The City Council approved a 1998 Study Issue to complete a study of potential revenue sources for major transportation capital improvements in the City. Previously approved studies and the Land Use and Transportation Element of the General Plan identify a number of major roadway capital improvement projects that will be necessary to mitigate increased travel in the City generated by new development over the next 20 years. No funding sources have been specifically identified, although candidate types of revenue have been discussed. Without a source of funds for improvements to the City transportation system, traffic congestion could negatively affect the City's economy, neighborhoods, and environmental health, among other things.

Subsequently the City Council authorized the hiring of a project management consultant and transportation modeling and finance experts. Work on the study is well underway. This study is exploring the universe of potential revenue sources available to fund major transportation capital improvements required to support land development as forecast in the Land Use and Transportation Element. Revenue potential, implementation and legal issues are being identified at a level of detail sufficient to determine the viability and subsequent implementation of a program of new revenue sources. A revenue program could include outside funding, impact fees, and improvement districts, among other means.

This report is to update the City Council on the progress of the Transportation Strategic Plan, and to inform Council on steps being taken to assure that long term transportation system needs are taken into account in the mitigation of current development projects.

Study of potential development of new transportation revenue sources for transportation is consistent with Fiscal Sub-Element policy 7.IB.6, "Use all available funding sources to finance capital improvement projects consistent with City priorities." It implements Land Use and Transportation Element action statement C3.7. 1, "Develop alternatives and recommendations for funding mechanisms to finance the planned transportation system."

The City has adopted long range land use plans covering the next 20 or so years including Land Use and Transportation Element of the General Plan, the Futures Study, the Downtown Specific Plan, the Southern Pacific Corridor Plan, and the Lockheed Site Master Use Permit. These area-specific plans and the Land Use and Transportation Element identify mitigation of transportation impacts required to support the plans, but do not identify funding sources. As a result, development is occurring without a solid financial plan for mitigating transportation impacts.

The cost of this mitigation is considerable, estimated in the Land Use and Transportation Element in excess of $ 100 million. This level of funding cannot be accommodated by the City's current Resource Allocation Plan. In order to provide for planned, orderly development in Sunnyvale over the next 20 + years, new revenue sources must be identified and implemented for transportation improvements.

Revenue studies are typically very involved due to the complexity of some revenue mechanisms. While outside funding sources and the likelihood of receiving funding from those source can be relatively easily stated, more reliable sources such as fees and assessments require detailed study of revenue generation potential and legal issues with the scope, amount and justification of fees. Fairly detailed cost estimates of improvements that would be eligible for fee revenue is also necessary. Crafting a logical package of revenue sources that supports the proposed menu of capital improvements is another component of these studies. The City has retained a transportation finance expert and a transportation computer modeling firm to assist in completion of the study, and will soon be retaining a civil engineering firm. Representatives of the Finance Department Budget and Revenue divisions, the Public Works Engineering and Traffic Engineering divisions, the Community Development Department Planning division, and the Office of the City Attorney are participating in the study as well.

Project Status

The Transportation Strategic Plan work is progressing on schedule. Currently the transportation computer model parameters have been established, consistent with Congestion Management Program requirements and the recommendations of the City’s transportation finance consultant. The virtual roadway network characteristics are now being programmed. Over the next two months, the base year transportation model will be run and validated against actual traffic data. The result will be a rational representation of current roadway conditions, from which the foundation for making projections of future conditions will be based.

The Project Manager has structured the planning process so that expert consultants are brought in only at those times needed, rather than retaining a full consultant team over the life of the project. This is a more efficient contracting process. As the base transportation model is completed, a Civil Engineering expert will be retained to conduct detailed design and cost estimating studies for possible future roadway improvements. A Request for Proposals for these services is currently being drafted, and Council will be asked to contract with a preferred engineering consultant in the near future.

One of the work plan items for the consultant team was to investigate measures that could be implemented to capture revenue potential from new development in the interim period between initiation of the study and development of detailed information. Using development projections from the City’s GIS system, employment estimates from the General Plan, and the best available cost estimates for the most likely future transportation improvements, the consultant has developed a framework for mitigating current development’s impact on future transportation needs. By relating anticipated square footage, job growth and vehicle trips from development (as forecast by the General Plan) to the cost of future anticipated transportation improvements, costs per vehicle trip and per square foot of development have been developed. Staff is now using these numbers as a framework for mitigating long term cumulative impacts of development.

Equitability and nexus are important issues to consider in using such a framework. In order to assure that assessments for mitigation are fair and meet a test of nexus between development and mitigation, a number of measures have been undertaken. Cost estimates for future improvements were adjusted to account for only expenditures that were highly likely to be needed in the future. Also, assumptions on sources of funding of future improvements assumed a considerable (82%) amount of funding from sources other than development. If the framework were based on mitigation of 100% of the cost of projected improvements, the cost per trip would be almost 5 times higher. By scaling back the base assumptions, the City reduces the risk of challenge of the equitability of mitigation and does not make the costs of redevelopment and development prohibitively expensive.

To date, staff has only applied the framework on projects requesting use permits requiring industrial intensities greater than the zoning allows (typically 35% FAR) by right. Therefore, funds contributed by development are considered environmental mitigation per the California Environmental Quality Act, rather than a fee. This approach allows funds to be collected without the substantial technical substantiation required for a fee or assessment on all development. Finally, staff is recommending mitigation only of net new trips, not existing trips from structures that are redeveloped.

Staff has discussed this mitigation with developers of pending projects. There appears to be general agreement on the need for mitigation and the basis for the proposed framework. Staff recognizes the amounts may seem quite large particularly for sites with little or no existing development. Staff believes our approach is essential to assure adequate mitigation of long term traffic infrastructure impacts.

Costs per vehicle trip and per square foot of development for six land use categories are as follows:

Further outreach to the development community is planned over the next several months to introduce the mitigation concept and discuss the overall approach to the full program of Transportation Strategic Plan funding alternatives. This outreach is a critical aspect to gaining consensus among the business community and the community at large on the overall Transportation Strategic Plan approach. At this time, staff is requesting that the City Council support initiating public outreach. The transportation finance consultant and the Economic Development Division of the Community Development Department will play leading roles in this effort.

The specific fiscal impact to the budget of the current strategy for mitigation of long-term transportation impacts is unknown, due to the speculative nature of the pace of development. However, revenue will be realized towards future transportation improvements called for in the General Plan. It is anticipated and expected that the amount of revenue generated will be substantially less than the current total estimated cost of future improvements. However, in the absence of this mitigation framework, foregoing revenue for future planned improvements through mitigation of current development proposals would constitute a negative fiscal impact to the City.

Publication and posting on the City Council Agenda. Reports to Council are also available in the Sunnyvale Public Library and on the City’s Internet home page. In addition, developers with projects currently pending before the City as well as the Chamber of Commerce were notified of the meeting and mailed copies of the Report to Council.

Staff recommends that the City Council support a public outreach effort to the business and development communities on the Transportation Strategic Plan.

Prepared by:

Jack Witthaus
Transportation Planner

Reviewed by:

Ray Williamson
City Traffic Engineer

Reviewed by:

Reviewed by:

David S. Boesch Jr.
Director, Department of Community Development

Approved by:

Robert S. LaSala
City Manager