STAFF REPORT. Highway 101 Milpas to Cabrillo/Hot Springs Project. MEETING DATE: January 15, 2009 AGENDA ITEM: 12

Transcription

1 STAFF REPORT SUBJECT: Highway 101 Milpas to Cabrillo/Hot Springs Project MEETING DATE: January 15, 2009 AGENDA ITEM: 12 STAFF CONTACT: Jim Kemp, Steve VanDenburgh RECOMMENDATION: Authorize the Executive Director to negotiate an amendment to the construction cooperative agreement with Caltrans for the 101 Milpas to Cabrillo/Hot Springs project providing short term loans of SBCAG funding to avoid construction delays. SUMMARY: The Highway 101 Milpas to Cabrillo\Hot Springs project faces a potential work stoppage, most likely in the next two months, due to the ongoing state fiscal crisis. Although the project construction costs are funded through state Proposition 1B bond funds, SBCAG is a partner with Caltrans in delivering the project having provided $13.0 million in local Measure D funds for project development and right of way costs. Staff is recommending at this time that the Executive Director be authorized to negotiate an amendment to the existing construction agreement with Caltrans to provide the state with a short term Measure D loan for the project. A request for a loan has been made by District Director Rich Krumholz. Ultimately, the SBCAG board may have to decide if it wants to loan funds to the State of California to pay the project contractor to keep working while the crisis is being resolved. Or, the board may determine the risks of lending to the state are too great, or that a stoppage cannot be prevented and decide not to complete the loan agreement. Execution of the loan would require a vote of the board at a future meeting. The benefits of prenegotiating the agreement are that it could be approved quickly if all other options to fund the project have been exhausted by Caltrans, a disruptive and expensive work stoppage is imminent and the terms and risks of loaning the funds are acceptable. This staff report provides a brief background on the project, an explanation of how the state s fiscal crisis affects the project, and discusses options the board has before it. DISCUSSION: The Highway 101 Operational Improvements between Milpas Street and Hot Springs Road./Cabrillo Boulevard mark the first phase in Highway 101 widening. This is one of the largest highway projects undertaken in Santa Barbara County. Construction costs are

2 approximately $53 million. The project includes the reconstruction of two major interchanges, six new or improved bridges, new freeway lanes, and improvements to local streets and circulation. Construction began in June of 2008 and will take 4 years to complete. There are four construction stages, each approximately 1 year in length. The main components of the project are: Third lane southbound Hwy 101 added from Milpas St. to 1/2 mile past Hot Springs Rd. Bridge replacement on Hwy 101 at Milpas St. Northboud Hwy 101 merge lane added from Cabrillo Blvd. on-ramp to the Salinas St. offramp Third lane northbound Hwy 101 added between Salinas St. and Milpas St. Cacique St. tunnel for vehicles, pedestrians, and bikes under Hwy 101 Roundabout added at Cabrillo Blvd./Hot Springs Rd./Coast Village Rd./Old Coast Hwy Improved pedestrian and bicycle access under Hwy 101 and along Old Coast Hwy The construction contractor, Security Paving of Sun Valley, is presently billing at an average rate of approximately $1.9 million per month. Caltrans has estimated that approximately 1,000 jobs are being created directly or indirectly by the project. Impact of the State s Fiscal Crisis Project construction is funded with State Proposition 1B bond funds. Prop 1B, which was approved by state voters in 2006, authorizes $20 billion in general obligation bonds for transportation. The cash raised from selling the bonds and the debt service to pay back the bonds go through the state s general fund. At one time, the SBCAG board had programmed county share state gas tax ( STIP ) funding to construct the project. STIP funds normally come from the State Highway Account (which is supported primarily by state and federal fuel taxes), not the general fund, and their use for general government purposes is restricted. When Proposition 1B passed in November 2006, some of the $20 billion in 1B funding was used to augment to STIP program, and Proposition 1B funding was allocated to the 101 project for construction by the California Transportation Commission. There was no concern at the time that using Prop 1B bond funds presented a greater risk than regular STIP funding. It helped get the project funds allocated sooner and was a way for the Governor to show voters that Prop 1B funds were being put to work immediately to construct a project. Unlike Measure D funding, though, which was used by SBCAG on the project to purchase right of way and pay for project design, SBCAG never has physical control of the Prop 1B funding. The funds go directly from the state general fund in Sacramento to reimburse the contractor working on the job. This makes the funds and the Milpas\Hot Springs project vulnerable to the boom and bust swings of state government financing and budgeting. This vulnerability became realized when Caltrans Director Will Kempton mailed out on December 19 a letter to all Prop 1B recipients alerting them that the state s fiscal crisis was going to affect Prop 1B projects. Mr. Kempton s letter is attached to this staff report. The effects of the fiscal crisis are far reaching. According to Caltrans, a total of 39 highway projects in the STIP throughout the state that have awarded construction contracts are funded by Prop 1B although not all of them have begun construction like the 101 project. They are all in jeopardy of being delayed or stopped. Other 1B highway projects that have not yet been put out to bid, had a contact awarded, or given a start-work order have been suspended. This includes one project to install traffic congestion sensors and cameras on Highway 101 on the South Coast. In addition, hundreds of local projects including many in Santa Barbara County are funded from new programs created by Prop 1B and are affected. These projects include local 2

3 street repairs, transit capital (bus) purchases, and transit security improvements. Other transportation projects that are funded from grants that go through the state general fund, including the Tepusquet Bridge (Item 13 on the agenda) are at risk, too. Tepusquet is partially funded from a State Wildlife Conservation Board grant. Thus, the impact of the fiscal crisis extends to many other general obligation bond programs, including flood control, water supply, housing, correctional facilities, etc. Why Prop 1B projects (and all projects funded from the general fund) are in jeopardy is related to how the state handles its daily operations. The state sells bonds as a way of generating a pooled money account for temporary internal borrowing that occurs to keep state government operating. This is necessary because expenditures occur throughout the fiscal year, but most revenues are received in the second half of the fiscal year (through income taxes, for example). Normally, the pooled account is replenished through the issuance of bonds throughout the fiscal year. Unfortunately, current market conditions and the lack of a balanced state budget have restricted the state's ability to sell those bonds. As a result, the cash reserve in the pooled account has dropped precipitously. The potential consequence is that unless the Legislature and Governor act to pass a balanced budget and restore creditors confidence in the state s fiscal solvency, the state s inability to sell bonds and the corresponding lack of cash in the pooled account may require that Proposition 1B project spending be slowed or stopped. It has been reported in various news media that the state will run out of cash in February. The Highway 154 Group II Safety project that is under construction in the Santa Ynez Valley is fully Measure D funded and is not affected by this crisis. This illustrates one of the great benefits Santa Barbara County has with a transportation sales tax measure program, compared to non-measure counties. SBCAG can fully fund some projects to insulate them from state government fiscal issues and loan measure funds to state-funded projects if needed to keep projects moving forward. Because Santa Barbara County voters approved Measure A on November 4, 2008 to continue collection of the transportation sales tax through 2040, we are in a better position in this crisis, and going into the future, than other parts of the state that don t have a measure program. Other regional highway projects that are in the field or will be shortly funded from the STIP may be affected by the state s fiscal crisis. This includes the Hollister\Cathedral Oaks\Ellwood interchange project in Goleta which is scheduled to be put out to bid in the Spring. SBCAG staff is monitoring the effect the crisis is having on these projects very closely. Request from Caltrans to For a Loan Agreement Caltrans District 5 Director Rich Krumholz has submitted a letter to SBCAG asking that in the event no other funds are available to continue work on the project, the SBCAG board consider a loan of Measure D funding to the state to avoid the costs and disruption associated with a work stoppage and a re-start. Effectively, the idea is this would be a bridge loan to provide the project with cash flow until the state resumed selling bonds to replenish its general fund. According to Caltrans preliminary estimates, the costs of stopping and re-starting the project could be as much as $5.0 million. This cost is not covered in the project budget. It is unclear who would have to pay this cost, or how it would be paid if it were realized. Proposition 1B funds for Corridor Mobility Improvement highway projects have been fully subscribed to projects so there are no additional funds in this state program to cover these costs. The costs of stopping a project in the field would include such things as bringing in concrete barriers to shield open trenches that would otherwise be left open for an indefinite period of 3

4 time, canceling contracts for leased equipment, transporting equipment off the job site and protecting the job site from storm damage. The cost can also be measured in terms of lost workers. Skilled laborers on the job may be reassigned or leave the area or state to find work elsewhere. When the project re-starts, they may not be available return to the job. There will be a loss of productivity as new workers have to become familiarized with the project. There is also a potential loss of community support on the project. Leaving the project in a partly finished state will inconvenience motorists, pedestrians and bicyclists, especially on the surface streets in Santa Barbara. Businesses in the project vicinity would likely be impacted by an extended work stoppage. The project has made significant progress since it started construction in June, 2008 and stopping work at this stage would be particularly disruptive. The Los Patos offramp and Milpas southbound onramp are closed and a stoppage would likely extend the closures. The new roundabout in Montecito has just broken ground at a very busy intersection. SBCAG and Caltrans have received many calls from concerned motorists about the disruption caused by the project before the contactor had even broken ground on Coast Village Road. The sidewalks along Old Coast Highway are excavated but not constructed and this will inconvenience pedestrians if the project is stopped. Although this is the first time that SBCAG has considered loaning Measure D funds, it is not unprecedented for SBCAG to use Measure D funds to replace state funding that has been delayed. In October 2003, the SBCAG board approved $ 3.1 million in Measure D regional funding for the 101 Northbound auxiliary lane project between Evans Avenue and Sheffield Road in Summerland. Providing the Measure D funds in lieu of delayed STIP funding allowed the project to stay on schedule. Measure D Funds Staff is recommending that Executive Director be given direction to negotiate an amendment to the existing cooperative agreement with Caltrans to provide for a short term loan using Measure D funding. Such a loan would have to be made with great care and caution. As we all know, the Measure D program is in its twilight years. The program is set to expire in March There are current obligations that SBCAG must meet with the limited funding available in the short time the measure is still in effect. These include paying the contractor on the Route 154 Group II Safety Project, paying outstanding right of way claims for the Milpas project, and making debt payments from bond issuances earlier in the Measure D program. Staff has completed a preliminary analysis of projected Measure D regional program revenues and expenditures. There would be sufficient cash flow to make a $2.0 million loan, with conditions, from the 29.5% of measure funding that goes to regional highway projects. Since the contractor is billing at an average rate of $1.9 million per month this would allow work to continue at the current rate for 1-2 months. Local program funding, which is 70% of Measure D, would not be used to make the loan and payments made to local agencies would not be affected. Given current conditions, a loan of $2.0 milllion might forestall a work stoppage but it may not prevent the stoppage from occurring in the next 2-3 months. It is unclear when the state would be in a position to repay the SBCAG loan and there are risks that if the loan payback is delayed beyond August, SBCAG may not be able to meet all of its existing commitments for the Measure D regional program. Even if the state resolves its budget crisis in the near future and 4

5 the state resumes selling general obligation bonds, the market for buying bonds will be limited and the state s cash flow situation may take many months to recover and allow for repayment of the SBCAG loan. It may be advantageous, however, for SBCAG to consider making a loan of Measure D funds for the 101 project. SBCAG funds could be used to keep the project moving forward albeit at a slower pace until state funds become available, thus avoiding a complete work stoppage. Making partial payments to the contractor on monthly invoices may serve as an incentive to the contractor to continue working. SBCAG s funds could be used to complete some critical items of work prior to a work stoppage if a stoppage is necessary. Priority could be given to work that minimizes impacts to the community and reduces the costs associated with stopping and then restarting the project. By putting up local measure funds to continue work on the state highway project, SBCAG could argue that our project be given priority by the state when bond funds do become available. Therefore, staff is recommending that the board give direction to the executive director to continue negotiating with Caltrans on an agreement to loan funds for the 101 project. The agreement would specify the terms and conditions of the loan such as priority/timing of repayment, exhausting all other funding options before consummating the loan, specifying which work would be eligible for loan funding, etc. The agreement s execution would require a vote of the board at a future meeting. The purpose of pre-negotiating the agreement would be to have it ready in case a work stoppage is called for by the state and all of our conditions are met. The agreement could be executed before the contractor has demobilized and laid off or reassigned workers so there would be no disruption in work effort. Only going so far as to negotiate but not execute the agreement also buys SBCAG more time to understand the gravity of the crisis facing the state, the risks of our lending to the state and when we might be paid back, the likely length of time a stoppage might occur if no intervention were made by SBCAG, the impact of a stoppage on the project budget and the community s views on using Measure D funds to support for the project With so many unknowns and factors in play, staff believes that a decision to move beyond negotiating the agreement to executing it should be deferred until more is known and it becomes critical that action be taken. RECOMMENDATION: Authorize the Executive Director to negotiate an amendment to the construction cooperative agreement with Caltrans for the 101 Milpas to Cabrillo/Hot Springs project providing short term loans of SBCAG (Measure D regional) funding to avoid construction delays. COMMITTEE REVIEW: This issue was discussed with TTAC. It was not an agendized item for action. Attachments 1. Milpas\Hot Springs Upcoming work activities 2. Letter from Caltrans (Rich Krumholz) RE: Loan to SBCAG (Jim Kemp). 3. Letter from Caltrans to Security Paving 4. Letter to All Prop 1B recipients from Caltrans 5

6 Attachment 1 UPCOMING WORK ACTIVITIES HIGHWAY 101 MILPAS\CABRILLO-HOT SPRINGS An immediate work stoppage may affect the following list of activities crews are scheduled to perform in the next 30 days: Begin work on the Hwy 101 bridges over Milpas Street. During this work, Milpas Street will have temporary closures under the Hwy 101 bridges. It is expected that work on the Milpas bridges will require night closures to move equipment into and out of the area, followed by partial street closures during the day. During the Milpas Street temporary closures, a detour will be in place directing traffic around the closure using Mason, Quarantina, and Cacique Streets as detailed below. The southbound Hwy 101 on-ramp at Milpas Street will remain closed. While the onramp is scheduled to close for up to five months (May 2009), crews are optimistic that they will be able to open the ramp ahead of schedule (weather permitting) due to work already completed. Lay aggregate base for the new northbound Hwy 101 merge lane between Cabrillo Boulevard and Salinas Street. Drive piles near the Hwy 101 off-ramp at Milpas Street in preparation for the first stage of the Cacique Street under-crossing work. Continue work on the retaining wall for the new southbound hook off-ramp to Milpas and construct the new hook off-ramp and the upgraded southbound Hwy 101 on-ramp at Milpas Street (the on-ramp remains closed during this work). Crews may begin paving the upgraded southbound Hwy 101 on-ramp at Milpas Street as early as next week. Following Milpas ramp paving, crews will move paving activities to the new third lane southbound. On Hwy 101 southbound between Milpas Street and Olive Mill Road, crews will continue drainage work and installing aggregate base for the new third lane. Crews will continue excavation and grading for the new Montecito roundabout near the intersections of Coast Village Rd, Cabrillo Blvd, Old Coast Hwy, and Hot Springs Rd. As a part of the local street improvements, crews will continue excavation work and begin forming for sidewalk and parkway improvements on Old Coast Hwy between the tennis courts and the new roundabout. Continue work on the new sound wall by the municipal tennis courts. 6

7

8

9

10

11

12