Following a two-hour work session on Monday, councilors directed staff to form a committee to look at the issue

City staff and councilors gathered for a two-hour work session on Monday night (March 7) on the topic of city streets.

The quality of Cottage Grove’s streets has been a frequent point of friction between the public and local government and is a consistent source of complaints. The city reports that concerns sent to its online “Pot Hole Spotter” on the city website are received “on a regular basis”.

At the work session, the topic as presented to council by Public Works and Development Director Faye Stewart highlighted major financial obstacles in meeting goals, in particular that the city does not have the revenue to even maintain streets at their current level of quality.

While councilors did not settle on a particular solution by the end of the session, there was a general consensus that public participation in finding a solution would be key. The council directed staff to form a committee comprised of councilors, planning staff and citizens.

State of the Streets

The City of Cottage Grove has approximately 42 miles of paved and just under two miles of gravel streets.

On Dec. 9, 2019, the city received a road quality report from project management company Emerio Design. The company had been hired by the city in 2018 to perform a Pavement Condition Index (PCI) survey of the city streets.

PCI is a numerical rating between 0 and 100, which is used to indicate the general condition of a pavement section. According to the index, 85-100 is considered Good, 70-85 Satisfactory, 55-70 Fair, 40-55 Poor, 25-40 Very Poor, 10-25 Serious and 0-10 Failed.

The report graded Cottage Grove’s streets overall at the lower end of the “Fair” category with a score of 58. In addition, the company stated that around 42 percent of the city’s 321 road segments were in Poor, Very Poor or Serious condition.

The 2019 report also indicated that to maintain the city’s current Fair grade over the next 10 years, the maintenance budget would have to more than double to $1.4 million per year. Emerio estimated that in order to improve the PCI to 72 (Satisfactory), the city would need to invest about $2.8 million per year over the next 10 years and to reach a PCI of 80 (upper end of Satisfactory), it would cost $3.6 million per year for 10 years.

These numbers were based on the report’s estimate that the amount of unfunded maintenance and repair costs of the city’s transportation system is about $26.73 million today and projected to be $31.12 million by 2029.

However, the report was prepared prior to the recent spike in oil prices, which has seen consumers paying record amounts at the gas pump.

Emerio is currently resurveying the pavement condition for all Cottage Grove city streets and an update to the Pavement Management Report is expected in July this year.

Budgeting and Expenditures

Finding revenue to keep up with road improvements has been a constant challenge for the city.

The adopted 2021-22 Cottage Grove budget estimated around $1.37 million in revenue for the street fund. About a quarter of that was estimated to come from local gas tax and more than half comes from a state highway fund.

Other sources include Federal Urban Aid, project assessments of the Sunrise Ridge development and a transfer from the city’s storm drain fund.

Operating expenses were budgeted at $684,275 this year, which includes general maintenance and payroll. Actual operating expenses over the last eight years have routinely come in under budget, though, averaging around $557,000.

For the 2021-22 fiscal year, there was also approximately $600,000 allocated for capital projects leftover from operations and the total revenue. These projects have included purchasing equipment and crack sealant for maintenance on roads. There is another $185,000 due to carry forward into 2022-23 for street repaving.

In next year’s budget, $450,000 is planned to be allocated for a Main Street rebuild project as part of a required 20 percent match if the city is successful in being awarded an Economic Development Administration grant.

An additional $450,000 would have to be allocated in the 2023-24 budget to reach 90 percent of the match required for the grant.

There have also been major projects done each year since Stewart took over his public works position in 2017, which he presented to the city council at the work session.

In Stewart’s first year (2017-18), the city spent $906,798 on: repaving South Sixth Street from Highway 99 to Johnson Street and Mosby Creek Road from Thornton Road to the city limits; installing a pedestrian crossing across Row River Road near Walmart; and repairing Gateway Boulevard near the I-5 interchange.

During the 2018-19 fiscal year, about $1.1 million was spent on: Main Street, Silk Creek and Harrison Avenue Bridge repairs; and rebuilding the railroad crossing on South Sixth Street.

From 2019-20, nearly $1.2 million was spent on: completing construction of the J. Polk Currin Swinging Bridge; rebuilding railroad crossings at Villard and Chamberlain Streets; and crack sealing 100,000 lineal feet of street cracks.

In 2020-21, more than $1.8 million went toward the Safe Routes to School project, almost $1.3 million of that coming from a grant.

And finally, from 2021-22, the city has done chip sealing on North Gateway Boulevard from Harvey Road to East Main Street and so far crack sealed about 400,000 of lineal feet.

In all, about $3.6 million from the street fund and $1.5 million from grants were spent on these projects. While securing grants has been a helpful strategy for some of these projects, Stewart pointed out that they are not enough to address the total investment needed to improve Cottage Grove’s streets.

Future Projects

The city is looking at eight repair, maintenance and repaving projects which need attention in the city.

These projects and estimated costs include: Row River Road between Thornton Road and Currin Boulevard ($406,000); East Whiteaker Avenue and East Main Street from Gateway Boulevard to new pavement west of Thornton Road ($379,00); North 16th Street from Main Street to Ostrander Lane (almost $2.5 million); North Gateway Boulevard from the Vintage Inn entrance to the truck stop ($127,000); Douglas Avenue from the city’s wastewater plant to Villard Avenue ($385,000); River Road from Woodson Bridge to Harrison Avenue ($806,000); Harrison Avenue from River Road to R Street ($293,000); and Bryant Avenue from M to R streets ($938,000). 

With contingency planning added to the price tag, around $7.5 million is needed for those eight projects, for which Stewart estimated two to three years would be needed to design and complete.

The return on these projects, though, would have only a small impact on PCI.

“It’s hard to estimate what it would bring our total street Pavement Condition Index up to from the 58 that exists today,” said Stewart. “But in talking to the engineers from Emerio, they estimated that it would bring the condition index up to about the low 60s, so 61 or 62 PCI.”

Revenue Options

The issue of finding revenue for street improvements remains an unsolved challenge for the city. Stewart presented several current and potential options to the city council on Monday night:

Gas Tax

Like most cities, Cottage Grove’s gas tax is $.03 per gallon. Any increase would require a citywide vote.

By comparison, Portland’s gas tax is $.10, Coburg’s is $.06 and Eugene’s is $.05.

While travelers and tourists would help contribute to this revenue generation, one of the downsides to relying on gas tax is the decreased revenue generated over time as vehicles become more efficient and some consumers shift to electric cars.

Stewart estimated that, if the city were to raise this tax, a $.01 increase would bring in an additional $120,000 to $130,000 per year, $.03 would bring $350,000 to $400,000 and a $.05 increase would bring in $600,000 to $675,000.

Transportation Utility Fee

Around 20 cities in Oregon use a transportation utility fee for revenue. This is a fee added to all utility billings, making a dedicated fund for transportation improvements and maintenance.

There are two ways that the fee can be calculated: an across-the-board flat fee per month on each utility bill or basing it on trip generation. The second method would charge more for places like fast food businesses which generate higher trip counts. 

Some cities have included sunset clauses in their transportation utility fees and opted out when they did not see desired returns, Stewart said.

Presently, the city’s minimum charge for water, wastewater and storm drain is $90.10 per month. For an average residential building using 6,000 gallons of water per month, the bill is around $100. Residents have routinely complained about the high cost of utilities in Cottage Grove and this option would likely see heavy pushback.

There are currently 3,921 utility accounts in the city.

Property Tax

Another option would be a property tax in which voters would approve a general obligation bond for transportation projects, with property tax revenue servicing the debt.

Eugene and Springfield voters have approved general obligation bond measures for street improvement projects, which have lasted three to five years and require a vote to renew. They have included annual reports to voters and citizen oversight committees.

In Cottage Grove, if a 50-cent-per-thousand tax increase for a bond were approved by voters, it would generate approximately $629,000 per year. The increase for a $350,000 home would be $175 per year.

A one-dollar increase would generate $1.25 million and, for that same $350,000 home, it would cost an additional $350 per year, or just shy of $30 per month.

Local Improvement District

A local improvement district option would require voters to approve a defined geographical area or zone of benefit. It would not fund ongoing maintenance — only capital improvements.

Like in the recent case of Downtown Cottage Grove’s Economic and Business Improvement Districts, if at least 33 percent of voters within the zone remonstrate, the district is terminated.

“The challenge there is that if it was approved in year one and year three it was terminated, all the projects that were funded based on that level of income — that money could potentially disappear and put the city in a precarious position to pay the remaining costs of that debt,” warned Stewart.

Urban Renewal District

Urban renewal districts are established by municipalities to finance improvements and redevelop in specific areas of a city by reinvesting the increase in the area’s property taxes.

The programs use tax-incremental financing, which caps the property tax rate once district boundaries are formed. Projects are identified for the purpose of increasing property values and the increased property values from new developments are frozen and used to fund bonds, which in turn generate the revenue for the projects.

Districts are limited in size, however, and cannot encompass an entire city. Certain definitions must be met as well.

Bonding

The city could also sell revenue bonds to fund street improvements. Generating $10 million for improvements would require $650,000 per year for 20 years to pay it back at a 2.1 percent interest. 

City staff estimated that if Cottage Grove were to take out a loan for $6.3 million dollars at three-and-a-half-percent interest and pay it back with dedicated revenue from the street fund, it would require $1.36 million a year over five years to service that debt.

If the city were to take it at 4 percent interest, it would be almost $1.4 million a year to service the debt.

City staff are expecting interest costs to rise in the short term as well.

Infrastructure Funding

Companies

Lastly, Stewart presented the option of using companies which specialize in helping cities make street improvements. Services would include design, build and finance.

These companies have access to private funds at interest rates close to current bond rates and would contract with firms to design and construct improvements. They would also finance the projects, typically charging a four or five percent administration fee to manage the design build.

The amount of money financed is based on the city’s ability to service the debt.

* * *

Before discussing solutions, the city council was informed of some additional challenges which may impact project costs. Current pricing is unstable, for instance, and the price quotes are meant for short time frames, so are highly susceptible to change.

In addition, availability may be an issue. Street projects are in high demand and contractors could be hard to find.

Meanwhile, oil, fuel and labor costs have all increased.

Stewart finished his presentation by reminding councilors that doing nothing still has a cost. He cited a news report from The Hill which estimated that the quality of American roads cost car owners $500 a year on average. He also noted that deferring it would just cost more later as streets deteriorate.

City Manager City Richard Meyers added that, as gas prices go up, tax revenue drops or stays the same.

“People kind of react to the increase in prices of gas, so we’ll probably see that now, where our motor vehicle fuel tax will drop,” he said. “And it usually takes about six months for it to come back up again to where it was.”

Council Discussion

Councilor Mike Fleck went point by point through the proposed options, immediately dismissing the gas tax in light of recent oil price hikes.

On the transportation utility fee option, he rejected a flat fee.

“We have to have a fee that’s based on the impact on those streets,” he said.

Fleck gravitated more toward the property tax option as it would pay for utilities as well as streets.

“It makes absolutely zero sense to fix the street if we don’t replace the pipes under it,” he said, adding that he appreciates the chip and crack sealing work done by the city lately to keep water from further degrading roads.

Fleck also liked the idea of a bond, but pointed to the downside of prices of properties eventually falling on already-struggling homeowners and renters.

On and urban renewal district, he worried it would be just a “piecemeal approach” to the problem.

Selling revenue bonds, he said, didn’t make any sense because of the interest the city would pay and, as a long-term solution, was not viable.

Local improvement districts he rejected as unpopular.

Fleck suggested that, as a general strategy, the city should put off major capitol projects until the price of gas comes back down.

“I think we’re shooting ourselves in the foot if we start doing major projects right now,” he said.

Whatever the option chosen, he said the city should at least try to maintain its current PCI rating.

Fleck also recommended creating a committee of councilors, planning commissioners and citizens to work on the ideas.

“Because I think we’re going to need buy-in from the community,” he said. “Clearly the last time we went out for a gas tax, we failed terribly. Yet in the same breath, people are beating us up with the conditions of our streets, which is very frustrating, because we get the complaints, we try to put something on the ballot to fix them, and — the gas prices weren’t huge at that point — yet we still were shot down on that.”

In 2016, the Cottage Grove City Council voted to place a measure on the November ballot to increase the gas tax from $.03 to $.06. The measure was unsuccessful.

Councilor Kenneth Roberts concurred with the idea of creating a committee and getting the public involved in weighing options.

Councilor Chalice Savage was also against adding a transportation utility fee.

“I think that’s going to make folks really, really upset,” she said, adding that she was leaning toward a gas tax based on conversations she’d had with area residents.

She also advocated for community input in the process.

Councilor Jon Stinnett asked what Stewart thought needed to be done first, to which Stewart said the Row River Road project was likely needing attention most immediately. Stewart said he was also interested to see what the new Emerio report says about roads which have received crack sealing.

Stinnett pointed out that the problem has no easy solution.

“I think the short answer is that we need help. We need more money and we need help getting it,” he said. “I like just about anything that pulls the public into this conversation.”

He also said the gas tax is a non-starter, but the property tax idea could be presented to the public for consideration

Councilor Greg Ervin said that maintaining infrastructure was a fundamental requirement of the city and that he would be in favor of just about any option or combination of them to meet the needs of the city’s streets.

He put another option on the table, too, proposing that Cottage Grove become a “road builder”, in other words, spending money up front to buy equipment for the city to solve problems itself and pay it off by contracting out to other communities.

Stewart said he would have to do more research on the idea.

Mayor Jeff Gowing said he was in favor of a gas tax as he supported the measure the last time.

Councilor Fleck reiterated that public buy-in would be a critical component of finding a solution.

A committee may take about a year to finish its work on this topic, said staff, meaning a committee formed now would be primed to present something on next year’s spring ballot.

The council was in agreement on the need for a committee and directed city staff to begin the process of creating one.

The next Cottage Grove City Council meeting is scheduled for 7 p.m. on March 14 in the council chambers. Virtual attendance is available through the city’s website at cottagegroveor.gov.