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ATTACHMENT B converters to function more effectively. Federal rules require by 2006 that all diesel fuel sold in the United States will have low sulfur levels. By 2007, all new diesel engine vehicles must have emission control devices, which are estimated to be 95% effective in eliminating particulates and hydrocarbon emissions. However, there is a cost to retrofitting vehicles for the emission control devices, and the ULSD itself is currently about 15-cents more per gallon than regular diesel. Grants are currently available to offset the higher cost of ULSD as well as to assist school districts in retrofitting school buses with emission control devices to attain the full pollution-reducing benefit of ULSD. While the City of Eugene is an active participant in the Lane Clean Diesel Project, staff is not recommending that Eugene's scarce pavement preservation resources be used to subsidize the cost of making ultra-low sulfur diesel available in Eugene on an accelerated schedule, since the use of ULSD will be mandatory by June 2006, regardless of short-term incentives which the City might offer for early implementation of the regulations. · What is the basis for staffs' recommendation for an 80% refund of city tax for diesel fuel sold for vehicles also subject to the weight-mile tax and being faeled at their owner's bulk fueling facilities within the city limits? In July 2004, the Springfield City Council considered testimony that a significant number of companies with bulk diesel fueling facilities servicing their own fleets within the Springfield city limits traveled only a minor proportion of their mileage on Springfield streets. As a result, it was concluded that the local companies operating those vehicles were likely paying a disproportionate share of the local fuel tax compared to the miles driven on local streets. The Springfield council subsequently adopted an amendment to its fuel tax ordinance that authorized an 80% refund of city tax for diesel fuel sold for vehicles also subject to the state weight-mile tax which were fueled at their owner's bulk fueling facility within the city limits. A number of local companies in Eugene also have bulk diesel fuel facilities servicing their own fleets within the city limits. Some of these companies have compiled data to support their assertion that the majority of the miles driven by their diesel-fueled fleets (i.e., 90-95%) are not driven on Eugene streets. As was the situation in Springfield, this results in a disproportionate tax burden to these companies. Like the Springfield bulk fuelers, these local business owners are concerned about the competitive disadvantage created by a Eugene fuel tax when applied to their diesel-fueled fleets which are being driven primarily outside the Eugene city limits. Neither ODOT nor the city tracks data establishing the number of miles driven by local bulk fuelers on city streets. The 80% refund level approved by the Springfield City Council was a concession which attempted to acknowledge that local companies with bulk fueling facilities in the city limits benefit from a well-maintained transportation system, while also acknowledging that payment in full of the city fuel tax creates a competitive disadvantage which may be deemed unfair when one considers that their weight-mile fleets are driven primarily outside the city limits. State Fuels Tax Group urged that, should Eugene choose to adopt a diesel refund provision, that we "mirror the Springfield ordinance in order to minimize the diversity of statues" which they are called upon to administer. Since Springfield implemented their diesel refund provision, three dealers have applied for certification for qualification for refund of the tax on diesel fuel purchases in bulk for use at their own facility, although no refunds have actually been granted at this time. Eugene estimates that the maximum financial impact of a refund at the 80% level would be in the $20,000 to $25,000 range for each level of 1-cent fuel tax imposed in Eugene--or approximately $60,000 to $75,000 annually at the current 3-cent tax level. In all likelihood, the revenue impact of such refunds would be significantly less, as not all diesel fuel sales are made to bulk fuelers. Page 2 of 2