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TD:JFH:RLA:jw/ayer.trans/loan2
Council Meeting: October 8, 1991
Santa Monica, California OCT
S 199
TO: Mayor and City council
FROM: City Staff
Subject: AUTHORIZE THE CITY MANAGER TO NEGOTIATE AND EXECUTE A
LOAN AGREEMENT WITH THE LOS ANGELES COUNTY
TRANSPORTATION COMMISSION
Introduction
This report requests that the City Council authorize the City
Manager to negotiate and execute an agreement to loan up to $7
million of Proposition A Discretionary Funds to the Los Angeles
County Transportation commission (LACTC) for use in implementing
the County's Commuter Rail Program. These funds, currently being
held by the LACTC for the Santa Monica Municipal Bus Lines, would
be loaned by the LACTC to other local jurisdictions to build
commuter rail stations.
Backqround
LACTC proposes to initiate a commuter rail system in October 1992
composed of four routes converging on Union station in downtown
Los Angeles from Eastern Ventura county, Santa Clarita, San
Bernardino and Orange County.
The LACTC has adopted a policy
requiring that local cities along the four rail routes pay for
any station development and construction.
It was originally
planned that Proposition C local return funds would be a major
source of local financing.
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~- Legal challenges to Proposition C have delayed distribution of
funds from this source. LACTC has been seeking potential sources
of temporary funding to permit the commuter rail program to
proceed on schedule and has authorized its staff to negotiate
agreements with various jurisdictions desiring to loan funds. As
part of this effort, LACTC staff has been authorized to negotiate
an agreement with the city of Santa Monica to borrow unexpended
Proposition A Discretionary funds, currently being held in
reserve by the LACTC for SMMBL.
IACTC annually allocates Proposition A Discretionary funds by
formula to the County's bus operators. The funds are available
for bus operations only after all other subsidy sources have been
exhausted and carry a 61% local match requirement. SMMBL's
operating efficiency has allowed the system to sustain its
operations without using these subsidies. However, LACTC policy
allows funds to be available to each operator for two years after
the year of apportionment. They then revert to LACTC for
reallocation among other bus operators. SMMBL receives no
interest on the funds during the time LACTC holds them.
Currently, the LACTC is holding approximately $8.4 million in
reserve for the Municipal Bus Lines from proposition A
Discretionary funds originally allocated in fiscal years 1990 and
1991. SMMBL does not foresee the use of any of these funds prior
to the end of the lapsing period.
BudqetarY/Financial Impact
There are several advantages to loaning these funds to the LACTC.
First, for the period of the loan, the LACTC policy of
reallocation of lapsed funds would be waived, extending the time
during which these funds would be available for use by SMMBL.
Second, the LACTC has agreed that funds, once loaned by the
LACTC, would accrue interest for SMMBL at a rate of one-half
percent above the LACTC pooled investment fund rate. The
interest income could be used by SMMBL for current transit
operations without the match requirements attached to proposition
A Discretionary funds. In order to protect SMMBL from any loss,
in the event that Prop C is struck down by the court, LACTC will
guarantee repayment from the Prop. A Local Return allocations of
the cities receiving the loans.
LACTC staff has requested that City staff seek authorization to
loan up to $7 million for a 5-year period.
The exact amount
required will not be known until LACTC completes its negotiations
for loans with other jurisdictions. The LACTC has estimated that
the interest will equal approximately $70,000 annually per
million dollars borrowed.
Recommendation
City staff recommends that the city council authorize the city
Manager to negotiate and execute an agreement for a period not to
exceed five years to loan the LACTC up to $7 million in
Proposition A Discretionary funds currently being held by the
LACTC for the Santa Monica Municipal Bus Lines.
Prepared by: J. F. Hutchison, Director of Transportation
R. L. Ayer, Assistant Director of Transportation