Meeting_Body
REVISED
AD-HOC CONGESTION REDUCTION COMMITTEE
OCTOBER 14, 2015
Subject/Action
SUBJECT: METRO EXPRESSLANES ROUND 2 NET TOLL REVENUE ALLOCATION GUIDELINES
ACTION: APPROVE RECOMMENDATIONS
Heading
RECOMMENDATION
Title
AD-HOC CONGESTION REDUCTION RECOMMENDED (3-0) AS AMENDED:
A. APPROVING the guidelines for Round 2 of the ExpressLanes Net Toll Revenue Allocations (Attachment A); and
B. ADOPTING a timely use of funds provision to be applied to projects funded as part of the 2014 (Round 1) Net Toll Revenue Reinvestment Grant Program.
DUPONT-WALKER AMENDMENT: include the proposal release period being 3 months versus 2 months and return in January with information on including non-profits.
Issue
ISSUE
State law requires net toll revenues generated from the ExpressLanes program be reinvested for transportation improvements in the corridor where generated, pursuant to an expenditure plan adopted by the Metro Board. The Round 2 guidelines incorporate lessons learned from Round 1.
Additionally, as of this date, many of the projects funded as part of Round 1 of the grant program have not executed their initial grant agreements. Staff recommends that a timely use of funds policy be adopted for these projects providing the sponsors with six months ending on April 22, 2016 within which to execute their agreement and begin expenditure of funds or risk lapsing the funds. Incorporation of such a policy is consistent with board adopted policy for other Metro discretionary grant programs. Any funds that are lapsed as a result of non-compliance with this policy will be added to the available funding for Round 2 projects.
Discussion
BACKGROUND
Gross toll revenues generated from the ExpressLanes program are first used to cover the direct expenses related to the maintenance, administration, and operation, including marketing, toll collection, and enforcement activities related to the ExpressLanes. Any remaining revenue produced must be used in the corridor from which the revenue was generated.
The net toll revenue program’s primary objective is to increase mobility and person throughput through implementation of integrated strategies that enhance transit operations, transportation demand management, transportation systems management, active transportation, and capital investments in the 1-10 and 1-110 corridors. These combined strategies have resulted in more reliable and consistent outcomes and greater magnitude of positive change than a single strategy scenario. This rationale is confirmed by actual usage on the ExpressLanes. Specifically, customer account activity demonstrates that, on a monthly basis, the majority (75%) of account trips are a combination of SOV & HOV. Only 4 % of trips are solely made by SOVs. The primary payers of the toll benefit 100% from the proposed allocation since mode shift through alternative transportation choices reduces congestion and as a result, reduces travel time and the toll amount for toll paying customers. An expenditure plan that retains this focus on integrated strategies and multi-modalism advances Metro's Long Range Transportation Plan and sustainability goals.
In October 2013, the Metro Board adopted guidelines governing reinvestment of approximately $26.7 million in net toll revenue funds to projects with a direct mobility benefit to the ExpressLanes Corridors. The overall program is comprised of two elements: a set-aside component and a competitive grant. The set-aside is comprised of funds provided to continue the operation of transit services that address social equity and encourage increased transit ridership as well as a reserve fund. The competitive grant provides funding to implement multi-modal mobility options including freeway/roadway improvements, transit enhancements and active transportation and system connectivity.
As part of Round 2, staff estimates that $42.5 to $53.3 million will be available for allocation through June 30, 2017. This represents a 63 to 100 percent increase in available funding over Round 1. Staff is seeking approval of the guidelines to begin Round 2 of the net toll revenue allocation with funding from FY 16 and FY 17.
Proposed Reinvestment Guidelines for Round 2:
Maintain Core Principles consistent with Round 1:
• Reinvestments in the transportation corridor provide a direct benefit to reducing congestion on the Metro ExpressLanes corridors (1-10 and 1-110);
• Establish a reserve fund, consistent with the Board approved Toll Policy to ensure financial sustainability of the Metro ExpressLanes and to enable potential system expansion;
• Direct annual allocation to fund the incremental transit service implemented to support the deployment of the Metro ExpressLanes. The incremental services include Metro Silver Line, Foothill Silver Streak and Route 699, Gardena Lines 1X and 2, and Torrance Transit Line 4;
• Allocate net of set-asides on a competitive basis utilizing targets of 40% for other Transit Uses, 40% for System Connectivity/Active Transportation, and 20% for Roadway Improvements to benefit the ExpressLanes and support sustainable transportation strategies; and,
• Leverage net toll revenues with other funding sources. Locally sponsored capital projects and operating programs are encouraged. The funding will be mutually determined by Metro and the lead agency, proportionate to the local and regional benefits of the project/program.
Continuation of the Reserve Fund
Establishment of a Reserve fund is crucial to the continuing financial health of the ExpressLanes program. A reserve fund ensures that funding is retained to cover unanticipated costs to avoid placing a burden on general funds for operations as well as to meet future debt service obligations of the Metro ExpressLanes. This policy is consistent with the Board approved toll policy regarding the ExpressLanes’ financial sustainability as well as policies of other toll facilities in the State where net toll revenues are generated.
As part of the Round 1 Net Toll Revenue program, the Metro Board approved a set aside of 3 to 5% of net toll revenues in the amount of $801,695 toward establishing a reserve. While that level of reserve funding was adequate during the demonstration phase, given the fact that the I-10 and I-110 ExpressLanes were made permanent and have been in operation for approximately 2 ½ and 3 years respectively and based on analysis of potential needs, staff recommends an increase to $3 million per year. This level of funding will ensure adequate funding for state of good repair, potential near term replacement of lane side and system components, as well as system expansion.
Continuation of Direct Allocation to Support Existing Metro ExpressLanes Transit Services
A continuation of the direct allocation is recommended to subsidize the incremental operating costs of the transit service deployed to support the Metro ExpressLanes. The incremental additional service was initially provided through the purchase of 59 clean fuel buses and operating subsidies funded by the CRD grant. The operation of these services within the ExpressLanes corridor has resulted in net benefit for low income commuters as well as an increase in bus ridership denoting a potential mode shift. The Silver Line has experienced consistent increase in ridership since the inception of the incremental additional services culminating in a cumulative144% increase in ridership between FY 2012 and FY 2015. Concerns about the impact of ExpressLanes on low- income drivers decrease when toll revenues are used to enhance transit services along the same routes or corridors, thus providing more choices for low-income travelers (and others).
A direct allocation of up to $6.25 million per year is recommended to provide an operating subsidy to support these incremental services for an additional 24 months.
Continuation of Competitive Application Categories
Three categories of projects are recommended that enhance the Metro ExpressLanes program and promote multi-modal and sustainable transportation strategies in support of the LTRP. Consistent with Round 1, a category for Transit Use is recommended because operation of high frequency transit and feeder service as well as transit capital improvements have proven to be effective in creating mode shift and reducing congestion on the Metro ExpressLanes. A category for System Connectivity/Active Transportation is recommended to improve system connectivity between transit and the state highway. The category also demonstrates Metro's commitment to advance sustainable community strategies since Metro currently does not have a discretionary fund source eligible to fund operations activity for Active Transportation. A category for Roadway improvements is recommended to build upon prior investments in signal synchronization and ITS.
Continuation of the Requirement to Leverage Net Toll Revenues
Consistent with Metro's other discretionary grant programs, matching funds are recommended.
Proposed Guideline Changes from Round 1 based upon Lessons Learned:
• Establish a new set aside for direct allocation of funds to Caltrans for freeway improvements that benefit the ExpressLanes. In order to secure the funds, Caltrans must identify projects with a direct benefit to the ExpressLanes subject to approval by Metro. Additionally, 50% of the Caltrans set-aside will be distributed based on Caltrans’ ability to meet project schedule milestones developed in collaboration with Metro. Staff discussed this policy with Caltrans representatives and secured their concurrence with the proposed changes.
• Execute agreements within 6 months of receipt of agreement from Metro or risk de-obligation of funds.
• Funds are subject to lapsing if the Grantee has not expended any funds within one year of executing their agreement.
Lessons Learned Detail: Direct Allocation to Caltrans
One of the objectives of the ExpressLanes program is to more effectively and proactively manage traffic to optimize the efficiency of the entire freeway corridor. As part of Round 1, Caltrans competed for funding within the Highway category. Based on recent discussions with Caltrans and in light of the fact that Caltrans is in a singular position to implement freeway improvements, for the purposes of Round 2 funding, staff is recommending an off-the-top set-aside equivalent to 20 percent of the competitive grant funding in the amount of up to $2.4 million annually. This will enable Caltrans to implement mainline, on/off ramp and Intelligent Transportation Systems (ITS) improvements that benefit the ExpressLanes corridors’ users. As a condition of and prior to receiving these funds, Caltrans must submit a project list identifying the benefits of the project to the ExpressLanes, project cost, milestones and schedule for approval by the Metro Board. Upon the Board’s approval and execution of the necessary agreements, Caltrans will receive 50 percent of the funds. In order to ensure Caltrans is completing critical projects in a timely manner, the remaining 50 percent will be tied to Caltrans’ ability to meet project milestones per their original schedule. Since Caltrans will be receiving this set aside, they will be precluded from participation in the competitive grant program.
Lessons Learned Detail: Timely Use of Funds
Based on best practices and in order to assure project readiness to implement improvements in a timely manner, staff recommends adoption of a timely use of funds provision whereby project sponsors must execute their funding agreements within six months of receipt of funding agreements from Metro or risk losing the funds. Execution of the funding agreement is the first step in project implementation. As of this date, 14 of the 20 projects that received funding through the round 1 competitive grant have failed to execute their funding agreements. Staff is recommending that this policy also be applied to projects funded as part of Round 1 Net Toll Revenue grants. Round 1 projects will be subject to lapsing if they have not executed their agreements by April 22, 2016. Furthermore, in order to assure that funds are optimally utilized to implement ready to go project improvements, staff recommends that if no funds are expended on a project within one year of execution of the funding agreement, the project be considered for lapsing of funds. Any funds lapsed as part of Round 1 will be considered for allocation as part of Round 2 grant funds. If approved by the Board, the timely use of funds provision would also apply to the Caltrans direct allocation projects.
Funding Target Goals for Round 2
If the recommended guidelines are approved by the Metro Board as outlined above, the ROUND 2 expenditure plan could provide the following:
|
Draft Reinvestment Categories |
Estimated Net Toll Revenues |
Allocation Target Estimate (per Corridor) |
|
Period Ending June 2017 |
$42,500,000 - $53,300,000 |
|
|
Set-Aside (Reserve Fund) |
($6,000,000 ) |
|
|
Set-Aside (Direct Allocation -Transit Ops) |
($12,500,000) |
I-110 |
I-10 |
|
Set-Aside (Caltrans) |
($4,000,000 - $4,800,000) |
|
|
|
Subtotal Net Set-Asides |
$20,000,000 - |
$12,400,000- |
$7,600,000- |
|
|
$24,000,000 |
$14,880,000 |
$9,120,000 |
|
Allocation Target (40%- Transit Uses)* |
$8,000,000 - $9,600,000 |
$4,960,000- |
$3,040,000- |
|
|
|
$5,950,000 |
$3,650,000 |
|
Allocation Target (40%- System |
$8,000,000 - $9,600,000 |
$4,960,000- |
$3,040,000- |
|
Connectivity)* |
|
$5,950,000 |
$3,650,000 |
|
Allocation Target (20%- Roadway Improvements)* |
$4,000,000 - $4,800,000 |
$2,480,000- $2,980,000 |
$1,520,000- $1,820,000 |
|
Reserve funds approved in Round 1 |
|
$875,000 |
|
*Baseline targets of 40% for Transit Uses, 40% for System Connectivity/Active Transportation, and 20% for Roadway Improvements are identified as goals; however, the actual allocation of the funding will be based on the merits of the proposed projects and programs.
Outreach
As part of the Round 1 Net Toll Revenue program process, for the purposes of guidelines development and project evaluation, staff consulted with the Metro ExpressLanes I-10 and I-110 Corridor Advisory Groups (CAGs). The CAGs are composed of participants with subregional and multi-modal expertise whose input has proven beneficial and crucial in developing and funding a program of priority projects.
Consistent with the Round 1 process, on October 1, 2015, staff convened a CAG meeting which included representatives from both corridors to present guideline changes and seek stakeholder input. As Attachment B illustrates, the summit was attended by a myriad of agencies representing public and non-profit interests in transit, highways, active transportation, health and housing. Participants concurred with the proposed guidelines changes.
Finally, staff informed Round 1 grant recipients of the recommended timely use of funds provision that would be considered by the Board as part of this item.
Determination_Of_Safety_Impact
DETERMINATION OF SAFETY IMPACT
Approval of the Guidelines will have no impact on the safety of Metro patrons or staff.
Financial_Impact
FINANCIAL IMPACT
Approval of Round 2 Net Toll Revenue Allocation Guidelines has no financial impact.
Impact to Budget
No impact to the FY 16 Budget is anticipated as a result of approval of the guidelines.
Alternatives_Considered
ALTERNATIVES CONSIDERED
The Board may choose not to approve or defer approval of the Net Toll Revenue Guidelines. Staff does not recommend this option as the program as designed furthers the Board’s objectives with regard to the LRTP, reinvestment within the corridor where funds are generated, congestion reduction and sustainability.
Next_Steps
NEXT STEPS
Upon adoption of the guidelines, staff will proceed as follows:
• Develop a grant application package for Board approval: January 2016
• Release grant application package: February 2016
• Application due date: April 2016
• Evaluate applications/outreach: May 2016
• Seek Board Approval: June 2016
Attachments
ATTACHMENTS
Attachment A - Metro ExpressLanes Round 2 Net Toll Revenue Allocation Guidelines
Attachment B - ExpressLanes 1-10 and I-110 CAG Summit Attendees
Prepared_by
Prepared by: Kathleen McCune, Director, (213) 922-7241
Shahrzad Amiri, Executive Officer, (213) 922-3061
Reviewed_By
Reviewed by: Stephanie Wiggins, Deputy CEO, (213) 922-1023
