Item 4: Ordinance on Tax on Motor Fuel

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Proposed Uses of Funds, Legal Analyses and Implementation Issues Repealing or extending the sunset provision would effectively continue collection of the local motor vehicle fuel tax (“gas tax”) at the five-cent per gallon level, thereby preserving nearly $1.4 million in annual street funding revenue. Capital Pavement Preservation Needs – The current five-cent gas tax has allowed the City to complete nearly $16.5 million in street preservation project work since 2003, with additional contracts in progress. This past year, more than 17.4 lane miles of slurry seal projects and 20.5 lane miles of rehabilitation projects were completed, including the overlay of portions of 18th Avenue, Chambers Street and Bailey Hill Road. Project th plans for 2008 include portions of East 13 Avenue, Barger Drive, Chambers Street and Roosevelt Boulevard. In spite of these accomplishments, the backlog of needed repair work continues to grow in the face of rapidly rising construction costs and insufficient revenues. In late 2001, the City was facing an estimated $67 million backlog in pavement preservation work. By spring of 2007, the estimated cost of that backlog had grown to nearly $170 million and, with no new funding, is projected to grow to $282 million within the next 10 years. With the impending loss of the additional two-cent tax, which provides 40% of the current fuel tax proceeds, the growth in the backlog of street repairs would accelerate even more rapidly. According to the American Public Works Association, the cost of reconstructing a road on which maintenance has been deferred is five times as much as the cost to perform a timely overlay on the same road several years earlier. This is borne out by the Eugene’s own experience in recent years, which shows that it costs approximately four times as much to reconstruct a road as it would to overlay the road and extend its life for 20 years. One of the most cost-effective uses of pavement preservation dollars is to perform overlays on roads which are identified as likely to fall into the much more expensive “reconstruct” category if the overlay treatment is not performed in the upcoming year. The nearly $1.4 million of of annual gas tax proceeds at stake in this decision would help fund the pavement preservation overlay program and leverage those community dollars to avoid many times those repair costs in future years. One of the primary goals of the pavement preservation program is to rehabilitate streets with an overlay before they require the most expensive level of repair, a reconstruction. Additionally, when streets go through reconstruction, the community and adjacent property owners are subject to considerable delay and inconvenience. With the funding provided by the additional two-cent gas tax over a three-year period, the City would be able to fund an estimated $4 million worth of overlay projects that are otherwise at risk of falling into the expensive reconstruction category. This is the same strategy followed by the Eugene Budget Committee when they allocated $1.5 million to help fund the pavement overlay program in FY08. This funding would allow an estimated additional 20 lane-miles of street to be overlayed over three years, which would prevent these streets from further deterioration, thereby avoiding expensive reconstruction. The nearly $4 million generated by the additional two-cent gas tax over the next three-year period would save an estimated $16-20 million (today’s dollars) in future reconstruction costs. Legal Uses of Revenue - The restrictions on the use of local fuel tax revenues for street system operations, maintenance and preservation is provided in Eugene City Code 3.489 (2): “The net revenue shall be used only for the reconstruction, repair, maintenance, operation and preservation of City-owned roads and streets within the city, roads and streets for which the City is contractually or legally obligated to operate and maintain, or roads and streets for which the City has accepted responsibility under intergovernmental agreement. No revenue shall be used for capacity-enhancing street improvements.” Use of local motor vehicle fuel taxes is also limited by the Oregon Constitution (Article IX, Section 3a), which states that F:\CMO\2008 Council Agendas\M080128\S0801284.doc