This bond measure would provide $208 million primarily for San Francisco street re-surfacing and maintenance, but also for capital improvements, pedestrian and disabled access enhancements, bicycle upgrades, and other street-related physical improvements. If approved by voters, the measure will add roughly $9.50 annually per $100,000 of assessed value to property taxes, or $38 per year for a home with an assessed value of $400,000 until the bonds are paid off. The total cost of repaying the bond over 20 years is estimated to be $360 million, including $152 million in interest.
Proposition B was placed on the ballot by a vote of the Board of Supervisors. General obligation bonds must be approved by the voters under state law. The measure requires a two-thirds vote in support to pass.
SPUR’s Analysis
For many years, San Francisco has spent less than required to maintain city streets, resulting in a significant backlog of projects and an increase in costs over time to replace highly degraded pavement. The current need for street maintenance is estimated at $34 million annually, but the City spends only a fraction of this amount. Approximately $3.6 million per year of this need is currently met through the enhanced local sales tax, and $5.2 million from State funding. This underfunding of street maintenance has resulted in a current backlog of over $330 million in repairs. This backlog, plus annual ongoing needs, would require $751 million dollars over the next 10 years. Only $125 million has been identified to meet this need.
Proposition B is designed to begin catching up on this backlog of projects. Funding will include $115 million for street reconstruction and paving, $40 million for improved curb ramps and Americans with Disabilities Act (ADA) upgrades, $7 million toward sidewalk improvements, $8 million for street structures (such as bridges, pedestrian overpasses, and stairways), and $3 million for pedestrian and bicycle safety projects.
In the past, General Fund support and gas tax revenues were used to pay for street repairs. As other funding sources became available, however, General Fund support was diverted to other programs and a conscious policy decision was made to divert $24 million in local gas tax funding from street repairs to street cleaning annually.
But due to changes in the allocation of the City’s transportation sales tax and State funding, money the City has for years relied on for street repair is no longer available. No dedicated financing mechanism has been identified in its place.
Well-maintained streets are able to last 20–40 years or more. Poorly maintained streets may begin to fail after 8–15 years. The cost of maintenance required to prolong the life of a street is small compared to the cost of rebuilding from scratch. Thus, when the City defers maintenance, it ends up costing much more money in the long run as it becomes necessarily to more frequently rebuild prematurely deteriorated streets.
Bonded indebtedness is generally considered appropriate for capital projects with a long life, which are too large to pay for out of regular annual revenue. To justify incurring bond debt, the projects funded with the debt must have benefits that exceed the costs of the interest the City must pay on the debt. By contrast, it is fiscally inappropriate to fund ongoing operations or expenses that occur predictably over time using bonds.
Because street repaving is a normal, predictable expense of government that occurs annually, it is generally considered fiscally inappropriate to pay for it with bonds. As a result, most jurisdictions fund streets using regular tax revenues instead of long-term debt.
By contrast, some of the work to be done on streets under Proposition B, such as ADA improvements and street substructure upgrades, are true capital expenditures meriting long-term financing since they are one-time investments in new structures.
Supporters Claim...
Those who support Proposition B state:
- The city’s streets are falling into disrepair and further delay in improving the most-in-need streets will result in worse pavement conditions. This will translate into increased costs to motorists, Muni vehicles, and bicyclists
- While generally speaking it is a bad idea to fund street repaving with long-term debt, in this case it is appropriate. The bond will fund repaving for the streets in the worst condition. Because at this point the condition of these streets is deteriorating rapidly, it is actually cheaper to pay the interest on bond debt than to allow them to deteriorate further, which would increase the cost of repairs
- City officials now understand the need for a long-term funding solution for street maintenance, but hammering out an agreement on such issues will take time. This bond will provide a temporary funding source while a long-term solution is being developed
- Many costs to be incurred under the proposal are appropriate for a bond measure as they provide long-term capital improvements
Opponents Claim...
Those who oppose the measure state:
- It is unacceptable to indebt the City for projects that are a basic responsibility of government and should be funded through annual income. City officials simply need to figure out how to accomplish this basic task, not ask voters to incur long-term debt for what they should have been doing all along
- Covering maintenance projects with bond measures is financially wasteful. If we approve this bond, we will be paying interest for 20 years just to get five years of street repairs
- If a long-term strategic plan for funding streets were in place, this measure might make sense as a short-term infusion of cash to catch up on the City’s backlog. But no such plan exists
- Passing this bond measure will reduce pressure on City officials to develop a long-term funding solution
SPUR’s Recommendation
SPUR has no position on Proposition B. SPUR requires a 60 percent majority vote of its Board of Directors to take a position for or against any ballot measure, and we were unable to reach this threshold on Proposition B. It is disappointing that voters are even being asked to make this decision. Street maintenance is one of the most basic responsibilities of City government, and the fact that policymakers have been unable to meet this responsibility is a sign that our City government has become deeply dysfunctional. SPUR has a history of consistently supporting general obligation bonds, and has been a strong advocate for improving the City’s management and funding of its capital assets.
But this bond measure is a product of poor financial management, and comes without any assurance that things will improve in the future.
That being said, an argument can be made that given current circumstances, there are few other choices than a bond to begin to address the backlog of deferred maintenance. This bond would be more palatable as a “catch-up” measure if a steady source of funding for annual repairs had been identified, since we could be confident that our streets would not continue to deteriorate even as the bond funds are spent. Unfortunately, none yet exists.