Item 3: An Ordinance Concerning Transportation System Maintenance Fees

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