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ATTACHMENT B Public Works Administration City of Eugene 858 Pearl Street MEMORANDUM (541) 682-5241 (541) 682-6826 FAX www. ci.eugene.or, us Date: January 10, 2005 To: Mayor Piercy and City Council From: Kurt Corey, Public Works Director Subject: Staff Responses to Council Requests for Information The information offered below addresses a number of questions that have arisen in the course of recent community discussions and public hearings on the council's consideration of transportation funding options. · What are the concerns being raised about the taxation ofbiofuels, particularly those fuels being sold in Eugene for later export and use outside the city limits? Eugene's ordinance defines motor vehicle fuel as "gasoline, diesel, mogas, methanol and any other flammable or combustible gas or liquid...usable as fuel for the operation of motor vehicles .... "There is currently no special tax exemption for the sale of biofuel, since the council's intent at the time the ordinance was established was to impose the tax on the sale of all classes of motor vehicle fuels used to propel vehicles on Eugene's street system. The current motor vehicle fuel tax (MVFT) ordinance does, however, contain a tax-exemption provision for fuel exported by a dealer, as well as an exemption for small-quantity purchases for export outside the city in containers other than the fuel tank of a motor vehicle. Consistent with existing ordinances in other Oregon local jurisdictions, Eugene's exemption for fuel subsequently exported by the purchaser currently applies only to small-quantity purchases in individual quantities of 500 gallons or less. A concern was raised by a Eugene bio fuel distributor who is purchasing fuel within the city limits for export and ultimate use in Portland and other areas outside of the Eugene city limits. Because he is purchasing the biofuel inside the city limits in quantities exceeding 500 gallons, those purchases of subsequently exported fuel are currently subject to the Eugene MVFT. After consultation with Oregon Department of Revenue Fuels Tax Group, staff is proposing an amendment to the ordinance to strike the small-quantity limitation language from the exported fuel exemption, making exempt from tax all sales of exported motor vehicle fuel (including exported biofuel). · There has been a suggestion that Eugene shouMprovide a MVFT exemption for businesses that voluntarily agree to participate in the Lane Clean Diesel Project. What is this project, and how does it relate to Eugene's motor vehicle fuel tax? The Lane Clean Diesel Project is a collaboration between public-sector, private-sector and non-profit entities to bring ultra-low sulfur diesel fuel to Eugene ahead of the federal government's mandated schedule. Black carbon or carbon soot produced by diesel engines is one of the biggest factors in global warming. Ultra-low sulfur diesel (ULSD) is the most cost effective method for reducing particulate matter and toxics from diesel engines. The fuel allows pollution control devices such as catalytic Page 1 of 2