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Potential Motion 3: Move to amend Section 7.765(2) of the proposed ordinance to replace the word <br />"may" with the word "shall." <br /> <br />ISSUES RELATING TO BROADER ISSUE OF TRANSPORTATION FUNDING <br />During the public engagement process and in subsequent discussion by council, several additional issues <br />were raised that relate to the broader issue of transportation funding and, therefore, impinge on the TSMF <br />discussion but are not necessarily directly related to the TSMF ordinance. <br /> <br />Increasing the Local Motor Vehicle Fuel Tax to Offset the TSMF Revenue Target <br />At the October 2006 public hearing on the TSMF, city council requested information about increasing the <br />local gas tax in order to reduce or eliminate the amount that would need to be generated from a TSMF. <br /> <br />Each penny of Eugene’s local fuels tax generates roughly $670,000 per year, after factoring ODOT’s <br />administration costs ($11,000 per year). An individual who drives 20,000 miles per year in a 20 mile-per- <br />gallon vehicle pays $10 per year for each cent in the local gas tax, assuming all gas is purchased inside <br />city limits. The current 5 cents per gallon tax is scheduled to revert to 3 cents per gallon in February 2008. <br /> <br />At the current yield per penny, a 2-cent increase in the local gas tax would generate an additional $1.34 <br />million per year. A 10-cent increase theoretically would generate an additional $6.7 million. However, a <br />realistic forecast must account for a reduction in yield that would result from consumer choice to purchase <br />outside Eugene city limits in order to avoid the tax. While staff does not have solid research to predict the <br />decline in yield under a given rate, it’s safe to say the loss would increase with an increasing local rate, <br />assuming no change in gas tax rates on fuel purchased outside city limits. A related policy issue is the <br />potential impact on local business owners under a scenario in which a higher local fuels tax results in lost <br />business income. <br /> <br />Springfield’s fuel tax is 3 cents per gallon, with no sunset or rate increase planned. Lane County does <br />not have a fuels tax. <br /> <br />Potential Motion 4: Move to direct the city manager to bring back for discussion after the first of the <br />year a draft ordinance increasing the local motor vehicle fuel tax to generate additional funding to offset <br />the amount that would otherwise be generated from a TSMF for pavement preservation capital funding <br />needs. <br /> <br />Using General Obligation Bonds to Meet Certain Capital Preservation Needs <br />General Obligation (G.O.) debt backed by property tax revenue may be used to finance transportation <br />system capital preservation projects. There are four main points to keep in mind when considering G.O. <br />bonds for transportation: (i) the opportunity to ask voters for approval of G.O. bonds is limited; (ii) G.O. <br />bonds cannot be used for all of the expenditures that would be eligible with other revenue sources, such as <br />a TSMF; (3) the City has limited capacity to issue debt under its policies; and (iv) the use of G.O. bond <br />will mean added costs for all taxpayers in the City. <br /> <br />Elections: New or additional property taxes must be approved by a majority of voters. There are four <br />opportunities for elections each year, in March, May, September and November. For any election except <br />in November of an even-numbered year, there must also be a double-majority, which means that there is <br />at least a 50% turnout of voters and a majority of those voters approve the measure. The next opportunity <br />for a non-double-majority election is in two years. <br /> <br />Use of Funds: G.O. bonds may be used for capital construction and capital improvements, terms which <br />are defined in the statutes. The definition states that G.O. bonds may not be used for maintenance and <br />A <br />repairs, the need for which could be reasonably anticipated. While G.O. bonds could be used to address <br />@ <br />Attachment A for TSMF AIS/Council Action 112706 - 3 <br />