DDA To Spend More On Streets

May 19, 2006
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GRAND RAPIDS — Sales tax revenue to the state from gasoline sales is going up, while gas tax revenue to the city isn't.

That's because more sales tax is being generated from the higher pump prices, but more gallons aren't being purchased. And that scenario has left one of the city's two main sources of paying for street projects nearly on empty.

"It doesn't give us much room for a bad winter," said Deputy City Manager Eric DeLong of the account's fund balance.

The city will get roughly $3 million as its share of the state's gas and weight tax each year through 2011 — less if consumers actually cut back on their driving. That tax represents about half of the $6.8 million account that will fill potholes and cracks, pay for traffic signs and signals, and paint the line markings next year.

The other main source of funding is the transfer the city makes from its major street fund to the local street fund. That account, too, receives gas-tax revenue, and revenue to that fund isn't growing either, as roughly $11 million is forecast to go into it each year through 2011. And that $11 million is the vast majority of the $14 million major street fund.

DeLong projected that the local street account will only have a balance of $20,000 by the end of the next fiscal year, and the balance for the major street fund will dip below $440,000 then. But he also pointed out that by the end of FY09, both fund balances will be in a deficit mode, a shortfall that will reach $6 million by the end of 2011.

"But the streets don't stop deteriorating," he said.

So DeLong asked the Downtown Development Authority to help the city by picking up a larger share of the repair and construction costs for downtown streets, and board members recently agreed.

"The city is in some pretty tough constraints," said DDA member Paul Mayhue, also a county commissioner. "We are helping out the city."

"Well, we are the city," added DDA Chairwoman Kayem Dunn.

The DDA immediately began putting more money into street work, as the board upped its contribution to the reconstruction of Ionia and Crescent streets. (See related story.) At first, the DDA had planned to put $835,000 into the work, but then doubled that amount to $1.67 million when the project's total cost went from $1.35 million to $2.66 million. The difference will show up in the DDA's FY07 budget.

But the DDA can only spend local tax increment revenue that is collected from property owners in the district on street work, an amount expected to be $3 million for the next fiscal year, which begins July 1. Street work will take up $3.7 million of the $6.5 million in total expenditures to come from that revenue source next year, an account that also includes interest on investments and a small tax increment from the transit millage.

"Over half of our budget will be dedicated to this," said DDA member David Cassard of improvements to downtown streets.

The DDA will draw $4 million from its fund balance to balance the fund next year.

DDA Executive Director Jay Fowler said the board could handle putting more of its dollars into street projects. But he said doing that might cut into the panel's ability to fund other types of projects in the future, like new downtown parking facilities.

"We could put off a (street) project, but there is a cost to doing that," he added.

There are 10 downtown street improvement projects in the DDA's future through 2008. The board had committed $5.3 million toward the $16.4 million combined cost of those efforts, but now it appears the DDA will raise its commitment from $5.3 million to $9.3 million for the same 10 projects.

"This is over a several-year period, but the increased request is substantial," said Fowler.

DeLong said there weren't additional sources of revenue that the city could tap into and create more funding for street work, except for a possible millage that would be dedicated to that task. He said the city does receive grants from the state, but those require a local match within a certain time period or the city loses the grant money.

DeLong said the state hasn't raised its gas tax since 1997, but construction materials have increased appreciably since then. He noted that if the state bumped the tax by a cent, the city would get about another $1 million in gas tax revenue. The state imposes a tax of 19 cents on a gallon of gasoline and 15 cents on a gallon of diesel.

"There aren't any on the horizon," said DeLong of visible funding options. "There are no shortcuts."    

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