Road Construction Financing

Capital improvement projects are funded through multiple programs at the federal, state, and local levels. Most federal and state funds are channeled through Metro, where the Joint Policy Advisory Committee for Transportation (JPACT), a committee made up of local government representatives, determines which projects will be funded based on regional needs.

The County strategically packages funding for high priority projects from eligible funding sources. Some funding sources have "match" requirements, meaning that funds from that source must be matched with funds from another qualifying source. The rules are subject to change and the amount of funding from each source can fluctuate from year to year. For most funding sources it is the project that qualifies. From most sources, the County does not get funds that it can direct to projects based on County priorities alone.

The following review of funding sources will provide basic information, but cannot hope to clarify all of the complexity of conditions placed on funding, annual fluctuations in funding levels, or the political strategy needed to obtain funding for a project. The State and Cities have their funding, too. Sometimes joint funding can be brought to a project that benefits two or more jurisdictions, or the jurisdictions can support each other's projects when competing for limited resources.

Federal Funding Sources

The majority of federal funds for transportation is derived from the federal gas tax and is distributed by the Federal Highway Administration (FHWA) to qualified projects.

• Community Development Block Grants (CDBG)
  These funds can be used to construct a wide range of projects that enhance designated low and moderate-income communities. They can be used for transportation projects in an area where at least 51% of the residents have low or moderate income. Funds are available in 3-year cycles. The next cycle starts in 2006. Because the funds are to help the local residents, transportation projects funded from this source are usually sidewalks or reconstruction of local streets. Project selection takes place at the Department of Housing and Urban Development (HUD).
• Congestion Mitigation and Air Quality Funds (CMAQ)
  This fund is for projects that contribute to meeting national air quality standards. Projects must reduce Vehicle Miles Traveled (VMT) or take Single Occupancy Vehicles (SOVs) off the road. Projects can qualify if they make better use of the existing system and increase the use of alternative transportation modes. Types of projects include new transit service, bike lanes, pedestrian ways, Transportation Demand Management (TDM) or Intelligent Transportation Systems (ITS). In order to qualify, projects must be within areas of non-attainment or areas that have an Air Quality Maintenance Plan. Competitive selection for projects takes place at Metro, usually every two years.
• Hazard Elimination Program (HEP)
  The Oregon Department of Transportation (ODOT) administers this program to encourage engineering improvements that address identified safety needs. Amounts brought to the County vary because projects are funded on a competitive basis. This federally funded program requires each state to identify hazardous locations on all public roads, assign priorities for necessary corrections at these locations, and establish a schedule of improvement projects.
• Highway Bridge Rehabilitation and Replacement (HBRR)
  This fund is for bridge projects on public roads where the bridge falls below a specific rating standard. Projects are selected every 2 years based on a standard bridge inspection rating. ODOT selects the projects on a competitive basis. Funds are highly variable because they are based on project approval. The County is required to contribute 20% as matching funds on any selected project and uses the road fund for this purpose.
• Surface Transportation Program (STP)
  Funds can be used for all transportation projects, but the local match is 10%. The urban part of these funds is distributed to projects within the Metro Region, using a competitive process, usually every 2 years. Project awards for the urban part of the County vary widely. The STP funding for the rural part of the County is not competitive by project.
• Transportation Enhancement (TE)
  These funds are generally available for a wide range of projects that enhance the transportation system. States are required to set aside 10% of their STP funds for enhancement projects. These are projects that are normally not funded by other sources. These projects are to "enhance" or "preserve" the system to include ferry improvements, renovating historic transportation facilities, and constructing multi-modal pathways. The Oregon Department of Transportation (ODOT) controls this fund. They may allocate funds to local jurisdictions based on a competitive project selection process. ODOT has announced that they will not be allocating funds in 2004-05.

State Funding Sources

• Road Fund
  The sources of this fund are the state gas tax, vehicle registration fees and weight-mile taxes paid by trucks 80,000 pounds or greater. Portions of the state's funds are distributed to counties each year based on the number of vehicle registrations. Clackamas County's portion is almost $16,000,000 from the Highway Trust Fund. At the County level, about $4,000,000 is added from national forest legislation per year. Money from the County Road fund can be used only for projects within road rights-of-way. The County has determined that these funds are to be used for road maintenance. There are two exceptions. The first is an average of $270,000 annually to be used for the required County contribution (local match) for bridge and safety projects. The second is that the County is required to spend 1% of the state gas tax money for pedestrian or bike projects annually.
• State Bicycle Fund
  This consists of 1% of the state's gas tax revenue. Projects are selected statewide on a competitive basis, usually every two years. Because projects are funded statewide, this is not a smooth flow of funds to the County. The County cannot expect a funded project every year.
• Oregon Transportation Investment Act (OTIA)
  New state funds approved by the 2001 and 2003 Oregon Legislature for road and bridge improvements. These new funds will improve Sunnyside Road and eight county bridges.

Local Funding Sources

• Local Improvement District (LID)
  If property owners want a capital improvement on their street (anything that exceeds normal maintenance), they have the option of agreeing to form a local improvement district to pay for it. When this is done, it is generally to construct unimproved roadway, reconstruct an existing road surface, add a sidewalk or drainage improvement, or install traffic calming devices, most commonly speed bumps. Landowners within a specific geographic area pay for the cost. Local improvement districts are not shown as a revenue source, because they are "revenue neutral" to the County, and they are seldom on roads of a collector or arterial classification. Because we cannot anticipate where these requests will come from, they are not scheduled in the CIP.
• Transportation System Development Charge (TSDC)
  New developments are charged for transportation improvements attributable to growth through the transportation system development charge program (TSDC). The funds from TSDC fees can be used only for capital improvements that add capacity on roads that are needed to support new development. The charge is levied based on the number of trips forecasted to be generated by the development. The amount collected each year depends upon the number of building permits issued.

  In 2000 and 2001, the County worked on improvements to the TSDC program. A major change in the County TSDC program was the recognition that geographic subareas in the County could experience far greater impacts from new development and have greater infrastructure needs than other subareas. In 2000, the County and City of Happy Valley identified the "Happy Valley/Clackamas County Joint Area" as one of these subareas. The two jurisdictions collaborated on the "Joint Area" TSDC program that would coordinate with the "countywide" TSDC program, but have its own fee structure.

  Another significant change in the TSDC program was the policy directive that new development should pay its fair share, determined to be 100%, of the transportation costs attributable to the impacts of that new development. This policy was based on recommendations to the Board from the Clackamas County Concurrency Task Force that evaluated growth impacts and funding issues during 2000-2001.

County staff worked with a transportation consultant to refine the TSDC methodology to ensure that only the cost of that portion of a project that would be used by trips from new development could be covered by system development fees. The impacts of trips from existing development and residents, trips from incorporated cities (except for Happy Valley) within the County, and trips from outside the County were not included in the TSDC calculations. Separate TSDC fee structures were developed for the Joint Area and for the "countywide" area. ¹

For the countywide TSDC, about 150 projects were determined to be eligible to receive some level of SDC funding. On average, about half of the projects' costs were determined to be for capacity improvements, and about 40% of trips on those facilities were forecasted to be from new development. As a result, approximately 20% of the project costs of TSDC eligible projects could be paid for by TSDC fees.

• Tax Increment Financing (TIF)
  Eligible projects must be capital projects within an Urban Renewal District, and be included in the adopted urban renewal plan and the Capital Improvement Program (CIP). Clackamas County has three urban renewal districts (Clackamas Town Center Area, Government Camp, and the Clackamas Industrial Area), and transportation projects are just one type of capital improvement project that can be funded. Other examples of eligible capital improvements are water supply, fire protection and storm drainage. The amount of revenue is highly variable and the transportation projects compete against other capital construction needs. Urban renewal districts are set to expire, but can be extended by the Board of County Commissioners.

¹ The TSDC methodology is documented in two reports: "The Countywide Transportation System Development Charges Methodology Update Report" (January 7, 2002R), and the "Happy Valley/Clackamas County Joint Capital Improvement Plan Area, Transportation System Development Charges Methodology Report" (December 4, 2001R)