Running On Empty

February 25, 2007
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GRAND RAPIDS — The city intends to fund its street and bridge repairs with a series of capital improvement bonds it will issue later this year.

At least 31 construction, reconstruction, repair and rehabilitation projects are on the city's to-do list, and the bill for all that work could run as high as $14 million.

Because the reserve in the city's major street fund was below $475,000 at the end of the last fiscal year, and with receipts from the state gas tax not increasing, the city needs another source of revenue for its growing list of street and bridge projects.

"We do need to have more resources," said Deputy City Manager Eric DeLong.

Chief Financial Officer Scott Buhrer said the city will seek up to $20 million from a series of 2007 Capital Improvement Bonds. The proceeds would cover the street work plus replace the wall that collapsed at the Fulton Street Cemetery last year and make upgrades at the public museum.

But Buhrer didn't think the tab would reach the bond limit.

"We do not intend to spend $20 million," he said.

Revenue from the state gas and weight tax to the city's two street funds, the major and local accounts, has remained at roughly $14 million a year for the past few years and has been projected to fall from that level over the next few years.

In past years, the city has been able to use the reserve it built up in the major street fund — the larger of the two accounts — to make repairs, but that reserve is almost gone. The reserve in the smaller local street fund was under $20,000 at the end of the last fiscal year.

DeLong said advancements in auto manufacturing have made many vehicles more fuel efficient. So even with higher gasoline prices, the tax revenue to the city hasn't risen.

"These payments are expected to decline by another 2 percent in the next fiscal year," he said.

About $3 million in gas tax revenue has gone into the city's local streets fund each year, while the major streets fund has received about $11 million from gasoline sales.

The city has cut 10 positions from its streets department to lower expenses, and DeLong said the city has eliminated some maintenance procedures such as roto-milling to reduce costs even further.

DeLong also reported that the price of asphalt has risen by 40 percent over the past few years, while the need for street work hasn't diminished over that time. He said the city was $1.4 million short for its planned street projects last year, and not all that work was done.

After listening to a plea from DeLong last May, the Downtown Development Authority agreed to fund a larger share of the street work in its district this year. About half of the board's local tax increment revenue has been budgeted for those projects.

The DDA has 10 street improvement projects on its list through 2008 that have a total cost of $16.4 million. Board members had committed $5.3 million to those projects at first but raised that commitment to $9.3 million after learning of the city's funding situation. The DDA had to transfer $4 million from its fund balance to cover the increase.

DDA Executive Director Jay Fowler said the board could afford the extra street dollars but not without a potential cost to other projects such as parking facilities.

The situation isn't expected to get any better next year. DeLong said the street capital program will be $11.5 million short of being able to match all the available grants the city could get for 2008 street work.

"We're in a real tight squeeze," said DeLong.

DeLong and Buhrer told commissioners last week the city's best option was to issue tax-exempt bonds to finance a portion of the projects' costs, and then reimburse itself a portion of the cost from the bond proceeds. City commissioners gave Buhrer the authority to issue a notice of intent for the bond package.

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