Item B: Transportation System Maintenance Fee

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Road Fund Operations and Maintenance The Road Fund accounts for operations and maintenance (O&M) of the city’s street system. The majority of Road Fund revenue comes from Eugene’s share of the State Highway Trust Fund, which is derived from Oregon motor vehicle fuel taxes as well as state motor vehicle registration fees and weight- mile taxes. Revenue growth in the State Highway Trust Fund has been relatively flat since FY00, when the City was receiving about $6.0 million per year in allocations. The projected revenue for FY07 is less than $6.2 million, which equates to only a 3% growth over the entire seven-year period. The second major source of revenue for this fund is the County/City Road Partnership Agreement that once contributed $2.5 million per year and more recently has been providing about $1.2 million in annual street maintenance funding to Eugene. The current agreement expires in FY07, and the Board of County Commissioners has adopted a five-year Capital Improvement Plan which discontinues the partnership payments to Lane County cities after FY07, which means that Eugene would lose over $1 million in annual street maintenance funding beginning in FY08. In the meantime, Eugene continues to look for opportunities to cooperate with the County in identifying sustainable mechanisms and agreements for funding operations, maintenance and preservation (OM&P) to meet the broad transportation needs in the region. Cost reductions of $850,000 were implemented in the Road Fund in FY04, primarily through elimination of the in-house street overlay program and organizational restructuring and consolidations of Public Works divisions and work crews, which resulted in the elimination of supervisory positions. These cost reductions were implemented as a partial remedy for stabilizing the O&M activities for the city’s road system, with the hope that additional revenue sources for O&M activities would eventually be realized as an outcome of the council’s ongoing work with transportation funding. Some relief was also provided by the City Council’s February 27, 2006, action, which shifted nearly $655,000 of Road Fund program costs related to street trees/median maintenance to the Stormwater Fund. However, insufficient remedies and additional resources have been identified to date, so that by FY08 when the County/City Partnership transfer is scheduled to be discontinued, the Road Fund is expected to generate an annual operating deficit of nearly $1.3 million (growing to nearly $2 million by FY10) in the course of providing basic O&M activities such as street lighting, pothole patching, street tree maintenance, signing and striping. An additional annual revenue stream of $1.5 million would stabilize funding for ongoing O&M activities through the six-year forecast period. A portion of the proceeds from a TSMF could also potentially be considered as a funding source to address other transportation-related priority needs which have been recognized by the council but for which no ongoing funding source has yet been identified. If made available, annual Budget Committee deliberations could direct the priority uses of those resources. Proposed Ordinance, Public Outreach and Timeline Attachment A includes both a proposed ordinance for establishing a transportation system maintenance fee (TSMF) as well as a memo which outlines the principal provisions of that proposed ordinance. That memo also provides an overview of staff’s rate modeling work efforts, along with estimated rates and sample customer fee levels under specified assumptions. The City Manager is proposing to schedule a public hearing this fall to take public comment on the proposed ordinance establishing a transportation system maintenance fee. L:\CMO\2006 Council Agendas\M060724\S060724B.doc