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

For 15 years, the City of Mountlake Terrace has been primarily focused on completing its Main Street Revitalization Project, which runs along West 56th Avenue from the Mountlake Terrace Transit Center to Southwest 230th Street. While Phase I of the project was completed in 2020, the city faces a potential $18 million shortfall to complete the second phase, Mountlake Terrace City Council learned during its business session/ study Thursday evening.

Acting Director of Public Works Phil Williams – who is working on a contract basis after the departure of Director of Public Works Eric LaFrance at the end of August – announced the disappointing news during the council’s consideration of the draft improvement program six-year transportation plan (TIP) for the city, which runs from 2023-2028.

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

(State law requires cities to update their TIP program annually. The board will hold a public hearing on the proposed program at its business meeting on Monday, Sept. 19.)

The city planned to begin construction of Phase II of Main Street in 2023. Total project costs are estimated at just over $23 million, including $16.6 million for construction and $4.5 million dollars for the acquisition of the right-of-way and related properties, as well as certain city-related expenses. The city has approximately $5.187 million on hand, leaving a balance of just over $18 million “that will need to be there for the project to proceed. 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 reconstruction of the deteriorated roadway along Southwest 236th Street from I-5 to West 56th Avenue. The project also added wider sidewalks with trees, decorative LED lighting for pedestrians and streets, and moved existing overhead utilities underground. Phase I construction was fully funded by a federal Surface Transportation Program grant, two state statutory appropriations, a Transportation Improvement Council grant, and city utility funds. Phase II would rebuild West 56th Avenue from Southwest 236th to 230th Streets with many of the 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 ($20 fee applied to local vehicle permits) and traffic impact fees. Construction funding already secured includes $2.45 million in state appropriations, a $2 million grant from FHWA, and an additional $285,000 from FHWA for the right-of-way carried over from Phase I.

The right-of-way acquisition phase has already begun, although no bids 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 Southwest 236th Street from the Mountlake Terrace Transit Center to West 56th Avenue, is complete. (Graphic courtesy of the Town of Mountlake Terrace)

The city is now working to secure the remaining $18 million needed to build Main Street Phase II, including a submitted $5 million State Transportation Improvement Council grant application. in August 2022. The city expects to know by Dec. 2 if it receives that money. Among possible funding sources for the balance, Williams explained, include the federal RAISE grant program, which has a significant money due to the new law on investment in infrastructure and employment. “Instead of the whole United States fighting for a billion or a billion and a half dollars every year, there’s about $50 billion that will be in this program over the next few years,” Williams said.

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

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

– Increase the current city vehicle registration fee assessed through the Transportation Benefit District from $20 to $40.

– Increase the amount the city charges developers through the transportation impact fee.

– Using part of the city’s $4.5 million allocation from the US Federal Bailout Act.

– Financing by general bond or levy of property tax.

In 2015, when the city announced plans to complete the Main Street project in two phases, it estimated the total cost at $18 million. Phase 1 was expected to cost between $5 and $6 million (not including the 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 passed and a lot of inflation, especially in the construction industry. That probably explains most of it.

City staff and council are expected to have a conversation “fairly soon” about funding options for Main Street’s Phase II, Williams said.

Councilman Doug McCardle asked if it would be possible for the city to get a loan to fund the entire Main Street Phase II project and then use the district’s assessments of the city’s transportation benefits to repay the loan over time. “If this (main street) is really a priority and we have been working on it for so long… why not look at it differently? McCardle asked.

Councilman Steve Woodard agreed the city should explore a range of options for funding capital projects, which also include future paving investments – something Williams and City Engineer Marc Seferian agreed that ‘it was necessary.

“Something has to be done,” Woodward said.

Williams said while the loan options are worth considering, “the best place to start is to get as much of that other money as you can get” and see what kind of balance is left. “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 had previously discussed the issue with the city’s federal lobbyist Jake Johnston, who encouraged the city to seek federal RAISE grants.

Council member Laura Sonmore said while she was also frustrated with the lack of downtown funding, she was wary of bond or debt financing that could increase the city’s debt. She said she would prefer the city explore “everything we can do at the federal and state level to get funding.”

“It was an eye opener,” Mayor Kyoko Matsumoto Wright told Williams. “It’s nice to have someone come in with a different perspective from the outside and see what we need and where our holes are. We have more holes than we thought.