The Price of Liberty is Eternal Vigilance
Transportation Advisory Board. April 19
To recommend that CARTA gets special funding
Deliberates on other funding prioritiesWarwick Jones
Yesterday's meeting of the Transportation Advisory Board (TAB) was devoted largely to defining policy, specifically to funding allocations. One of the recommendations is certain to create controversy.
CARTA has indicated that it plans to seek $9.2 million in fiscal 2007 from sales tax proceeds. This would represent roughly 22% of all sales tax receipts and above the 18% that is commonly believed to be its entitlement. Although the amount sought is well below the $11.8 million previously being considered by CARTA, there was unease on the TAB. The figure was still too high and would not sit well with either the public or the County.
Borrowings are the heaviest burden
There are a number of reasons why CARTA is seeking such a high level of financing for its 2007 budget. The main reason is the burden of servicing borrowings made to finance operations after the Supreme Court ruled against the referendum result in 2002. CARTA mortgaged its Leeds Avenue property, taking on $6.5 million of debt of which approximately $5.7 million remains outstanding.
The TAB was sympathetic to CARTA's predicament. One member suggested that the solution would be to repay the debt out of Sales tax funds in accordance with the lending Bank's schedule. This solution may cause some heat on County Council, and within the public. But it would remove the necessity for CARTA to continue seeking financing over the next few years above the "proscribed" 18% of all sales tax funds. The TAB agreed and voted accordingly, with only two members voting against the motion.
Ratio could average 18% over full term
Board member Smith is also Chairman of CARTA. He was the champion of CARTA's cause at yesterday's meeting. As at previous meetings, he stated that the entity presently needed much more than the 18% of total sales tax funds to meet its commitments. But he envisaged that over time, the ratio would fall below 18%, and that for the full 25 years, the ratio could be maintained at 18%. Nobody was inclined to point out that a dollar today is worth a lot more than a dollar in say 10 years. So even if the allocation were to fall to 16% or 15% in year 9 or 10 say and beyond, CARTA would still be well ahead of its 18% allocation if funding were measured in terms of present-day dollars.
Do projects underway have precedence over others for future funding?
Another issue that took a long time to resolve was financing of projects that had been approved, but required further financing for completion. Specifically, the TAB was considering the projects mentioned in the sales tax referendum. Specific funding was noted for each project. However, with the exception of one project, the amounts were not sufficient to ensure completion. Should these projects take precedence over any other in qualifying for further funding? The Board ultimately said no. The amounts mentioned in the referendum should be spent on each of the projects. If further funding were required, these projects would be on a "level playing field" with new projects and judged on their merits. The priorities would be decided by the County with recommendations by the TAB. However, it was agreed that if they were excess funding for a particular project, the excess could be shifted to another project as long as both projects fell under the same bond issue.
Earlier, the TAB chairman had noted that the consultant assumed that projects started should be completed before new projects commenced. There was no discussion as to whether the consultant's plans should be changed.
Raises spending recommendation for pedestrian and bikeway spending
Board member Sinkler noted the importance the public ascribed to pedestrian and bike ways. She was not happy about the suggestion that funding should be based on a percentage of total sales tax funds. The Comprehensive Plan prepared by the consultant suggested spending $0.5 million a year over the life of the sales tax. Considering its importance to the public, the funding should be raised to $1 million a year, she suggested. There was an issue as from where the extra funds would come. But the Board decided to sidestep this. The proposal was voted and endorsed with only two members voting against. These members had pointed out that the TAB had previously adopted a Complete Street policy which called for pedestrian and bikeways in new developments. Board member Cawley also noted that all developments in North Charleston were required to have bike and pedestrian ways. Strangely, no member pointed out that bike and pedestrian ways also were considered by the GAB which has set a target of 200 miles of trails. Clearly this is an area where the TAB and GAB could cooperate.
Pavement funding is adequate
The TAB also briefly considered as to whether the proposed level of funding was adequate for pavement maintenance given the long backlog. It called on the consultant for an opinion, who opined that it was - the draft Comprehensive Plan gave details of future spending, and that the backlog would be reduced over time. This seemed satisfactory for TAB members.
Breakdown of "management costs"
At an earlier meeting, the TAB asked whether the consultant could break down its estimate of $65 million for administration costs relating to the transportation side of the sales tax. Mr. Robert Probst, representing the consultant, opened his presentation with some observations. He noted that the costs of constructing highways had risen 22% per mile in 2005 and given the trend in energy costs, were likely to rise at a more rapid rate in 2006. With energy costs rising, so would highway construction costs, and at a rate likely to be much faster than the cost of money. So the obvious conclusion was to complete as much construction as possible as soon as possible, and to finance what is necessary with bonds, and in particular, capital appreciation bonds. Not only would an accelerated schedule help reduce the impact of construction inflation, it would also reduce management fees.
He went on to say that the cash flow projections that he was putting before the TAB were only estimates. They were still so many things to determine and so many variables that the final outcome could be quite different to that projected. He noted that the $65 million administration cost over the sales tax life included $6.4 million relating to the cost of bond issues (underwriting fees, legal costs, but not interest). If this were extracted, the figure is close to $59 million. The table showing projections was long and complex. In Year 1 of the program, total costs were estimated at $5.2 million of which $0.7 million related to bond issues. The consultant's fee was $3.5 million and costs attributable to the County, $0.425 million. Costs for the next four years were comparable though bond funding costs varied depending on the timing. Bond funding costs were projected at $2.8 million in Year 4. In year 6, management costs fell sharply to $3.1 million reflecting essentially the end of the fees paid to the consultant at the conclusion of its agreementwith the County.
Discussion on management fees ranged over wide area and the figures above were based on the accelerated schedule recommended by the consultant. Board member Smith expressed some concern about the concentration of activity in years 5 to 9 and the fear that it could cause an increase in construction costs. Mr. Probst said this fear was not founded as contractors could easily handle the activity. The bump in County spending of $30 to $80 million had to be set against spending from the State alone of over $1 billion a year on roads. The consultant also noted that it would be hard to get funds from the State for road construction over the next few years. But opportunities would increase after 2009.