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HomeMy WebLinkAboutRPT 4 MTAP 01-03-94DATE: DECEMBER 22, 1993 REPORTS NO. 4 1-3-94 TO: NILLIAM A. HUSTONv CITY MANAGER FROM: P. ONaLD A. NAULT, DIRECTOR OF FINANCE SUBJECT: MEASD~ "M" TURN BACK ADVANCEMENT PROGRAM (MTAP) RECOMMENDATION= Receive and File FISCAL IMPACT= None 'DISCUSSION= During the general election in held April of 1991, the voters approved a special 1/2 cent sales tax increase, the proceeds of which would be restricted to statewide transportation improvements. The County of Orange and its cities receive about 14.6 percent of the net sales tax revenues of these "Measure M" funds. The City of Tustin is expected to receive approximately $450,000 per year from this special revenue source. , . Measure "M" payments are made to cities on a quarterly basis with cities sharing the interest.earnings with the state for funds held prior to distribution. Several major cities that expect significantly larger Measure "M" receipts and that are in a position to start major projects immediately have approached the Orange County Transportation Authority (OCTA), the Measure "M" administrators for Orange County, and proposed a program of advancing funds to be supported by tax exempt debt. After much discussion, OCTA initiated the Measure "M" Turn Back Advancement Program (MTAP). In early December, we received correspondence from OCTA that briefly outlined the program and a copy of their procedures and guidelines. (see attached) Having reviewed the documents provided and touching base with Bob, my recommendation at this time would be to not participate in the program this year. The guidelines indicate that cities may participate in the program on a year by year basis so we would not be closing the door on any potential benefits by not proceeding this year. They did not provide any numbers for analysis and they are not sure of the cost of the program and the impact on participants. I feel that it is worth the wait to see how the program is received in the market place and Page 2 December 21, 1993 Measure "M" Turn Back Advancement Program give them time to gain some experience so that we may conduct a more thorough analysis of the program. At this time it appears that we would be at risk of losing net tax proceeds to cover cost of issuance that could be in excess of potential increases in interest income on advanced funds. Director of Finance RAN: ls Attachments: Letter from OCTA Procedures and Guidelines a: ~a~re. ¥ OCTA BOARD OF DIRECTORS Gao/L. Hausdorfer Chairman Gaddi H. Vasquez Vice-Chairman Sarah L. Catz Director William D. Mahoney Director ltv Pickler Director Thomas F. Riley Director Charles V. Smith Director Roger R. Stantoi~ Director William G. Steiner Director Bob Wahlstrom Director Daniel H. Young Director Russell O. Lightcap Governor's Ex-Officio Member Eileen Krause Alternate Harriett M. Wieder Alternate Gregory Winterbottom Alternate December 8, 1993 Ronald Nault Finance Director City of Tustin 300 Centennial Way Tustin, CA 92680 RECEIVED 1 0 1993 FINANCE DEPT. Dear Mr. Nault: As you are aware, Measure M provides for a "local turnback" of sales tax revenues to the cities and the County of Orange. This turnback is equivalent to 14.6% of the net sales tax revenues received by the Authority and payments are made on a bi-monthly basis. In January 1993, the OCTA Board of Directors directed staff to investigate the possibility of advancing Measure M turnback funds to eligible jurisdictions. This would provide the jurisdicti0ns with more flexibility in programming Measure M funds for transportation.projects. One of the possibilities explored was to utilize a tax-exempt commercial paper program to provide the funds for advancement. OCTA determined it would be possible to advance up to one year's worth of turnback funds to local jurisdictions using this approach. This resulted in the development of the Measure M Turnback Advancement Program (MTAP). On July 22, 1993 the Authority was authorized to issue up to $100 million in commercial paper. Of that amount, $20 million was set aside for the MTAP program. The MTAP program guidelines were presented to OCTA's Technical Advisory Committee (TAC) and the Policy Advisory Committee (PAC) of city and county representatives in November 1993, where they were approved in concept. The guidelines will be presented to the OCTA Board of Directors for final approval on December 13, 1993. The PAC, comprised of ciW managers, requested OCTA staff to notify the city finance directors of the de:ails of the MTAP program. A copy of the guidelines for the MTAP program is -:,nclosed with this leter to serve this purpose. Mr. Ronald Nault December 8, 1993 Page 2 One of the requirements outlined in the guidelines is that each city wishing to participate in the MTAP program adopt a resolution as part of its Measure M eligibility submittal. For the FY 1993-94 MTAP program these resolutions must be adopted and forwarded to OCTA by January 14, 1994. This requirement was communicated to the jurisdictions at the November 17, 1993 TAC meeting in order to provide sufficient time for the cities to pass the resolutions. If you anticipate any difficulties in having your resolution approved and forwarded by January 14, 1994, please notify OCTA at the number below. The details related to the required resolutions are discussed in the enclosed guidelines. If you have any questions about the MTAP program or require additional information, please call Kurt Brotcke at (714) 560-5742; call Jeff Clark at (714) 560-5680 if you have any questions related to the financial asPects of the MTAP program. Sincerely, I, 1 ./ ! .'" . '~ ,S -' .-" ,: . ~ <.,." '?'-' - ./~ ~irector (~J.?Finance and Administration Enclosure C: City Managers OCTA TAC Members Dave Elbaum, OCTA Measure M Turnback Advancement Program (MTAP) PROCEDURES AND GUIDELINES Introduction Orange County voters approved the Revised Traffic Improvement and Growth Management Program (Measure M) in November 1990. Measure M authorized a one-half of one percent retail sales tax for transportation purposes. The ordinance provides a vadety of funding for transportation needs in Orange County. Included in the Measure M program is a 'turnback" provision in which 14.6 percent of Measure M funds is returned to cities and the County of Orange on a formula basis. This formula is based on Master Plan of Arterial Highway miles in a given city, population, and the current sales tax forecast. According to the Measure M ordinance, the Orange County Transportation Authority (OCTA) must disburse the turnback funds within 60 days of collection. OCTA disburses turnback funds to local jurisdictions every other month as required by the ordinance, based on the flow of sales tax revenue. In some cases, the disbursement of turnback funds to local jurisdictions does not meet the cash flow needs for street and road improvements. Unforeseen events, such as severe weather conditions, may create a need for repairing roads earlier than anticipated. To aid eligible jurisdictions in meeting critical cash flow needs for local transportation improvement projects, OCTA proposes using debt instruments to advance their turnback payments. Using a tax-exempt commercial paper program, OCTA can advance payments to local jurisdictions once during the fiscal year provided certain procedures and guidelines are followed. The program's interest costs are kept to a minimum by earning interest on escrowed turnback funds and using Iow-cost commercial paper to advanCe the turnback funds. The program provides local jurisdictions with advanced turnback payments once during the fiscal for Iow or no cost depending on interest rates and other factors. Specific procedures and guidelines for the Measure M Turnback Advancement Program (MTAP) are discussed below. Procedures and guidelines The MTAP program is designed to provide local jurisdictions the flexibility to advance turnback funds while assuring the funds are spent according to Measure M requirements and conform with state and federal laws related to tax-exempt debt instruments. Measure M Turnback Advancement Prc.,; ~m - ? 1/22;.! Page Local resolub'ons To be eligible to participate in the program, local agencies must adopt annual resolutions authorizing OCTA to issue commercial paper for the amount of turnback funds which the agency is expected to receive in a given fiscal year. Additional program requirements contained in the sample resolution (Attachment A) specify that the local agency must: (1) forego bi-monthly turnback payments and interest in lieu of a one-time payment for the sum of annual turnback funds less interest earned; and (2) use the advanced turnback funds to pay for transportation improvement needs within the City or County eligible under Measure M requirements; and (3) adhere to the Measure M ordinance and program guidelines set forth in the Measure M Growth Management Program Preparation Manual and the Measure M Turnback Advancement Program: Procedures and Guidelines (this document); and receive a debit against future 'turnback" payments if costs exceed interest earnings or a credit if earnings exceed costs subject to Measure M restrictions. Actual resolutions adopted by local jurisdictions may differ in format or style from the sample resolution. However, a local jurisdiction's resolution must contain items (1) through (4) above in order for the jurisdiction to participate in the MTAP program. Eligibility All local jurisdictions in Orange County are eligible to participate in the MTAP program provided Measure M eligibility is established and/or maintained. Schedule Attachment B is a summary schedule for the FY 94/95 MTAP program provided as an example.~ This schedule will be updated annually. General due dates for specific MTAP program requirements are discussed below. " In early March of each year, OCTA will evaluate the cost of implementing the MTAP program for the next fiscal year. In some cases, the costs to issue commercial paper may not be covered by the interest generated on escrowed turnback funds. Consequently, OCTA will assess current and projected interest rates, the cost to issue commercial paper, and local jurisdiction input in deciding whether the MTAP program meets a local jurisdiction's funding needs. As part of the Measure M eligibility call in late March of each year, OCTA will inform the local agencies of the feasibility of the MTAP program for the upcoming fiscal year. Measure M Tu."--..~ack Advancement Program - 11/22/93 Page 2 In some cases, local jurisdictions may wish to proceed with turnback advancement even though the costs of commercial paper may exceed annual turnback revenue. In this case, the local agency is responsible for any costs not covered by the interest earned on escrowed turnback funds. OCTA will deduct these additional costs from future turnback payments.- However, the local jurisdiction will be informed of these anticiPated additional costs ~ri0r to proceeding with the turnback advancement. Local jurisdictions with a need to advance turnback funds will adopt MTAP resolutions and forward them to OCTA as part of their Measure M eligibility submittals. MTAP resolutions and eligibility submittals are due to OCTA by June 30. Between July and November of each year, OCTA will review eligibility submittals including MTAP advanced payments. No advanced turnback funds will be released until a local jurisdiction's eligibility submittal has been approved by the OCTA Board. Generally, this will occur by November of each year. Advanced turnback payments will be made once the OCTA Board approves a local jurisdiction's eligibility submittal. Adjustments In certain circumstances, the amount of advanced turnback funds paid to a local agency may need to be adjusted upward or downward. Adjustments, if necessary, will be made in November of each year for the prior fiscal year. The adjustment will be made to either advance turnback payments or regular (bi-monthly) turnback payments. Summary The MTAP program is designed to meet a local jurisdiction's cash flow needs for transportation improvements. This is accomplished through the use of Iow cost debt and revenue earned from escrowed Measure M funds. Local jurisdictions requiring turnback funds prior to the bi-monthly payment schedule may choose to participate in the MTAP program. All Measure M requirements apply to advanced turnback funds. Payments of advanced turnback funds will be made in November of each year contingent on Board approval of Measure M eligibility submittals. NOTES: 1. The FY 93/94 schedule will differ slightly based on the program beginning in mid-fiscal year. Measure M Turnback Ac~vance~ent Program - 11/22/93 Page 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 2O 21 22 23 24 25 26 27 28 29 30 31 32 33 34 RESOLUTION A RESOLUTION OF THE CITY OF CITY COUNCIL AUTHORIZING THE ORANGE COUNTY TRANSPORTATION AUTHORITY TO USE COMMERCIAL PAPER TO ADVANCE THE CITY'S FY 93/94 TURNBACK FUNDS WHEREAS, Orange County voters approved the Revised Traffic Approve, d and Growth Management Program (Measure M) in November 1990 authorizing a one-half of one percent retail sales tax for transportation purposes; and WHEREAS, Measure M provides Orange County cities and the County with funds for street and road maintenance through a '~urnback" provision, and the Orange County · Transportation Authority is required to disburse these funds to the local jurisdictions Within 60 days of collection; and WHEREAS, Orange County local jurisdictions rely on '~urnback" funds for timely rehabilitation of existing streets and roads; and WHEREAS, the City of is expected to receive $ through the "turnback" program less intereSt earned; and in FY 93/94 WHEREAS, the City of has a need to fund local transportation improvements prior to receiving the bi-monthly "turnback" funds from the Orange County Transportation Authority; WHEREAS, Orange County Transportation Authority has demonstrated the feasibility of advancing FY 93/94 '~urnback" payments to local jurisdictions using commercial paper; NOW THEREFORE, BE IT RESOLVED THAT the City of Orange County Transportation Authority to: authorizes (1) issue commercial paper for 5/6ths~ of the amount of 'turnback" funds less interest the City is expected to receive in FY 93/94; 1 2 3 4 5 6 7 8 9 10 11' 12 13 14 15 16 -- ? 18 19 20 21 23 24 (2) use the revenue and interest generated from the City's 'turnback" funds to pay debt service for the commercial paper. NOW THEREFORE, BE IT RESOLVED THAT the City agrees to: forego bi-monthly turnback payments and interest in lieu of a one-time payment for the sum of annual turnback funds less interest earned; and (2) use the advanced turnback funds to pay for transportation improvement needs within the City or County eligible under Measure M requirements; and (3) adhere to the Measure M ordinance and program guidelines set forth in the Measure M Growth Management Program Preparation Manual and the Measure M Turnback Advancement Program: Procedures and Guidelines (this document); and (4) receive a debit against future "turnback" payments if costs exceed interest earnings or a credit if earnings exceed costs subject to Measure M restrictions. NOTES: 1. FY 93/94 requirement only. in future fiscal years the estimated annual amount of tumback funds can be advanced to a local jurisdiction provided Measure M eligibility is obtained and/or maintained.