Why 151 Million?

On May 15, 2018, Omaha voters will be asked to approve $151 million of Street And Highway Transportation Bonds (which we will refer to as “Street Bonds”). In return for this approval, the City commits to complete some transportation projects.

Mode Shift believes it is incumbent on the City to perform three steps:

1. Inform the voters what projects it plans to build with the Street Bonds
2. Account for Street Bond spending and the progress of the planned projects
3. Disclose how it selects the projects that receive Street Bonds funding

Future Mode Shift blogs will address these points, but let’s start with a simple question.

Why $151 Million of Street Bonds?

Street Bonds have been issued periodically following a vote as a “special issues” ticket. Here is the history:

The City will ask voters to approve the issue $151 million in Street Bonds (1)

So taxpayers will be asked to approve a City expenditure of $151 million, plus interest, funded by property taxes. This is more than triple the historical average. How does the City arrive at this number? In short:

• The City plans to double its spending on transportation projects
• The City forecasts a decrease in federal funds and a heavier reliance on Street Bonds

This Is Not About Potholes

Before we address the many questions about this request for huge property tax spending, let’s make one thing clear: This is not about potholes.

CIP projects may include resurfacing but do not include maintenance items like pothole repairs – which are funded with wheel and gas taxes, not Street Bonds. We’ll discuss this in more details in subsequent blogs.

Why Double the Spending?

The City has averaged Street Bond expenditures of  $13,618,000 per year. Starting this year, and during the next 5 years, the City claims it will double the Street Bond spending to an average of $30,507,000 per year:

Source: Capital Improvement Program Documents 2009-2018 (2)

Also, the City intends to double its entire transportation capital spending to $80,570,000 by 2019.

It is hard to believe the City can ramp up its staffing to manage the engineers and contractors that will generate such expenditures, without adding a lot of overhead:

• More spending means more staff to manage contractors – or risk worse: the mismanagement of the increased contracting load.
• More demand for contractors means less experienced workers and higher prices.

A gradual ramping up of spending could be managed, but doubling spending from one year to the next seems improbable, if not reckless.

Another way to look at this: We are more than 3 months into 2018. Has the City shown that its transportation projects have doubled? Or will double this summer?

For these reasons, we doubt that the City will (or can) ramp us as they claim, but we welcome any explanation from the City.

Why budget $26 million for 2023?

Street bonds are issued every 4 four years, so the next issue will be in 2022 and it will cover expenditures for 2023. Yet the 2018 Bond Issue up for vote this May includes $25,781,000 for budget year 2023.

Why include funding for a year that will be covered by another bond issue?

What about the $31 million left in the 2014 Street Bonds?

The City has averaged Street Bond expenditures of  $13,618,000 per year. The 2014 Street Bond issue still has the capacity for $31,582,000, or two years at the historical average. Doesn’t this reduce the need for 2018 Street Bonds?

What Happened to the Federal Funds?

The Federal funds in the 2018 CIP are decreasing to their lowest level ever, $3.6 million by 2023:

Percentage of Federal, City and Local funds by Budget Year (3)

It’s as if the City were saying “we must get voter approval for $151 million of property tax expenditure to cover for the forecast drop in Federal funds”. Can we trust the City’s forecast of federal funds? Let’s look at the accuracy of the forecast for past years:

This chart compares the City forecast Federal funds to the Actual (or the closest we can get to Actual because the City does not report expenditures of Federal funds) (4)

So the accuracy is questionable, especially in recent years, where the forecast drops did not occur. If that trend continues, the City does not need $151 million of property taxes because Federal funds could be used.

This leaves us with a lot of questions: Is the availability of Federal funds really decreasing? Or is it mere uncertainty due to the Federal paperwork requirement? If it is uncertainty, why burden Omaha taxpayers with $151 million instead of increasing the accuracy of the forecasts?

It’s hard to match the CIP forecast with the numbers from MAPA (Metropolitan Area Planning Agency, who coordinates the distribution of Federal funds to the Omaha & Council Bluffs area). How closely are the MAPA numbers reflected in the CIP? How much staff is Omaha able to put on acquisition of Federal funds? Are there unclaimed funds?

So Many Questions

Based on the City’s communications, it seems unlikely that Omaha has the need or the capacity for its spending plan of $151 million in 2018 Street Bonds. And the variances in the City’s forecast of Federal Fund availability casts further questions on the need for the largest bond issue ever.

Conclusion: Voters should press the City for more details.

Mode Shift will have more details about this topic in its next three blogs:

• Street Bonds Part 1: What Projects Will Be Funded? We find that the City deserves high marks for the new CIP format.

• Street Bonds Part 2: How Does the City Account for its Spending? We find that over half of project expenditures are not reported, many projects are over budget by a factor of three, projects are cancelled, delayed, or added without any public communication.

• Street Bonds Part 3: How Does the City Select the Projects? We find that the CIP language has been changed to remove the transparent and objective project selection process mandated in the City Charter, resulting in a vision-less and opaque project selection process.

Notes:

1. Source: City of Omaha Ordinance NO. 41399
2. All Street Bond amounts from CIPs 2009 through 2018. Expenditures were not reported for 2014 and 2015, so Appropriations were used.
3. This chart displays the 6 year Capital Budget forecast from the Capital Improvement Programs 2009 to 2018.
4. For more details on the numbers behind this chart, click here.