Main Street Phase II project facing $18 million funding shortfall, council learns

The Mountlake Terrace City Council at its Sept. 15 meeting recognized U.S. Constitution Week, Sept. 17-23. At left, Mountlake Terrace resident Sally Buckingham, regent of the Ladies Sterling Chapter of the Daughters of the American Revolution (DAR), receives a proclamation from Mayor Kyoko Matsumoto Wright.

For 15 years, a major focus for the City of Mountlake Terrace has been completing its signature Main Street Revitalization Project, running along 56th Avenue West from the Mountlake Terrace Transit Center to 230th Street Southwest. While Phase I of the project was finished in 2020, the city is facing a potential $18 million shortfall for completing the second phase, the Mountlake Terrace City Council learned during its work/study session Thursday night.

Acting Public Works Director Phil Williams — who is serving on a contract basis after Public Works Director Eric LaFrance left in late August — delivered that disappointing news during the council’s review of the city’s draft Six-Year Transportation Improvement Program (TIP), which runs from 2023-2028.

The funding shortfall is “kind of the 800-pound gorilla right now in the transportation capital program,” Williams said.

(State law requires cities to update its TIP program annually. The council will hold a public hearing on the draft program during its Monday, Sept. 19 business meeting.)

The city anticipated starting construction on Main Street Phase II in 2023. Total project costs are estimated at just over $23 million, which includes $16.6 million for construction and $4.5 million to acquire right of way and related property, plus some city-related expenses. The city has in hand about $5.187 million, leaving a balance of just over $18 million “that is going to need to be there for the project to break ground. And that will be a challenge,” Williams said.

Main Street Phase I was completed in 2020. (Photo courtesy City of Mountlake Terrace)

Main Street Phase I included rebuilding deteriorating pavement along 236th Street Southwest from I-5 to 56th Avenue West. The project also added wider sidewalks with trees, decorative LED pedestrian and street lighting, and relocated existing overhead utilities underground. Phase I construction was fully funded by a federal Surface Transportation Program grant, two State Legislative Appropriations, a Transportation Improvement Board grant and the city’s utility funds. Phase II would reconstruct 56th Avenue West from 236th to 230th Streets Southwest with many of same improvements.

Main Street Phase II design and right-of-way efforts are fully funded by Federal Highways Administration (FHWA) grants and city funds, Williams said. These include Transportation Benefit District revenue (a $20 fee applied to local vehicle licenses) and traffic impact fees. Construction funding already secured icludes $2.45 million in state appropriations, a $2 million FHWA grant and an additional $285,000 from FHWA for right-of-way carried forward from Phase I.

The right-of-way acquistion phase has already started, although no offers have been made on the 40 properties required for the project, he added.

A map showing the location of the Main Street Revitalization Project. Phase I, along 236th Street Southwest from the Mountlake Terrace Transit Center to 56th Avenue West, has been completed. (Graphic courtesy City of Mountlake Terrace)

The city is now working to secure the remaining $18 million needed for Main Street Phase II construction, including a $5 million state Transportation Improvement Board grant application submitted in August 2022. The city expects to learn Dec. 2 whether it is receiving that money.Among possible funding sources for the balance, Williams explained, include the federal RAISE grant program, which has a significant amount of money available due to the newly adopted Infrastructure Investment and Jobs Act. “Instead of having the entire United States fighting over a billion or a billion-and-a-half dollars every year, there’s like $50 billion that will be in that program over the next few years,” Williams said.

The city could also receive money from regional organizations that distribute federal funds, including the Puget Sound Regional Council. In addition, lawmakers have the ability to earmark funds for projects in their districts, Williams said.

Further options to consider are other federal and state loan programs, as well as local financing options, which could include:

– Raising the city’s current vehicle licensing fee assessed through the Transportation Benefit District from $20 to $40.

– Increasing the amount the city taxes developers through transportation impact fees.

– Using some of the city’s $4.5 million allocation from the federal American Rescue Plan Act.

– General obligation bond funding or a property tax levy lift.

In 2015, when the city announced its plan to complete the Main Street Project in two phases, it estimated the total cost at $18 million. Phase 1 was projected to cost between $5 million and $6 million (not including right of way) and Phase 2 was estimated at $10 million.

“The difference between the numbers you saw in Phase 1,” Williams said, “[is that] several years have gone by and lots of lots of inflation, especially in the construction industry. That probably accounts for most of it.”

City staff and the council need to have a conversation “fairly soon” on options for Main Street Phase II funding, Williams said.

Councilmember Doug McCardle asked if it would be possible for the city to get a loan to fund the entire Main Street Phase II project, then use the city’s Transportation Benefit District assessments to repay the loan over time. “If this (Main Street) is a really a priority and we’ve been working at it so long…why not look at it differently?” McCardle asked.

Councilmember Steve Woodard agreed that the city should explore a range of options for funding capital projects, which also include future investments in paving — something that both Williams and City Engineer Marc Seferian agreed are needed.

“Something needs to be done,” Woodard said.

Williams said that while loan options were worth considering, “the best place to start is to get as much of that other money as we can” and see what type of balance is left over. “That’s part of the discussion that needs to happen next.” The next step, he said, is for the city to meet with state and federal lawmakers to determine what kind of government funding is available.

Acting City Manager Stephen Clifton added that staff have already discussed the matter with the city’s federal lobbyist, Jake Johnston, who encouraged the city to pursue federal RAISE grants.

Councilmember Laura Sonmore said that while she was also frustrated about the Town Center funding shortfall, she is wary of bond or loan financing that could increase the city’s debt. She said she would prefer the city explore “anything that we can do on the federal and state level to get funding.”

“This has been an eye opener,” Mayor Kyoko Matsumoto Wright told Williams. “It’s nice to have somebody come in with a different set of eyes from the outside and seeing what we need and what are our holes. We have more holes than we thought.”

Transportation Improvement Program revenue. (Graphic courtesy City of Mountlake Terrace)

Seferian explained the details of the TIP program, which includes a range of capital projects that cover pavement preservation, sidewalks and sidewalk ramp construction, traffic signal equipment upgrades, bicycle route development, and a major intersection improvement. It is funded with $897,300 from the following revenue sources:

– The Transportation Benefit District generates approximately $325,000 annually, with all of it is going to the streets capital program

– State gas tax revenues provide $521,000 (in 2022), with approximately $110,000 to the street construction fund and $376,000 to the street operating fund.

– Transportation impact fees depend on the intensity of new development and property sales. It has averaged around $70,000 for the last five years and all goes into the TIP program.

– Real estate excise taxes provide $385,000 annually.

– Interest earnings are $7,300 annually.

In addition to Main Street Phase II, the draft TIP program for 2023-2028 includes the following projects:

66th Avenue West pavement reconstruction: Design 2022 and construct in 2023. Funded through state gas tax, Snohomish County Waste Transfer mitigation and city funding for staff time.

216th Street Southwest/48th Avenue West Intersection and Sidewalk: 2022 design and 2023 construction. Funded through state Safe Routes to School with local matching funds

48th Avenue West Bicycle/Pedestrian Connection: Design begins in 2025

244th Street Southwest Reconstruction from 56th Avenue to Cedar Way: Design in 2025 and build in 2026

You can review the complete draft TIP presentation with additional projects listed here.

In other business Thursday night, the council heard the second-quarter 2022 report from the police department. Look for details of that in a future story. The council also agreed to place two items on the council’s Sept. 19 consent agenda:

– Approving the city’s participation in an opioid settlement agreement. Washington Attorney General Bob Ferguson filed a lawsuit against McKesson Corp., Cardinal Health Inc. and AmerisourceBergen Drug Corp. for their role in helping to fuel the opioid epidemic. As part of a settlement agreeement, the three opioid distributors will pay the state a total of $518 million, which will be distributed to participating jurisdictions, payable over 17 years. The funds can be used to cover city expenses related to the epidemic, Police Chief Pete Caw said.

– Authorizing the acting city manager to extend the city’s current contract with Waste Management Inc. through Oct. 31 to allow additional time to conclude negotiations on a new contract for garbage, recyclables and organic waste collection

The council’s Monday, Sept. 19 hybrid meeting will begin at 7 p.m. in council chambers, 23204 58th Ave. W., Mountlake Terrace. In addition to a scheduled public hearing and approval of the TIP program, the agenda includes:

– A public hearing on a draft city code changes that would move all quasi-judicial decision-making to a hearing examiner.

– Review and approval of a $75,000 change order and a $50,000 contingency for Ballinger Park Trail Construction.

Those wishing to attend the meeting remotely can click here and enter the passcode 091922. To listen via telephone, call 1-253-215-8782 and enter meeting ID 835 6916 3686 and passcode 091922.

— By Teresa Wippel

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