Item B: Transportation System Maintenance Fee

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million projected annual deficit. Based on that discussion, the council directed the City Manager to develop a FY07 Road Fund budget at the current service level and to bring back a proposal for a new revenue funding package which would not only address the projected ongoing operating deficit in street operations and maintenance but which would also generate additional revenue to be dedicated to the backlog of unfunded projects in the Pavement Preservation Program. On February 27, 2006, the council reviewed and discussed a number of potential revenue strategies to address these two categories of unmet funding needs, including consideration of a street lighting fee, a Eugene livability fee (ELF), a shift in funding for one-half of the street trees/median maintenance program from the Road Fund to the Stormwater Fund, and reestablishment of the previously-repealed transportation system maintenance fee. At that session, the council directed the City Manager to include in the FY07 Proposed Budget a shift in a portion of the funding for street trees/median maintenance to the Stormwater Fund and also directed the City Manager to bring back a proposal for reestablishing the previously repealed transportation system maintenance fee (TSMF) to address not only the projected ongoing operating deficits in Road Fund street operations and maintenance, but also to generate additional revenue to address the remaining annual funding gaps in the pavement and off-street bike path preservation programs. In the course of its FY07 budget deliberations, the Budget Committee added a one-time funding allocation of $1.5 million to the pavement preservation capital budget for FY07 to be focused on overlay projects for streets that would otherwise fall into the reconstruct category in a subsequent year. Pavement Preservations Accomplishments and Funding Status The 3-cent local fuel tax implemented by the council in August 2003 and raised to 5 cents in February 2005 is expected to generate revenue of nearly $3.6 million for FY06. Additional dedicated preservation project revenue from transportation reimbursement SDCs, from the three-year County/City OTIA III revenue sharing agreement and from other fund sources has allowed the City to complete nearly $7.5 million in street preservation project work since the implementation of the fuel tax and the transportation reimbursement SDC, with additional contracts in process. This year, over 17 lane miles of pavement repairs are scheduled, including the reconstruction of Hilyard Street. However, if the 2- cent fuel tax increase is allowed to sunset as of February 28, 2008, and the effect of that is combined with the expiration of the County/City OTIA III revenue sharing agreement, annual revenues for pavement preservation are projected to fall to just over $2.0 million by FY09. Together with an approximate $700,000 in ongoing transportation reimbursement SDC revenue, this would provide annual preservation funding of only $2.7 million. When the Budget Subcommittee on Transportation Funding presented its report to the council in late 2001, the City was facing an estimated $67 million backlog in pavement preservation work, as confirmed by an independent consultant. By the time the council implemented the 2-cent fuel tax increase in early 2005, that backlog had grown to nearly $94 million and was projected at $102 million as of the end of 2005. In addition, the Budget Subcommittee concluded that $425,000 in estimated annual funding was also needed to address the backlog of off-street bike path repair and preservation projects. With additional pavement preservation funding of approximately $6.0 million per year (the amount needed to bring total projected annual preservation funding to approximately $9 million), the City could not only stabilize the growth in both of these backlogs but also begin to make significant progress in reducing this substantial future community liability. L:\CMO\2006 Council Agendas\M060724\S060724B.doc