Item 7 - PH/Motor Veh.Fuel Tax - Laserfiche WebLink

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The Pavement Preservation Funding Need and Estimated Revenue Yields The implementation of a 3-cent local motor vehicle fuel tax in August 2003, together with the reimbursement component of the transportation SDC and the transfer from Lane County of new OTIA II! maintenance and preservation monies, has allowed the City to begin addressing the significant backlog of pavement preservation projects. However, this backlog is projected to grow from the current level of nearly $94 million to a projected $180 million within the next decade. Additional funding is needed to reverse this trend to ensure the efficient and safe operation of the local transportation system. In its report to the council in October 2001, the Citizen Budget Subcommittee on Transportation System Funding determined that the appropriate level of new revenue to provide adequate funding for Eugene's transportation system was $9 million per year, with $8.5 for pavement preservation and another $500,000 for the off-street bicycle system and traffic calming elements. This funding level of $8.5 million for the pavement preservation program continues to be an appropriate target because it would allow the City to make effective progress in addressing the backlog of pavement preservation projects while also mitigating disruption to the transportation system and to the community due to construction. Using the most updated information on actual local fuel tax collections, staff estimates that a Eugene fuel tax generates annual revenue of approximately $725,000 per one cent of tax. This is somewhat higher than initial yield estimates for this revenue source but is an accurate reflection of Eugene's first 14-months of actual collections. Extrapolating this data to various levels of tax, Eugene could anticipate the following total revenue yields at the various tax levels shown: Motor Vehicle Estimated Annual Fuel Tax Level Revenue Yield 3 cents (current) $2,175,000 5 cents (2-cent increase) $3,625,000 7 cents (4-cent increase) $5,250,000 10 cents (7-cent increase) $7,250,000 In addition to the current 3-cent fuel tax, dedicated pavement preservation revenues from transportation reimbursement SDCs (estimated at $500,000 per year) and from the new County/City OTIA II! revenue sharing agreement (estimated at approximately $1.0 million per year through FY06) are expected to provide around $1.5 million per year in dedicated pavement preservation funding. To address the $7 million remaining pavement preservation revenue gap with a local motor vehicle fuel tax alone would require that the council adopt a local fuel tax in the 1 O-cent-per-gallon range. The goal of revenue generation aside, other fiscal and public policies which may weigh in this decision are outlined below. Other Considerations, Goals and Principles Diversification of Revenue - One of the Guiding Principles used by the Citizen Budget Subcommittee in the development of its recommendation for new, locally-controlled revenue sources for transportation funding was the principle of diversification of revenue sources. The concept adhered to by the subcommittee was that an overall funding strategy for transportation system service needs should include multiple funding sources which will adequately address the full range of identified transportation system service needs. For that reason, the subcommittee was reluctant to consider transportation funding recommendations which relied on only one primary source of revenue. This resulted in a recommendation by the subcommittee for a combination funding package consisting of a transportation utility fee and a small local motor vehicle fuel tax. L:\CMO\2004 Council Agendas\M041206\S0412067.doc