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Item 4 - Resolution Approving 2% Increase in RTCIP Traffic Mitigation Fee FY20-21April 7, 2020, Item #4DATE: TO: FROM: CONTACT: SUBJECT: Summary: AGENDA RE PO RT City of Poway April 7, 2020 Honorable Mayor and Members of the City Council Robert Manis, Director of Development Services fAA Melody Rocco, City Engineer ~ (858) 668-4653 or mrocco@poway.org CITY COUNCIL Resolution Approving a 2% Increase in the Regional Transportation Congestion Improvement Program (RTCIP) Traffic Mitigation Fee for Fiscal Year (FY) 2020-21, as required by the TransNet Ordinance On April 1, 2008, the City Council adopted the Regional Transportation Congestion Improvement Program (RTCIP) Traffic Mitigation Fee pursuant to the TransNet Ordinance. The Ordinance calls for the fee to be adjusted annually on July 1 of each year to reflect increases in construction costs. SAN DAG has informed all the Cities and the County of San Diego that the increase in the RTCIP fee for FY 2020-21 is set at 2%. This will increase the City's RTCIP Traffic Mitigation Fee from $2,533.15 to $2,583.82 per new residential unit starting on July 1, 2020. Recommended Action: It is recommended that the City Council take public input, close the public hearing and adopt the Resolution. Discussion: In November 2004, voters in San Diego County approved a 40-year extension to the existing TransNet program, which was first initiated in 1987. The TransNet program was designed to fund improvements to the region's transportation system through a half-cent sales tax. In addition to the sales tax extension, the TransNet Ordinance mandates implementation of a local traffic mitigation fee to fund missing improvements on the Regional Arterial System. The local traffic mitigation fee, also known as the RTCIP Traffic Mitigation Fee, was set at $2,000 per residential dwelling unit starting on July 1, 2008. Funds collected from this fee will be used for roadway and traffic signal improvements on Espola Road, Poway Road, Pomerado Road, Twin Peaks Road, Community Road, Ted Williams Parkway, Camino Del Norte, and Scripps Poway Parkway. On April 1, 2008, the City Council adopted the RTCIP Traffic Mitigation Fee pursuant to the TransNet Ordinance. The TransNet Ordinance mandates that the adopted RTCIP Traffic Mitigation Fee for new 1 of7 April 7, 2020, Item #4residential dwelling units be adjusted annually for construction cost inflation, based on the construction cost index, but requires a minimum 2% annual increase. The fee was increased by 2% in 2009 through 2014, 2.5% in 2015, and 2% in 2016 and 2017, 3.3% in 2018, and 2% in 2019 and is currently set at $2,533.15 per residential dwelling unit. SAN DAG has informed all the Cities and the County of San Diego (Attachment B) that the percentage increase for FY 2020-21 is set at 2%. This will increase the City's RTCIP Traffic Mitigation Fee from $2,533.15 to $2,583.82 per residential unit starting July 1, 2020, for FY 2020-21. Environmental Review: This item is exempt from the requirements of the California Environmental Quality Act (CEQA), pursuant to Section 15061 (b)(3) of the CEQA Guidelines, as it entails a State-mandated update to a current City fee, and there is no possibility that this will have a significant effect on the environment. Fiscal Impact: Using the new fee of $2,583.82 per new residential dwelling unit, estimated revenue of $527,099 is projected for FY 2020-21. Public Notification: A Notice of Public Hearing was published in the Poway News Chieftain on Thursday, March 26, 2020. A second Notice of Public Hearing was published in the same publication on Thursday, April 2, 2020. Attachments: A. Resolution B. SANDAG Agenda Item No. 7 dated February 28, 2020 Reviewed/ Approved By: ~~L-----Wend0Kaserman Assistant City Manager 2 of7 Reviewed By: Alan Fenstermacher City Attorney App roved By: City Manager April 7, 2020, Item #4RESOLUTION NO. 20-A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF POWAY, CALIFORNIA, APPROVING A 2% INCREASE IN THE REGIONAL TRANSPORTATION CONGESTION IMPROVEMENT PROGRAM (RTCIP) TRAFFIC MITIGATION FEE FOR FISCAL YEAR (FY) 2020-21, AS REQUIRED BY THE TRANSNET ORDINANCE WHEREAS, in November 2004, voters in San Diego County approved a 40-year extension to the existing TransNet program to fund improvements to the region's transportation system; WHEREAS, the extension Ordinance requires local agencies to collect traffic mitigation fees, starting July 1, 2008, from residential dwelling units to fund the Regional Transportation Congestion Improvement Program (RTCIP) to ensure that new development directly invests in the region's transportation system to offset the negative impact of growth on congestion and mobility; WHEREAS, on April 1, 2008, the City Council adopted the RTCIP Traffic Mitigation Fee of $2,000 per residential dwelling unit pursuant to Section 9A of the TransNet Ordinance; WHEREAS, Section 9A of the TransNet Ordinance also mandates that the RTCIP Traffic Mitigation Fee shall be increased annually, in an amount not to exceed the percentage increase set forth in the Engineering Construction Cost Index published by the Engineering News Record or similar cost of construction index with a minimum increase of 2%; WHEREAS, the City Council has adopted annual increases to the RTCIP Traffic Mitigation Fee and the current fee is $2,533.15 per residential dwelling unit, pursuant to Section 9A of the TransNet Ordinance; WHEREAS, SANDAG has informed the City that the percentage increase in the RTCIP Traffic Mitigation Fee for FY 2020-21 is set at 2%; and WHEREAS, the City Council intends by this Resolution to increase the City's RTCIP Traffic Mitigation Fee from $2,533.15 to $2,583.82 per residential dwelling unit to meet the requirement of Section 9A of the TransNet Ordinance. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Poway as follows: SECTION 1: The City Council finds that the adoption of this Resolution is exempt from the requirements of the California Environmental Quality Act (CEQA), pursuant to Section 15061 (b)(3) of the CEQA Guidelines, as it entails State-mandated updates to current City regulations, and there is no possibility that this will have a significant effect on the environment. SECTION 2: The City Council, starting July 1, 2020, hereby increases the RTCIP Traffic Mitigation Fee from $2,533.15 to $2,583.82 per residential dwelling unit, regardless of type, to fund roadway and traffic signal improvements on Espola Road, Poway Road, Pomerado Road, Twin Peaks Road, Community Road, Ted Williams Parkway, Camino Del Norte, and Scripps Poway Parkway considered part of the Regional Arterial System. 3 of7 ATTACHMENT A April 7, 2020, Item #4Resolution No. 20-Page 2 PASSED, ADOPTED AND APPROVED at a Regular Meeting of the City Council of the City of Poway, California on the 7th day of April, 2020 by the following vote, to wit: AYES: NOES: ABSENT: DISQUALIFIED: Steve Vaus, Mayor ATTEST: Faviola Medina, CMC, City Clerk 4of7 April 7, 2020, Item #4Item: 7 Board of Directors February 28, 2020 TransNet Regional Transportation Congestion Improvement Program Proposed Fee Adjustment Overview The TransNet Extension Ordinance requires the 18 cities in the San Diego region and the County of San Diego to collect a Regional Transportation Congestion Improvement Program (RTCIP) fee from the private sector for each new housing unit constructed in its jurisdiction, with certain exceptions, including low income residential units and accessory dwelling units. The purpose of this fee (sandag.org/rtcip) is to help ensure that future development contributes its proportional share of the funding needed to pay for the impact of new growth on the Regional Arterial System and related regional transportation facility improvements, as defined in the most recent Regional Transportation Plan adopted by SANDAG. Key Considerations SANDAG is required to adjust the minimum RTCIP fee amount on July 1 of each year based on an analysis of construction cost indices, but never less than 2%. The purpose of this annual adjustment is to ensure that the RTCIP retains its purchasing power to improve the Regional Arterial System. Based on an analysis of construction cost trends and relevant indices, staff recommends a 2% fee adjustment to the RTCIP, raising the minimum RTCIP fee from $2,533.15 to $2,583.82 beginning July 1, 2020 (Attachment 1 ). Next Steps Action: Approve The Board of Directors is asked to approve a 2% adjustment to the Regional Transportation Congestion Improvement Program, raising the minimum fee from $2,533.15 to $2,583.82, beginning July 1, 2020. Fiscal Impact: The Regional Transportation Congestion Improvement Program fee would increase from $2,533.15 to $2,583.82 beginning July 1 , 2020. Schedule/Scope Impact: The Regional Transportation Congestion Improvement Program fee is collected for each new housing unit constructed (with certain exceptions) and may be used for projects on the Regional Arterial System, such as new or widened arterials, traffic signal coordination, freeway interchange and related improvements, railroad grade separations, and improvements required for express bus and rail transit. In accordance with TransNet Extension Ordinance provisions, 1 each jurisdiction's RTCIP funding program must be submitted for review by the Independent Taxpayer Oversight Committee (ITOC) by April 1 of each year to remain eligible for TransNet local street and road funding. The annual submittal of RTCIP funding programs by local jurisdictions is scheduled for review at the April 8, 2020, ITOC meeting. Hasan lkhrata, Executive Director Key Staff Contacts: Stephanie Guichard, (619) 699-6977, stephanie.guichard@sandag.org Ariana zur Nieden, (619) 699-6961, ariana.zurniedenr@sandag.org Attachment: 1 . Discussion Memo Section 9 of the TransNet Extension Ordinance requires that local jurisdictions establish a program or mechanism for funding the Regional Arterial System. For purposes of the RTCIP, the Regional Arterial System is defined in the most recent Regional Transportation Plan adopted by SANDAG. 5 of 7 ATTACHMENT B April 7, 2020, Item #4Attachment 1 Discussion Memo Background The TransNet Extension Ordinance requires the 18 cities and the County of San Diego to collect a fee from the private sector for each new housing unit1 constructed in that jurisdiction for contribution to the Regional Transportation Congestion Improvement Program (RTCIP). RTCIP revenue is required to be used to construct improvements on the Regional Arterial System such as new or widened arterials; traffic signal coordination and other traffic improvements; freeway interchange and related freeway improvements; railroad grade separations; and improvements required for express bus and rail transit. The TransNet Extension Ordinance further requires SANDAG to adjust the RTCIP fee amount each year and states that in no event shall the adjustment be less than 2% per year, or more than the percentage increase set forth in the Engineering Construction Cost Index (CCI) published by the Engineering News Record (ENR), or a similar CCI. The purpose of this annual adjustment is to ensure that the RTCIP retains its purchasing power to improve the Regional Arterial System and to help ensure future development contributes its proportional share of the funding needed to pay for the impact of new growth on the Regional Arterial System and related regional transportation facility improvements, as defined in the most recent Regional Transportation Plan adopted by SANDAG. The RTCIP funding programs fall under the responsibility of the 19 local jurisdictions, which must maintain their RTCIP funding programs and comply with specific administrative requirements in order to remain eligible for TransNet local street and road funding. The RTCIP has been implemented to the San Diego region since July 1, 2008. Annual RTCIP fee adjustments, funding program reports, and related audits can be found at sandag.org/rtcip. Relevant excerpts can be referenced at TransNet Extension Ordinance and SANDAG Board Policy No. 031 . Analysis of Construction Cost Indices SANDAG staff evaluated changes recorded in the ENR Los Angeles CCI, which is based on monthly price changes in four areas: lumber, cement, structural steel, and labor. Los Angeles reflects construction cost trends similar to those in San Diego. During the period that covers December 2018 to December 2019 (latest available data), the ENR Los Angeles CCI increased by only .2%, much less than the ENR National CCI, which grew by 1.7%, and the Caltrans CCI, increasing 6.7%. As cost indices show some volatility, it is important to focus on the longer-term picture from 2008-when the RTCIP was first instituted-when considering the required annual adjustment. The cumulative growth of the RTCIP has been 26.6%, with the ENR Los Angeles CCI seeing a 22.5% growth over the same period. The ENR National CCI (33.1 %) and Caltrans CCI (72%) both exceeded this rate over the same period. While the ENR Los Angeles CCI is the slowest growing of the CCls considered, the chart below shows it also has increased at about the same rate as the RTCIP. This comparison over time also shows that by maintaining the annual adjustment at the minimum 2% increase required, the RTCIP had fallen behind the overall goal of keeping pace with inflation in 2017, but has caught up since then, as construction costs were almost flat in 2019. 1 Units constructed for extremely low-, very low-, and moderate-income household-as well as accessory dwelling units-are exempted. 6 of7 2 April 7, 2020, Item #4Construction Cost Index (2008 = 100) 135 130 125 120 115 110 105 100 95 Comparing Construction Costs (2008=100) TransNet RTCIP vs. ENR LA CCI 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 -TransNet RTCIP-ENR CCI -LA There is a consensus that construction costs will increase in 2020, driven by labor costs. While a US recession would moderate these costs, no recession is expected in the short term, and in any case, its impact on costs would take time to materialize. In the current situation-when the most recent available data shows increases in the national and Los Angeles CCI both below 2%-there is no need to adjust the RTCIP fee by more than the required minimum of 2% in 2020. Even if CCI inflation were to accelerate from its current low pace, this 2% increase should be enough to ensure that the RTCIP fee maintains its purchasing power to complete necessary road improvements. Staff will continue monitoring the performance of the economy and the construction cost indices. If global economic growth strengthens more than expected in 2020-putting pressure on commodity prices-and labor shortages in the US persist, it could result in high CCI increases, potentially leading to an increase larger than the minimum 2% RTCIP increase for 2021. 7 of7 3