wouldn't want that?! But, as is often the case, the devil is in the details.
In November, Richmond voters approved Measure U, a ½% sales tax increase
that is estimated to bring an additional $7.5 million in revenue each year to the
City. The City Council has indicated that it would like to dedicate half of that--
$3.75 million-towards street repair each year. Staff had done some study about
the possibility of issuing 30 year bonds (i.e., borrowing money) to do much
needed street repair now and use half of the Measure U revenues to make the
annual principal-plus-interest payments on the debt. In the short term, it seemed like a real win-win solution, but following public requests for a longer-term analysis that was presented to the City Council on Jan. 27, a lurking poison pill emerged.
Staff analyzed four scenarios and recommended 3A:
1. Use no Measure U revenues at all for street repair (status quo)
2. Don't go into debt and use half of Measure U revenues--$3.75
million-along with our existing gas tax revenues of $2.5 million to spend
$6.25 million annually over the long-term on street repair and maintenance
(pay as you go)
3A. Go $44 million into debt for 30 years (issuing bonds) and use it as follows: $36.2M during the coming 5 years for street repairs, $0.8M for one-time financing costs, $4M for "gateways" (street enhancement on major corridors), $0.6M for public art, and $2.8M to provide the matching funds required for other grant-funded projects. Over the long-term we'd have the existing $2.5M from the gas tax plus $1.1M from Measure U, totaling $3.6M annually for street repair, with $2.65M annually from Measure U being paid for 30 years for debt service.
3B. Go $63 million into debt for 30 years (issuing bonds) and use it as follows: $54.4M during the coming 5 years for street repairs, $1M for one-time financing costs, $4M for "gateways" (street enhancement on major corridors), $1M for public art, and $2.8M to provide the matching funds required for other grant-funded projects. Over the long-term we'd have only the existing $2.5M gas tax each year for street repair, with $3.75M annually from Measure U being paid 30 years for debt service.
Strategies 3A and 3B would have more benefits in the short term (5-10 years
from now), but would put us in a worse situation 20 and 30 years down the road
when funds for ongoing maintenance dry up, as evidenced from the two graphs
showing projected differences in PCI (Pavement Condition Index) and remaining
deferred maintenance over time. The pay as you go strategy appears to be more
beneficial in the long haul (think of our children and grandchildren).
Graphics from Richmond City Council agenda packet; prepared by City staff.
Strategies 3A and 3B (City borrowing either $44 or $63 million) would both
require significant interest payments to financial institutions ($36 million or $48.5
million over 30 years, respectively), nearly doubling the total amount of money needing to be repaid, whereas pay as you go would provide a steady source of income dedicated to street repair and no need for interest payments at all. Generally speaking, it's considered reasonable to go into debt for major capital
improvements (like remodeling Civic Center) but not for maintenance.
Pay as you go offers the opportunity for an increase in sustainable, long-term
good local jobs (perhaps even putting them all in the City's Public Works Dept.!)
for street repair. Strategies 3A and 3B, on the other hand, would create a larger
number of jobs (likely with more going to non-Richmonders) in the short term, but
all those jobs would disappear in five years.
Pay as you go allows for slower but steady and more sustainable improvement of
our city streets with only a brief and minimal dip in 5 years, followed by steady
improvement. Strategies 3A and 3B would have improvements that spike in 5
years and then descend to well below the current status 20 and 30 years from
With pay as you go, we could be more flexible with how we spend the money--
using more some years if we're able and there's a specific need, or holding back
if there's another financial crisis. We could also use some of the remaining half
of Measure U revenues for added street repair in the first few years. With 3A and
3B, we have to make those interest payments to banks no matter what.
All that said, it's also clear that the public wants to see more up front
improvements than pay as you go would allow. Therefore, at Council member
McLaughlin's urging, the Council has asked staff to bring back further analysis of
a scenario with only $22 of debt, in order to have at least some additional funds
now to repair the worst streets that are failing. If we go this way, priority should
be given to failing streets in the lowest income neighborhoods.
Another option to consider would be a smaller amount of debt financed over 15
instead of 30 years, which would lower the overall interest payment and allow for
spending the full half of Measure U revenues for street maintenance each year
after 15 years, at a time when it will be badly needed.
A word on "gateways," public art and grant-funded projects: Providing the $2.8
million in matching funds for the grant funded projects should be a priority, and
could be paid over 3 years with $0.9 million per year from Measure U or reduced
bond proceeds (possibly even from the other half of U revenues, since only half
of the $7.5 in annual Measure U funds are currently being earmarked for street
repair). These grant-funded projects total over $12 million in improvements,
including bike lanes on Carlson between Bayview and Broadway, completing the
gap between the Richmond Greenway and San Pablo Avenue, and several
Public art by law is included as a small percentage of any capital improvement
projects, and so some amount of that will happen no matter what.
"Gateways" would be very nice to have, but it's questionable whether it's worth
going into debt for them. For such one-time capital intensive streetscape
improvements, public or private grant funds are often available.
In the bigger picture, who knows what the situation of street usage and
transportation will look like 20 years from now? Maybe there will be better paving
materials developed, or maybe gasoline powered cars will be phasing out, or
maybe vehicles will be lighter, or more and better public transit will be entering
the scene. With pay as you go or a lower debt load, we can adapt to all these
evolving situations as they arise. By going deeper into debt ($44 or $63 million),
we'd be locking ourselves into current street paving technology for a relatively
short term benefit.