Financing Strategies for a Future Multi-Jurisdictional Mid-Peninsula Bike Corridor

Financing Strategies for a Future Multi-Jurisdictional Mid-Peninsula Bike Corridor
March 2017
Anakaren Cervantes
Ryan Gaertner
Kaya McRuer
Alex Robinson
Caleb Smith
Manager's Mobility Partnership and Joint Venture Silicon Valley

The following memorandum presents five key potential financing strategies for a north-south bicycle/pedestrian path connecting the member cities of the Managers’ Mobility Partnership or MMP (Redwood City, Menlo Park, Palo Alto and Mountain View). The proposed path would span four cities and two counties, requiring non-traditional forms of financing to facilitate jurisdictional collaboration.

This report provides the MMP with a menu of financing alternatives for a future mid-peninsula bicycle corridor. However, mindful of the best advice we received from our interview subjects — “there is no silver bullet” — we do not expect any single alternative to raise the full sum. Thus, upon public approval and adoption of a route, we recommend the MMP pursue a combination of financing strategies, including corporate sponsorship, regional sales tax revenue, and other regional grant opportunities. Additional financing could be found at a local level through reallocation of existing funds, the creation of a Mello-Roos district, and use of lease revenue financing. Together, these mechanisms could yield the $40 million that we estimate will be needed to construct this corridor. In order to most effectively apply these strategies, we recommend the partnership formalize its structure in order to pool funding from multiple sources. Although investigating options for formalization is beyond the scope of our research, the formation of a joint powers authority is commonly used and strongly recommended when applying either Mello-Roos financing or a lease revenue financing strategy. Our analysis eliminated options that could not feasibly achieve the estimated construction cost in a multi-jurisdictional setting, and then rigorously assessed each alternative using criteria developed in collaboration with the client. Each alternative was assessed by considering the amount of funding available, its political feasibility, legal complexity, timeframe, and cross-city coordination difficulty.

The following analysis is agnostic about which particular north-south route the MMP should pursue. Rather, the financing strategies are analyzed according to their ability to achieve the $40 million cost estimate across the four jurisdictions. This cost estimate was determined by building off the work of an earlier Stanford undergraduate policy analysis, which estimated such a project would cost $18 million. In conjunction with staff from the MMP cities, our team adjusted their figure to account for construction and planning costs, including a more accurate assessment of protected intersection costs and a typical cost contingency for construction projects. It is important to note that the $40 million estimate excludes land acquisition costs and maintenance costs. Our analysis focuses only on identifying initial financing for the potential route, which our client identified as the key policy challenge confronting the MMP.

Our recommended alternatives are corporate sponsorship, regional sales tax revenue and grant opportunities, reallocation of funding from existing city resources, formation of a Mello-Roos district, and lease revenue financing. Local companies have previously collaborated with local governments to realize projects similar to this proposed bike corridor and have indicated a willingness to do so again. In particular, corporate sponsorship is a strong alternative because it is logistically less complex than other alternatives and minimizes the use of public funds.

We have identified two regional sales taxes measures, Measure B in Santa Clara County and Measure K in San Mateo County, as other promising sources of combined funding. Several additional regional grants, discussed in Appendix I , may be available to contribute to this project. If the MMP can indeed secure private sponsorship for part of the project, pledged private support may be helpful in attracting these funding sources. Regional grants and sales tax revenues are promising because they are relatively reliable funding sources that also avoid the use of municipal funds or new taxes.

Funding needs not satisfied through corporate sponsorship or grant opportunities may be met through targeted reallocation of general fund revenues or transportation impact fee revenues. Reallocation is a useful alternative because it is cost efficient compared to debt financing and can minimize the potential political contentions of generating new tax revenue.

If existing revenue from cities’ general or special funds cannot cover the full remaining cost of the project, we recommend the MMP consider creating a Community Facilities District through the Mello-Roos Act to levy a parcel tax in all four cities. Such a district could generate major funds for the north-south route, but would require the MMP to transition from a voluntary partnership to a Joint Powers Authority (JPA) spanning all four cities. Creation of a JPA would eliminate the potential complications of having four cities vote on new taxes on a city-by-city basis. If a new tax levy is not an acceptable option, lease-revenue financing offers a promising option to spread out the cost of construction. A detailed discussion of each of these options follows the summary and analysis of financing alternatives section.

Appendix II compiles a summary of several additional non-traditional financing alternatives that we examined that could be useful for future initiatives. These alternatives were identified through targeted literature review of academic and industry journals and existing research. Ultimately, our analysis demonstrated that financing strategies such as fee based-public private partnerships, social impact bonds, and crowdfunding are not suitable for the MMP at this time due to cost, time, limited funding potential, and/or legal constraints. Future research should investigate further options for formalization of the partnership, focus on identifying the best route, and calculate precise funding needs of the project based on the selected route. The MMP will also have to determine, based on this report, their willingness to contribute local funds to this project and should examine specific collaboration opportunities with local companies and grants options.