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Fullerton staff warns MOE increase will squeeze city discretionary funds; proposes mix of general and infrastructure funds to comply
Summary
City staff told NRAC that OCTA's updated Measure M2 maintenance-of-effort (MOE) benchmark rises from about $4.9 million to roughly $5.9 million for FY 2026'27 through 2028'29; staff proposed using roughly $6.5 million from a mix of general fund and infrastructure dollars, leaving a small buffer but reducing funding available for other programs.
Staff presented an update on the Orange County Transportation Authority's Measure M2 maintenance-of-effort (MOE), explaining how the revised benchmark will take effect in fiscal year 2026'27 and remain through 2028'29.
Juan, the presenting staff member, said the OCTA recalculation raises Fullerton's MOE from about $4.9 million to approximately $5.9 million. He told the committee the adjustment reflects higher construction costs and growth in city revenues: "As construction costs and city revenues increase, so does the required MOE benchmark, as well," he said.
The MOE rule requires cities to maintain a baseline of discretionary spending on streets (typically from general fund or other nonrestricted revenues) in order to remain eligible for Measure M funds. Juan said staff's current proposal is to program roughly $6.5 million toward streets and related maintenance in FY 2026'27, using a combination of general fund and infrastructure fund dollars to create a buffer of about $160,000 above the MOE benchmark.
That buffer, staff said, is intended to protect the city if budgeted dollars are not fully spent or if OCTA later deems certain costs ineligible during audit. Juan cautioned that the plan assumes at least $500,000 from the general fund; without that contribution the surplus would shrink and "it will really create some significant challenges in meeting the MOE," he said.
Committee members pressed on the consequences of noncompliance. Juan said that failing to meet MOE can put Measure M funding at risk and cited Buena Park's experience as an example of a city that lost Measure M funds after an audit.
A public commenter who identified herself as former member Wozap raised procurement and capitalization thresholds, noting higher construction costs and asking whether the city might raise the CIP threshold to speed project delivery. Staff and procurement staff explained two bidding processes (informal negotiation under a lower threshold and formal advertised bids for larger contracts) and confirmed that, for capitalization purposes, the city's threshold remains $25,000 unless changed through ordinance.
Why it matters: The MOE increase shifts discretionary infrastructure dollars into streets work to protect Measure M eligibility, reducing funds available for other capital programs. The committee deemed the Measure M item received and filed and directed staff to refine budgeting as numbers are finalized.
