Deal Targets Unused U.S. Funds : Irvine Offers to Buy Town’s Road Grants

Irvine is trying to become the first Orange County city to buy another community’s unused federal transportation grants--at a discount--to help pay for road improvements.

City officials have offered to pay 75 cents on the dollar for $640,000 in federal transportation grant money held by the Northern California town of Benicia, a community of 21,000 about 30 miles from San Francisco. The deal is expected to be finalized in the next few weeks.

The federal transportation money will be used to help pay for widening Irvine Center Drive from El Toro Road to the San Diego Freeway and for extending Jamboree Road through the Tustin Marine Corps Air Station, city officials said. The cost of those two projects has been estimated at $20 million.

Irvine officials figure the deal would give them about 10% more in purchasing power than if they spent the city’s money directly on Irvine road projects. Administrative expenses eat up the rest of the difference between the amount of money going to Benicia and the amount received by Irvine in federal funds.

In return, Benicia would get money that has no federal strings attached. Benicia officials said they plan to use Irvine’s cash to build a street that would cost 25% more in administrative costs if federal money were used.

“We’re trying to get more bang for our buck,” Irvine transportation analyst Rob McCann said. “It’s a smart way to leverage local dollars.”

The city has put out feelers for $8 million to $12 million in federal transportation funds elsewhere but has not agreed with other cities yet, he said.

“It’s one way to get a street built,” Benicia Finance Director Ron Peterson said. “This is a small town with a small staff not equipped to do major environmental reviews and process projects over a long period of time (as required when federal money is used). . . . The administrative costs are just too great. It took several years to amass our federal money. . . . There’s just not much you can afford to do with one year’s allocation.”

State and federal officials said they do not object to such transfers of grant money, as long as the funds are used for transportation improvements.

The money involved comes from the annual $100-million Federal Aid Urban grant the state receives from the Federal Highway Administration. The money is allocated to cities and counties based on their populations.

Transfers of such money are not new. Two years ago, state officials said, the Santa Clara Traffic Authority bought $30 million in other cities’ unused Federal Aid Urban dollars to help pay for major expressway projects.

Benicia and Los Angeles were among the sellers.