CITY COUNCIL AGENDA REPORT

MEETING DATE: 11/9/2020 ITEM NO: 7

TO: Mayor and Members of the City Council

SUBJECT: Informational Report Regarding the 3% Local Contribution Required Under Measure M to Fund the West Santa Ana Branch Line

FROM: Karen Lee, Management Analyst

REVIEWED AND APPROVED BY: Melissa Burke, Administrative Manager Christi Hogin, City Attorney William Rawlings, City Manager

RECOMMENDATION: Staff recommends that the City Council receive and file the report.

BACKGROUND: County voters approved Measure M on November 8, 2016, which implemented a permanent county-wide sales tax increase to fund projects to greatly expand the County’s public transit system, including new rail lines, roads, and related infrastructure. The Los Angeles County Metropolitan Transportation Authority (Metro) administers Measure M funds. Funding for the West Santa Ana Branch (WSAB) line is provided by Measure M. One of Measure M’s requirements is a local contribution by jurisdictions for constructing a rail project with a new station within their boundaries. The rationale for the contribution is that local jurisdictions receive a direct benefit due to the increased access to transit service that is above and beyond the project’s benefit to the County as a whole. The contribution amount is 3% of the project’s total costs at the 30% level of its final design. It is capped at this amount for local contribution purposes, even if the total project cost increases. This amount is then divided by the number of new rail stations constructed on the line. Jurisdictions located within a one-half mile area of the new station will proportionally share the costs based on each jurisdiction’s share of the area.

During the September 15, 2020, meeting of the WSAB City Manager Technical Advisory Committee, Metro staff gave a presentation and lead a discussion about the 3% local contribution for the WSAB project. They reported that the project’s design is at the 15% level, and still needs to undergo the environmental review process.

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ANALYSIS: Metro has publicly stated that the project cost is currently estimated at $6.3 to $6.5 billion in 2018 dollars based on 5% design level plus the addition of project revisions. The project cost has not yet been updated based on the 15% design level.

Based on the $6.5 billion estimate, the 3% local contribution is approximately $195 million. Each jurisdiction’s share is calculated based on the number of track mileage in the jurisdiction and the percentage of the jurisdiction in a station area. The City’s share would be approximately $8.71 million, which is 4.5% of the 3% local contribution amount. This cost does not include the design items requested by the City such as the below grade crossing at 183rd Street and Gridley Road, a multi-level parking structure with first floor retail that fronts Pioneer Boulevard with a façade designed in such a way that disguises the structure’s use as parking structure, and a public plaza at 187th Street and Pioneer Boulevard that creates open access between the station and Downtown. All of these design items would likely increase construction costs. The $8.7 million amount is a preliminary estimate because the final project design may change. Metro will vote in early 2021 on the final alignment of the WSAB line from among four possible configurations. Two of them would require two or more phases to complete. The City’s position is that it should not be saddled with a 3% local contribution for an entire project that may not get built for many years. Also, the existing cost includes extensive tunneling segments in the City of Los Angeles. These calculations are based on a conceptual design, and the City’s share will become more accurate after the 15% design level costs and final alignment are released in 2021 when the Metro board approves one of the four configuration.

Under Measure M, the City will be required to make five annual payments commencing one year after the date that the City executes its contribution agreement with Metro. Negotiations regarding the 3% local contribution are anticipated to start in early summer of 2023 and be completed by early 2024. Based on the current estimate, each annual payment will be approximately $1.7 million, and the City should expect to make the first of the five annual payments in Fiscal Year 2024-2025. Also, according to the Measure M Administrative Procedures (February 2018) the entire local contribution payment should be paid by the 50% point of the project’s construction. In-kind contributions such as waiving permit fees and staff time are eligible toward reducing the 3% local contribution, but must be included in the project costs and contribution amount by the conclusion of the 30% level. Metro will advance the station design to the 30% level by early 2022 when, at that time, it expects the Metro Board to certify the project’s Final Environmental Documents and when the Federal Transit Administration (FTA) is expected to issue its Record of Decision approving the project.

It is important that the City begins planning how to fund its 3% local contribution and station area improvements not covered by Metro. Additionally, Metro recently announced that it has resumed coordinating with Cerritos about a possible station at 183rd Street and Gridley Road after previously removing a station at that location. A station in Cerritos will have a severely negative economic impact on the City by undercutting the Downtown station with riders getting off at a proposed station at the Los Cerritos Center instead. The Cerritos station is not included in the 15% design level, and Metro will have to amend

2 the Environmental Documents before approving the Final Environmental Documents if this station moves forward. The City may need to persuade Metro, the Metro board, and the other cities in the corridor that the Cerritos station risks the project’s future by increasing costs after the project is already underway and complicating the Environmental Document review this far into the process.

The City’s Downtown station is expected to attract development like it has for other successfully planned and executed station areas among Metro’s train lines. Metro estimates that the WSAB corridor could potentially generate between $35.6 to $51.1 million per year due to increased property tax assessed valuation. It is important for the City to recover the revenue resulting from the train project. One idea is to establish an Enhanced Infrastructure Financing District (EIFD) to capture the value and use it to fund the City’s costs.

EIFDs can be created by a single city or with cooperating cities, counties, and special districts to form a governing board charged with creating a financing plan to meet the needs of the defined district. EIFDs are similar to the tax increment financing (TIF) district under redevelopment, where a portion of future property tax revenue in the district is dedicated to specific infrastructure projects to promote more economic growth. However, it will be necessary for the County to agree to contribute its share to the district. The cities of La Verne in Los Angeles County and Placentia in Orange County were successful in partnering with their counties to form EIFDs to prepare for new development due to coming transit projects. A corridor-wide EIFD consisting of all of the WSAB cities and the County can generate a substantial, collective economic impact due to the potential to create a unified, collaborative economic development vision and plan to benefit the region. The City and Eco-Rapid Transit (ERT), a joint powers authority consisting of most of the cities in the WSAB corridor, have been developing the framework for this EIFD. However, the City must be prepared to create its own EIFD if ERT is unable to organize the member cities into an EIFD. The City must be prepared to act independently absent the support of the other cities.

Other options to reduce the 3% local contribution include active transportation capital improvement contributions. These are capital improvement projects that promote and improve walking, bicycling, and accessing public transportation around the station area. In order for them to count towards reducing the City’s contribution, they must be included by the conclusion of the 30% level of the train project’s final design. There is State funding available for these projects on a competitive application basis. Staff is already working with a consulting team to develop the City’s active transportation plan that will identify such projects, and develop plans and cost estimates so that the City can successfully have them included in the 30% level plans and pursue State funds. This active transportation plan project is paid for by a grant that the California Department of Transportation awarded the City.

FISCAL IMPACT: The 3% local contribution could result in heavily burdening the City if it has to use the General Fund, Reserve Funds, and its local return funds from Metro such as Proposition

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A, Proposition C, Measure M, and . The City uses these local return funds for the Dial-A-Ride program, electric bus service, and transportation infrastructure maintenance for streets, sidewalks, trees, and medians. As of now, the actual full cost to the City is not fully known. Establishing the means to fund the City’s portion of the 3% local contribution ahead of Metro adopting the 30% design level in 2022 are urgent priorities to maintain the financial health of the City and ensure the station is constructed.

RECOMMENDED COUNCIL ACTION: Staff recommends that the City Council receive and file the report.

ATTACHMENTS: None

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