Agenda #: 5.3
Meeting Date: August 6, 2024
TO: Honorable Mayor and Members of the City Council
FROM: Daniel Fox, City Manager
TITLE: AGREEMENT WITH CITY OF COMMERCE FOR EXCHANGE OF
PROPOSITION A FUNDS.
STRATEGIC
GOAL: Responsible Stewardship of Public Resources
RECOMMENDATION:
A. Adopt Resolution No. 2024-34 approving, and authorizing the City Manager to sign, the Funds Exchange Agreement selling $1,333,333 of Proposition A Funds to the City of Commerce; and
B. Appropriate $1,333,333 from the Proposition A Fund and recognize $1,000,000 in Park & Facility Development Fund (262) revenue for the exchange.
FINANCIAL IMPACT:
The City of Commerce wishes to purchase $1,333,333 in Proposition A funds at an exchange rate of $0.75 per each $1.00 which is reflected in the proposed Exchange Agreement. At this exchange rate, the City of Diamond Bar will receive $1,000,000 in unrestricted funds. It is recommended that the proceeds from the exchange be deposited into the Park & Facility Development Fund (262) which will increase the available fund balance to approximately $2.4 million. To facilitate the exchange, the City Council will need to appropriate $1,333,333 from the City’s available Proposition A Fund (206) fund balance which will reduce the available fund balance to approximately to $1.5 million.
BACKGROUND/DISCUSSION:
Proposition A (Prop A), the half-cent sales tax for transit, was approved by voters in 1980. The revenues generated through this half-cent sales tax are to be used toward the development of transit related programs, which are administered by the Los Angeles Metropolitan Transportation Authority (Metro). In administering the program, Metro has been distributing Local Return Funds directly to cities. Each recipient city must use its
Local Return Funds within three (3) years from the date of receipt when the funding authorization expires.
Diamond Bar continues to utilize Prop A Local Return Funds to offer a variety of ongoing programs that include: the Diamond Ride Program which heavily subsidizes dial-a-cab service to seniors and persons with disabilities; the Holiday Diamond Ride which expands the Diamond Ride Program to all residents when shopping in Diamond Bar during the holiday season; bus transportation for recreation programs; Transit Pass sales which offers seniors discounted rates on Metrolink and Metro bus passes; and maintenance to our citywide bus stop shelters. The proposed exchange would not reduce any funding levels for existing Diamond Bar programs or services.
In addition to the aforementioned ongoing programs, $1.2 million in Prop A funds were recently utilized for the design and construction of new bus stop shelters across the City, and the current FY 2024/25 Capital Improvement Program includes $650,000 in Prop A funds for pavement rehabilitation projects ($50,000) and the Diamond Bar Complete Streets project ($600,000).
Due to a lack of additional transit-related programming – be it ongoing programs or onetime capital projects – a surplus of Prop A funds has accumulated which will expire after three years. Metro, which oversees these funds, allows cities with unused restricted Prop A funds to exchange them with other cities for unrestricted revenues. In these exchanges, the city that can use additional Prop A funds agrees to pay the city with the surplus Prop A funds a sum less than the value of the Prop A funds. This allows the city using the Prop A funds to obtain them at a discount, while the city with the surplus receives unrestricted funds that can be used for non-transit purposes. This arrangement is considered mutually beneficial for both cities.
The City of Commerce approved the attached Prop A funds exchange agreement at their July 23, 2024 City Council Meeting. Once the agreement is fully executed, a check in the amount of $1,000,000 will be forwarded to the City of Diamond Bar and deposited in the Park & Facility Development Fund (262).
LEGAL REVIEW:
The City Attorney has reviewed and approved the Agreement as to form.
PREPARED BY:
REVIEWED BY:
Attachments:
1. 5.3.a Resolution No. 2024-34
2. 5.3.b Exhibit A - Agreement - Proposition A Funds Exchange