2 illustrates ACHD s Federal funding in relation to total revenue. ACHD s trends are consistent with the US DOT s assertion (DeSimone 2006) that the bulk of transportation funding is generated at the local level. Millions $ Figure 2: Ada County Highway District Federal Funding and Total Revenue ( ) Total Revenue Federal Aid There is acknowledgement at the regional level through COMPASS that the MPO s Board of Directors should establish policies to prioritize STP and other Federal funds under its purview to address the goals, objectives and needs identified in Communities in Motion, the regional long-range transportation plan adopted in ACHD has historically been the recipient of nearly all of the STP funds for the Boise MPO, but the scale of needs identified in Communities in Motion points to greater investment through this program on both ACHD and state corridors, as well as the regional public transportation authority. (COMPASS Prioritization 2006) The establishment of these policies is a result of a $628 million deficit in transportation funding identified in Communities in Motion. The shortfall represents almost 10 percent of the more than $6.2 billion in anticipated transportation revenues for the Boise region, including five counties other than Ada County. (COMPASS Communities 2006) STATE GOVERNMENT AND FUNDING The Idaho Transportation Department, the state s DOT, is also grappling with the same operations/maintenance and capital allocation shortcomings acknowledged by the Ada County Highway District (ACHD). Historically, some state generated funds have been available to local jurisdictions for partnering projects such as joint state/local highway intersections. This mechanism has allowed ACHD to proceed with implementation of this type of project in a manner not typically afforded a state DOT due to lesser restrictions within local implementing agencies when compared to the state-level requirements. These partnerships have been mutually beneficial to the agencies. Now, and in the future, it is projected that state funds for the Idaho Transportation Department will primarily be used for maintenance, operating costs and Federal match, with little or no allocation to local agencies. The State of Idaho, through the Idaho Transportation Department, enabled Grant Anticipation Revenue Vehicle bonding authority (GARVEE) to finance transportation improvement projects throughout the state, but the GARVEE program is funded at levels significantly less than what needs would dictate. The Forum on Transportation Investment (2006) was initiated to establish an understanding of the needs and demands for transportation improvements and the available options for financing and funding Idaho s 6 transportation system. It also identified strategic action for consideration by the Idaho Transportation Department Board and State Legislature on how to shape future investment. Idaho s fuel tax, currently at 25 cents per gallon has not increased since 1996 and state vehicle registration fees, ranging from $24 to $48 have not increased since Inflation and more fuel efficient vehicles have flattened the primary sources for fun
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