At last month’s meeting of the Metro Board of Directors, staff gave a presentation on the updated alternatives for distributing Measure M’s local return funding, revenue that jurisdictions within the county can spend autonomously, as long as they spend it on transportation-related expenses. A sizable chunk of the new sales tax, 17% of the net revenue, is dedicated to local return. Metro’s proposed 2018 budget (PDF - page 13) assumes that it will amount to $128 million in the first year, a deliberately conservative estimate.

With that much money on the line, it is unsurprising that there has been behind-the-scenes wrangling over how to distribute it back to the cities and unincorporated regions of the county that will ultimately get to spend it. For past transportation sales taxes – of which Measure M is the fourth, following Measure R and Propositions A and C —local return funding has been divided and doled out on a per capita basis, but several members of the board are interested in changing the formula.

As discussed in a previous post, Director Janice Hahn of the Fourth Supervisorial District and Director Robert Garcia, Mayor of Long Beach, have argued forcefully that Metro should institute a minimum amount guaranteed to all cities regardless of their size. Such a minimum, or “floor,” would redistribute local return dollars from larger jurisdictions to smaller ones. The recipients of the greatest share of these moneys, the City of Los Angeles and the unincorporated regions of the county, would become donors to those receiving the least.

The policy is nominally intended to increase the fairness of Measure M, which as a result of Metro’s enormous service area, cannot deliver a major infrastructure project to every part of the county. However, the initial conception of the “floor” for local return funding was a blunt instrument that worked counter to ends of equity, increasing per capita funding for cities whose populations have been kept artificially low, and effectively, offering those cities a perverse reward for behaviors that a regional entity such as Metro should probably view as not benefiting the general interest. These behaviors include San Marino’s ban on multifamily housing, Hidden Hills’ existence as a quasi-municipal gated neighborhood, and Vernon’s habitual permissiveness of polluting industries next to some of the county’s densest residential areas.

Both Metro’s staff and its Policy Advisory Council recommended against carrying the local return floor proposal forward, but the floodgates appear to have been opened. All manner of proposals have now sprung up in the context of this discussion, with 20 alternatives presented for Board consideration thus far and probably more to come. Repeated calls for studies of the street mileage in suburban areas have been struck down by staff, who have been advised by the agency’s counsel that such stipulations violate the language of the ordinance approved by voters, which requires that population be the ultimate metric for apportionment.

The alternatives drawn up at the Board’s direction include:

  • 8 different floor settings with minimums ranging from $50,000 to $400,000
  • tiered minimums that round jurisdictional distributions up to the nearest tier above their de facto amount
  • minimums based on subregion, such that the most populous jurisdiction within the subregion becomes to neighboring smaller cities
  • minimums based on daytime population and employment figures
  • return to source, which is to say proportional distribution based on where taxable goods were sold in the county rather than on population
  • and distributions that rely on a weighted average of population, employment and return to source figures

Previously, we discussed the floor in a way that comprehends the various thresholds Metro could select. At the high end, which seems to lack any support beyond Directors Hahn and Garcia, the $400,000 floor would set aside over 5 percent of total revenue, or $5 million annually, in order to subsidize 3.5 percent of the county’s population. This minimum allotment would more than double the per capita distribution among the 32 recipient cities, including many of those with the county’s highest median incomes. Because it is such a blunt instrument, it would also pick up a few middle-income and low-income cities like San Fernando and Maywood, but there is no relationship between need and subsidy under this alternative.

That’s where the tiered minimum plan comes in. Staff proposed various rungs that Metro could use to give small cities a small bump in local return revenue without so much of the subsidy accruing to the cities with the very lowest population. Cities that would receive less than $50,000 based on their population share would be bumped up to $50,000, those between $50,000 and $100,000 would be bumped up to $100,000 annually, and so on. This alternative reduces the overall impact significantly. A structure, for instance, that had rungs every $50,000 up to $200,000 on the high end, would redistribute .37 percent of the local return revenue pot, as compared with 1.35 percent for a flat minimum of $200,000. And yet, as I said before, this has the air of aimlessly moving money around.

The expected subsidy for a city under such a plan would be $25,000. Director Garcia himself has cast doubt on the notion that such a stipend would materially affect the expenditures of recipient cities. The ineffectuality of the redistribution seems to further the notion that the floor is arbitrary and, therefore wasteful. Among the beneficiaries, only tiny Hawaiian Gardens appears meritorious on grounds of equity. As Mayor Garcetti was quick to note in the boardroom, that city is principally funded by revenues from its casino, which is to say that it has a major source of funding that (despite its troubles) many larger cities with greater populations and expenditure needs lack.

The subregional minimum plan would change how the subsidy was drawn, with, for instance, the jurisdictions of the Gateway Cities Council of Governments donating the subsidies to small cities like Vernon, Industry, and La Habra Heights. In general, the effect of the proposal would be to reduce the money forfeited by the city of Los Angeles and to increase subsidies coming from unincorporated Los Angeles County and the various larger non-L.A. cities. Notably, none of the subsidy cities are in the North County, San Fernando Valley, or Westside subregions, leaving them untouched by these plans. Director Kuehl came out strongly against the minimums specifically because, as she said, the unincorporated regions of the county contain some of the most vulnerable populations in Los Angeles. It seems unlikely that this plan would gain much traction with the supervisors who sit on the board, excepting Janice Hahn.

Daytime population and employment figures alternatives are written separately due to the unreliability of the daytime population data, which derives from the federal American Community Survey. The basic premise of using some metric involving daytime activity is that residents are not the only beneficiaries of transportation projects in cities that draw a large influx of daily visitors. Increasing the ability of an El Segundo, to use Mayor Garcetti’s example, to maintain and improve its infrastructure would not only be a boon to the 15,000 people who live there, but also to the 75,000 workers who commute there each day.

However, this also serves as de facto support for a preexisting and prevalent development pattern in coastal California in which in-demand cities zone for jobs while refusing to support housing growth. In this regard, this alternative still runs counter to equity aims. It provides an enticement for cities to extend policies leading to spatial mismatch, in contrast to the goals of the state, regional planning organizations like SCAG locally, and even of the many individual cities that have committed to combatting greenhouse gas emissions.

Return to source, as with the street mile calculation, has been marked as staff as incompatible with the language of the ordinance voters approved. Measure M stipulates that local return will be distributed on the basis of population, not based on where economic activity occurs. But, given that 70 percent of voters approved the new sales tax, and that local return in each of the other three sales taxes is strictly doled out on a per capita basis, it seems fair to assume that voters intended that that would be the case again this time around. If Metro is going to make any adjustment to that formula, it should be based on equity goals that are consistent with those held by Metro, SCAG and the state legislature.

Scott covers transportation and governance issues from his home in Silver Lake. Follow him on Twitter @safrazie.