Carmageddon: As transit project costs soar, RTC mulls borrowing against Measure D tax revenue

As major transportation projects continue to go over budget, the Santa Cruz County Regional Transportation Commission (RTC) is considering borrowing against future Measure D tax revenues in order to speed up projects like the Coastal Rail Trail and the Highway 1 expansion.

The RTC expects that it will need to borrow money within the next two years for money it has committed to spend on transportation projects. The agency has hired Berkeley-based financial advisory firm KNN Public Finance to explore ways to borrow against the remaining 22 years of Measure D funds. The voter-approved 2016 measure raises revenue through a half-cent sales tax over 30 years dedicated to transportation projects. It brings in about $27 million annually.

At the commission’s meeting on Thursday, RTC executive director Sarah Christensen said the agency is delivering projects faster than its “pay-as-you-go” revenue can keep up with.

Portions of the rail trail and the Highway 1 expansion are already over budget. The RTC approved up to $3 million to Caltrans for Highway 1 cost overruns last June, and more recently, the cost for Segment 5 of the rail trail has gone up by over $18 million due to environmental mitigation expenses. 

RTC planner Grace Blakeslee said the agency has committed a total of $162 million to projects that receive dedicated funds from Measure D’s highway category and $174 million on projects in its active transportation category. That is more than the RTC has the capacity to pay for with its existing revenues. 

KNN senior managing director David Leifer said one option would be to simply spread out the spending and slow down the timeline to complete the projects, but that could end up making them even more expensive.

The other option, he said, would be to issue a bond to be paid down through Measure D tax revenues in the future. That would allow the RTC to access more money up front in the short term. However, he did not specify how much the RTC would borrow and at what interest rate.

Christensen said that debt is the biggest drawback of financing.

“You have to pay interest on those loans, and potentially have less capacity to work with,” she said. “But then you get to realize those improvements early on and the public gets to start using the facilities. So there are obviously trade-offs.”

KNN director Melissa Shick said bonds would finance active transportation and highway projects, keeping Measure D funds that are earmarked for cities, counties and transit services untouched. The consultant’s high-level projections show that fiscal years 2025 to 2030 will likely see spending on transportation projects exceed revenues, and bond money could fill that gap.

She added that the RTC and the consultant firm would work together to ensure that the RTC borrows no more than it would be capable of paying back, and that costs of repaying the debt don’t affect other Measure D spending buckets, such as those dedicated to cities, counties and transit agencies. 

Commissioner and District 1 County Supervisor Manu Koenig said he realizes there are “not a lot of alternatives” in order to complete the projects, but worries about how that could affect the RTC’s funding for other projects.

“The more we borrow, the more we’re eating into our total project capacity,” he said. “When we talk about some of these very expensive projects and escalating costs, we’re looking at a dwindling amount for any other projects that haven’t been discussed, because the bonding costs are really significant.”

Commissioner Andy Schiffrin, Supervisor Justin Cummings’ alternate, said he believes difficult decisions lie ahead. KNN and RTC staff plan to return to the commission in the fall with more detailed plans for what a bond could look like, including how much the RTC would need to borrow and at what interest rates. 

“It’s going to depend on what we know about the cost of the projects at that time, the cost of interest rates at that time, and what we know about the cost of actually doing the bonds at that time,” Schiffrin said.

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Check out our Carmageddon road project list here. This week, pay particular attention to:

• Striping work will prompt overnight closures of northbound and southbound Highway 1 off-ramps at Park Avenue, Bay Avenue/Porter Street and State Park Drive between 9 p.m. to 6 a.m. from Sunday through Friday.

• Striping work will cause overnight closures of northbound and southbound Highway 1 between Bay Avenue and State Park Drive from Sunday through Friday between 9 p.m. and 6:30 a.m.

• An emergency sewer project in Soquel Village will cause intermittent lane closures and potential turn restrictions at the intersection of Daubenbiss Avenue and Soquel Drive on weekdays between 8:30 a.m. and 4:30 p.m. The project is slated for completion on Friday.

• Slope repair and vegetation control will close down sections of Highway 9 from Monday through Thursday from 7 a.m. to 4 p.m. Those sections are between Clear Creek/Pacific Street and Irwin Way, Prospect Avenue and Lorenzo Avenue, Waterman Gap and Tin Can Ranch Road, Sunnycroft Avenue and Ben Lomond Toll Road, and Woodland Hills Resort and Western Avenue.

• In Watsonville, a single lane on Green Valley Road from Holohan Road to Casserly Road is closed for the Multi-Use Trail Improvement Project. Lane closures occur from 8:30 a.m. to 4:30 p.m., Monday through Friday. Additionally, a single lane is closed on Buena Vista Drive and Ranport Road for overhead tree trimming on weekdays from 8:30 a.m. to 4 p.m., causing potential delays.

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