With voters shying away from supporting bonds, the Pima County Board of Supervisors on Tuesday will consider a new way to fund capital projects.
The pay-as-you-go policy (PAYGO) would allow the county to get around the need for long-term debt such as bonds while adding extra funding to the Department of Transportation's budget to complete a 10-year road repair plan.
Deputy county administrator Carmine DeBonis said the 1,900 miles of paved roads in unincorporated Pima County could reach 77 on the rating on the Network Pavement Condition Index with the added funds from PAYGO by the end of the 10-year repair plan. The rating index is on a 100-point scale, with 80 representing very good condition.
The 10-year plan would end in 2029.
Thanks to more revenue than previously projected, Pima County residents may be driving on 39…
On Tuesday, the board will also consider a $27 million fund allocation, with $10 million going toward this fiscal year's road repairs, which will be completed by June. Should the board approve the reallocation, the overall network index would increase another two points to 79 by the end of the 10-year plan, DeBonis said.
The county's network rating is at 42 this fiscal year and if the board approve the extra $10 million in funds the rating is projected to be 44 by June.
PAYGO would add an extra $5 million to road repairs every year until contributions reach $25 million. Once at $25 million, the funding will be maintained each following year until the 10-year road repair plan is completed.
However, PAYGO still needs to be approved; if the board rejects the policy, the time to complete repairs to the county's roads would remain undetermined, DeBonis said.
PAYGO would allow the county to get around having to use voter-approved bonds to fund capital projects and would also provide more money for road repairs.
Supervisor Steve Christy, whose District 4 includes Green Valley, said supports the policy and sees PAYGO as an improvement over bonds.
"I think it's a terrific shift in county policy in general and road repair maintenance in particular because the bottom line is that we're not going to spend money we don't have," he said. "Nor are we going to create a revenue source for any kind of project, be it a capital improvement project or a road repair and maintenance project, by raising taxes or trying to pass a bond."
There are three revenue scenarios in how the PAYGO policy could be implemented — 50/50, 60/60 and 100/50.
In County Administrator Chuck Huckelberry's memo on the PAYGO policy, all three scenarios could be implemented while also reducing the county's tax rate, he wrote. The 50/50 scenario would have the most impact and the 100/50 would have the least impact on lowering the combined tax rate.
Christy said he prefers the 50/50 plan because it reduces the tax rate the most. However, Huckelberry has recommended 60/60 to the board.
In the 60/60 scenario, 60 percent of the decrease in the secondary property tax rate combined with 60 percent of the growth in primary net assessed value — the primary property tax — would make up the revenue source for a General Fund PAYGO program.
According to Huckelberry's memo, the 60/60 scenario could produce $386.7 million after 10 years with $220 million being allocated to road repairs and $166.7 million as a remaining allocation. There are $461 million of unfunded projects in General Fund departments. The 60/60 scenario would provide 36 percent of the funding for those capital projects whereas the 50/50 would provide 22 percent of the needed funding.
The reduction in debt service, the secondary property tax, is from a decline in the county's debt. In April, Huckelberry reported to the board that the county's debt will be rapidly declining in the near future and within five years 76 percent of this fiscal year's debt will be paid off.
It's been tried
Using PAYGO policies isn't new to the county. The Library District, Regional Flood Control District and Regional Wastewater Reclamation Department all already use PAYGO as a revenue source.
"Those departments, in the case of the Library District and Flood Control District, those are special taxing authorities," DeBonis said. "The tax revenues collected go to fund both the operations of those entities as well as their capital projects programs."
The Wastewater Department collects new connection as well as user fees to fund their projects, DeBonis said.
Despite the history of PAYGO policies in the county, there are some downsides Christy has identified.
"The only downside I see is if we hit a recession or if some of the presumptions in the PAYGO plan don't actually come to fruition," he said. "I also have some concerns about the direction of the spending that the accumulated PAYGO funds will go towards."
Christy wants to see prioritization with his highest priority being road repair, he said.
The $27 million allocation the board will consider Tuesday would have $10 million for this fiscal year's road repair projects as well as $15 million for Facility Renewal Fund and $2 million for the Natural Resources, Parks and Recreation Department.
Christy said he wants to see the allocation redivided with $25 million going to roads and $2 million to the Parks and Rec Department. As for facility maintenance, Christy said there is already money programmed in the next budget to take care of repairs and replacements.
The next Board of Supervisors meeting is at 9 a.m. Tuesday at their chambers in downtown Tucson.