AGENDA ITEM NO. 5
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AGENDA STAFF REPORT
City of West Covina | Office of the City Manager
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| DATE: | June 16, 2026 |
TO: |
Mayor and City Council |
FROM: |
Milan Mrakich, City Manager |
SUBJECT: |
CONSIDERATION OF PROPOSITION A EXCHANGE WITH FOOTHILL TRANSIT |
RECOMMENDATION:
It is recommended that the City Council:
- Approved the exchange of $3,500,000 in Proposition A Local Return funds for $2,625,000 in general funds with Foothill Transit; and
- Authorize the City Manager to execute the Assignment Agreement with Foothill Transit.
BACKGROUND:
Approved by voters in November 1980, Proposition (Prop) A is a half (½) cent sales tax dedicated to transportation funding. Under Prop A, the City receives a portion of the ½ cent sales tax levied in Los Angeles County to develop and improve local public transit, paratransit, and related transportation infrastructure. At this time, the City does not have any projects to utilize these funds. The City is in the practice of selling these restricted transportation Prop A dollars to other cities or special districts in exchange for non-restricted General Fund dollars to assist with balancing the budget.
These exchanges are allowed under the guidelines for this revenue source and provide benefits for both parties. The buyer gets discounted transportation dollars and West Covina receives additional General Fund dollars. The exchange rate is a matter of supply and demand. According to the Los Angeles County Metropolitan Transportation Authority, the exchange rate has been at 70 to 75 cents on the dollar for the last 20 years. The City has exchanged its Prop A funds with Foothill Transit for the past few years at an exchange rate of 75 cents on the dollar.
The City utilizes the funding exchanged to offset General Fund expenditures. Proposition A Local Return funds are just one of the five (5) Metro revenue sources available for transportation projects. In fiscal year 2024-25, the other four (4) funds (Proposition C, Measure R, Measure M, and Transportation Development Act) had a combined revenue of over $6.5 million.
These exchanges are allowed under the guidelines for this revenue source and provide benefits for both parties. The buyer gets discounted transportation dollars and West Covina receives additional General Fund dollars. The exchange rate is a matter of supply and demand. According to the Los Angeles County Metropolitan Transportation Authority, the exchange rate has been at 70 to 75 cents on the dollar for the last 20 years. The City has exchanged its Prop A funds with Foothill Transit for the past few years at an exchange rate of 75 cents on the dollar.
The City utilizes the funding exchanged to offset General Fund expenditures. Proposition A Local Return funds are just one of the five (5) Metro revenue sources available for transportation projects. In fiscal year 2024-25, the other four (4) funds (Proposition C, Measure R, Measure M, and Transportation Development Act) had a combined revenue of over $6.5 million.
DISCUSSION:
The City has $3.5 million in Prop A funds available to sell. Foothill Transit has agreed to purchase the $3.5 million at 75 cents on the dollar, or $2,625,000 in general funds. Staff recommends City Council authorize the exchange with Foothill Transit at 75 cents on the dollar and authorize the City Manager to execute the Assignment Agreement with Foothill Transit. Over the past five (5) years, the exchange rate has consistently held at 75 cents on the dollar. The City has been able to generate a consistent revenue stream for the General Fund based on the revenue received for Proposition A. Below are the last five (5) years Prop A exchange revenue realized in the General Fund.
There is fluctuation in exchange depending on when the Proposition A funds are received and when, in turn, agreed to be exchanged with Foothill Transit. In Fiscal Year 2026-27, the City will expect to exchange approximately $3.0 million in Prop A funds in exchange for $2.25 million in General Fund monies.
| 2020-21 | 2021-22 | 2022-23 | 2023-24 | 2024-25 | |
| General Fund Revenue Exchange | $1,350,000 | $2,100,000 | $1,875,000 | $2,250,000 | $1,500,000 |
There is fluctuation in exchange depending on when the Proposition A funds are received and when, in turn, agreed to be exchanged with Foothill Transit. In Fiscal Year 2026-27, the City will expect to exchange approximately $3.0 million in Prop A funds in exchange for $2.25 million in General Fund monies.
LEGAL REVIEW:
The City Attorney’s Office has reviewed the agreement and approved it as to form.
Prepared by:
Karen Ogawa, Finance Director
Additional Approval:
Roxanne E. Lerma, Assistant City Manager
Fiscal Impact
FISCAL IMPACT:
The Assignment Agreement for the Prop A exchange with Foothill Transit will generate $2,625,000 in General Fund revenues. Both revenues and expenditures for the exchange are included in the FY 2025-26 Annual Budget.
110.409.00.00.00.00.45.45600. Prop A Exchange (General Fund)
121.504.61.10.00.00.65.65200. Prop A Exchange (Prop A)
110.409.00.00.00.00.45.45600. Prop A Exchange (General Fund)
121.504.61.10.00.00.65.65200. Prop A Exchange (Prop A)
Attachments
CITY COUNCIL GOALS & OBJECTIVES:
Achieve Fiscal Sustainability and Financial Stability