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Home My WebLink AboutCouncil Presentation 11/12/2019 - Critical Infrastructure FundMAJOR INFRASTRUCTURE FUNDING Yiannis Kalaitzidis, Finance Director November 12, 2019 RECAP & AGENDA September 24th Study Session: –Presented types of projects without a current dedicated funding source –Discussed using new Sales Tax for funding of certain projects –Discussed project eligibility and requirements Tonight –Respond to Council feedback: –Examples of preliminary revenue estimates –Options for payment and project financing of projects –Continued discussion of project criteria and eligibility RECAP & AGENDA •Council Requested: –History of sales tax increases –Comparison to others communities –How did we pay for previous projects without a sales tax –Budget processes and financial stewardship –Matrix showing impact of tax increase to funding –Criteria for project inclusion –Projects that have repayment or are for health and safety ANSWERS TO COUNCIL’S GENERAL QUESTIONS HISTORY OF SALES TAX •Sales Tax History: –Taxes established in 1979 and evolved over the years to the current classifications/categories, including eliminations and increases –Town previously had a dedicated, temporary tax for roads (2004) –More recently, a dedicated, temporary tax for public safety (2015) –Other municipalities have similar, dedicated tax •Phoenix –Public Safety Expansion, Parks & Preservation, Transportation (1%) •Peoria –Debt Serv, Reserves, Capital Expend., Economic Development, Community Promotions, Operational Expenditures approved by Council (Half- cent) SALES TAX COMPARISON •Retail Sales Tax Rate by Jurisdiction: Jurisdiction Tax Rate South Tucson 5.0% Eloy 3.0% Tucson 2.6% Oro Valley 2.5% Phoenix 2.3% Sahuarita 2.0% Marana 2.0% Casa Grande 2.0% Chandler 1.5% MAJOR PROJECT FUNDING SOURCES Project Name Funding Sources Lower Santa Cruz Levee County,ADWR,Impact Fees WW Treatment Plant Expansion Bonds (Impact fee repayable) Water Quality Treatment Plants WIFA Loan (TBD repayable) Tangerine Road,Phase I RTA,PAG,County,Oro Valley,Transportation Fund Tangerine Farms Road Improvement District Twin Peaks,I-10 to Tangerine Bonds (General fund repayable),DIF,RTA Twin Peaks Interchange Bonds,DIF,PAG,RTA,ADOT,Developer,Federal Ina Road Bridge PAG,Transportation Fund Ina Road Interchange ADOT,RTA Silverbell Road WIFA Loan,Developer funding,Transportation Fund FINANCIAL STEWARDSHIP –Structurally balanced budget •Detailed line item examination during budget process •Continued monitoring throughout the year –Reasonable, measured investments in our employees Marana Oro Valley Sahuarita Tucson Chandler Phoenix Total General Fund Cost 31,029,155 29,146,622 12,980,960 361,481,760 205,758,032 1,080,214,000 # Employees 337 310 131 3,284 1,380 7,098 Cost per Employee $ 92,143 $ 94,119 $ 99,167 $ 110,064 $ 149,137 $ 152,186 PROJECT CRITERIA PROJECT CRITERIA –Possible criteria for eligibility: •Projects related to Public Health and Safety •Full/partial/potential cost recovery element •Infrastructure projects •Allow for growth or enhanced capacity •All projects require Council approval –Limited to the following project categories: •Water quality and interconnectivity/redundancy/reliability •Storm drainage management •Transportation PROJECT CRITERIA CONTINUED –Funding not available for: •Developer rebates/refunds •Operations & maintenance projects •Golf courses & other municipal facilities –Additional Criteria: •Council review of infrastructure program –Review of repayment/recovery –Annual review of fund balance RATE, REVENUES AND DEBT COVERAGE PRELIMINARY REVENUE ESTIMATES –Preliminary estimates based on actual FY19 figures –Assumes all major sales tax categories excluding Contracting Estimated Annual Collections Sales Tax Rate Year 1 Year 5 Year 10 Year 20 0.1%$ 1,149,447 $ 1,193,492 $ 1,330,342 $ 1,494,369 0.2%2,298,894 2,386,984 2,660,683 2,988,738 0.3%3,448,341 3,580,475 3,991,025 4,483,107 0.4%4,597,788 4,773,967 5,321,367 5,977,476 0.5%5,747,235 5,967,459 6,651,709 7,471,845 PRELIMINARY DEBT FUNDING ESTIMATES Issuance Amount Annual Payment $1M $ 64,652 $2M 129,304 $10M 646,521 $20M 1,293,042 $30M 1,939,562 $50M 3,232,604 –Assumes rate at 4% and 25 year term SUMMARY ESTIMATE Sales Tax Rate Collections * Maximum Issuance 0.1%$ 1,149,447 $17.7M 0.2%2,298,894 $35.5M 0.3%3,448,341 $53.3M 0.4%4,597,788 $71.1M 0.5%5,747,788 $88.8M * At Year 1 PROJECT POSSIBLE EXAMPLES SPECIFIC PROJECT –WATER QUALITY Cost $16 million Debt Service $1.03 million Tax Rate –0.10% Criteria: •Health & Safety •Redundancy/Interconn. •Lawsuit recovery SPECIFIC PROJECT –NWRRDS Cost $8.4 million Debt Service $0.54 million Tax Rate –0.05% Criteria: •Impact Fee Recovery •Redundancy/Interconn. •Health & Safety •Allows for Growth SPECIFIC PROJECT –BARNETT CHANNEL Cost $30 million Debt Service $1.94 million Tax Rate –0.2% Criteria: •Impact Fee Recovery •FEMA Recovery •Health & Safety •Allows for Growth SPECIFIC PROJECT –TANGERINE TO I-10 Cost $17 million Debt Service $1.1 million Tax Rate –0.10% Criteria: •Impact Fee Recovery •Health & Safety •Allows for Growth SUMMARY OF SPECIFIC PROJECTS Project Cost (millions) Annual Debt Service (millions) Required Tax Rate (Rounded) Current Water Treatment Campuses 16.0 1.03 0.10% NWRRDS 8.4 0.54 0.05% Barnett Drainage Channel 30.0 1.94 0.20% Tangerine Road - Phase II 17.0 1.10 0.10% Total 71.4 4.61 0.45% –Collection of 0.5% results in $5.7M in revenues –Excess may account for overages through more debt or cash CASE FOR A NEW REVENUE STREAM SUMMARY OF POSSIBLE ADDITIONAL PROJECTS Project Category Estimated Cost (millions)Recovery Type Current Water Treatment Campuses Water Quality $16.0 Lawsuit/Settlement NWRRDS Water Reliability 8.4 Impact Fees Barnett Drainage Channel Drainage 30.0 FEMA, Impact Fees Tangerine Road -Phase II Transportation 17.0 Partial Impact Fees Tangerine Farms Road Transportation 10.6 Partial Impact Fees Marana Main Street Transportation 2.6 Partial Impact Fees Twin Peaks, Rattlesnake Pass Transportation 17.2 Partial Impact Fees $101.8 CURRENT FUNDING SOURCES Category Amount Water Quality None Water Reliability/Redundancy None Drainage -Large Projects None Transportation HURF $3.6M Pavement Preservation $1.25M Other Roadway/Maintenance Expenses $2.35M Available None Transportation Fund $6.0M Debt Service $0.7M Pavement Reconstruction (Asphalt Only)$2.25M Available $3.05M Impact Fee -South Benefit Area $6.0M For Twin Peaks, Rattlesnake Pass Project-Need $17.2 Transportation option: –Debt Issuance Available: $47.0M –Total Transportation Funding Available: $53.0M –Total Needs Identified: $47.4M IMPACT FEE FUNDING SOURCE Project Est. Project Cost (millions) Developer Contributions (millions) Impact Fee Eligible (millions) Est.Date Funding Avail. Twin Peaks, Rattlesnake Pass 17.2 6.0 11.2 FY 2030 Marana Main Street 2.6 -2.6 FY 2032 Tangerine Farms Rd.10.6 -9.0 FY 2049 –Based upon current impact fee revenue trends –Timing gap between when projects are needed and when funding is available WITHOUT NEW FUNDING SOURCE Issuing Debt from Available Transportation funds -Consequences: –Lose flexibility and ability to fund smaller projects or upgrade existing roads, by adding traffic signals, turn lanes, sidewalks, landscaping, drainage, etc. –Nothing left for new projects toward new development and future growth. –General Fund Exposure to unplanned events. Current process (pay as you go): –Use Transportation funds to set money aside will not allow for adequate and consistent funding of planned pavement preservation program. •Example –Tangerine Road Project will consume all Transportation fund funding in fiscal years 2025 (as shown in current CIP plan) and 2026. –Use General Fund available fund balance for unplanned events and overages. –Projects may not be completed in a timely manner. CONCLUSION –Lack of available funding for 3 out 4 proposed project categories –Impact fees are unpredictable and currently unavailable to fund complete projects –Transportation category has funding limitations •Use of all transportation funding for identified projects will: –Limit number and types of future projects –Limit flexibility with new projects and reconstruction upgrades –Endanger planned pavement preservation program –Expose General Fund to risk COUNCIL DISCUSSION REQUEST –Discussion on funding source for projects •New Sales Tax –Debt Financing vs. Pay as you go –Combination of above –Inclusion/exclusion of sales tax categories/classifications •Use of existing funding sources –status quo –Discussion on Categories •Water quality and interconnectivity/redundancy/reliability •Storm drainage management •Transportation –Discussion on Criteria •Public Health and Safety, Recovery element, Growth & Enhanced Capacity etc. NEXT STEPS Depending on feedback from Council, staff may: –Provide additional information requested by Council on tonight’s topic –Develop a plan and timeline for a new sales tax based on feedback •Determine amount of new sales tax (0.1% -0.5%) •Determine which tax rate classifications should be affected •Consider independent analysis and forecast on future sales tax revenues •Develop and implement a community outreach plan OR –Stay the course without a new sales tax DISCUSSION CURRENT TAX TABLE Classification Current Rate 1 Amusements 2.00% 2 Commercial Rental, Leasing &Licensing for Use 2.00% 3 Communications 4.00% 4 Contracting -Owner-builder 4.00% 5 Contracting -Prime 4.00% 6 Contracting -Speculative Builders 4.00% 7 Hotel/Motel (Additional Bed Tax 6.00% 8 Hotels 2.00% 9 Job Printing 2.00% 10 Manufactured Buildings 2.00% 11 Publication 2.00% 12 Rental Occupancy 2.00% 13 Rental, Leasing, & Licensing for Use of TPP 2.00% 14 Restaurants & Bars 2.00% 15 Retail Sales 2.00% 16 Severance -Metal Mining 0.10% 17 Timbering & other extraction 2.00% 18 Transporting 2.00% 19 Use Tax Purchases 2.00% 20 Utilities 4.00% MAJOR PROJECT FUNDING SOURCES (In Millions) All Other includes ADOT, Federal, County, Special Districts, Oro Valley, ADWR, BOR & private funding Project Name Transportation Fund Marana Debt Marana Impact Fees Marana Water RTA/PAG All Other Total Lower Santa Cruz Levee --1.9 --13.6 15.5 WW Treatment Plant Expansion 2.4 26.0 ----28.4 Water Quality Treatment Plants -15.0 ----15.0 Tangerine Road, Phase I 0.5 -3.6 -45.6 3.9 53.6 Tangerine Farms (West of I-10)-----26.9 26.9 Twin Peaks, I-10 to Tangerine --14.0 1.4 50.4 47.8 113.6 Twin Peaks Interchange -10.8 --8.9 2.0 21.7 Ina Road Bridge 11.1 ---16.1 -27.2 Ina Interchange ----34.2 59.0 93.2 Silverbell, Cortaro to Ina Rd 1.8 18.5 ----20.3 Subtotals 15.8 70.3 19.5 1.4 155.2 72.0 415.4 CURRENT FUNDING SOURCES Funding Type Amount (millions)Programmed Available General Fund -Available for One-Time Projects 10.3 -10.3 Highway User Revenue Fund (HURF)3.6 3.6 - Transportation Fund 6.0 6.0 - Transportation Impact Fees 1.1 1.5 -0.4 Water Quality -1.0 -1.0 Water Interconnect/Reliability (Impact Fees)2.9 5.9 -3.0 Wastewater (Impact Fees)1.7 2.1 -0.4