Item B: Funding Strategies for Transportation System Operations, Maintenance, and Preservation

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Commuter Tax Estimated Rough estimates of gross revenue yields for the City of Eugene may be as follows for Revenue Yield, each method applied to non-residents only. If parallel taxes were applied to residents Administration/along with the commuter tax the revenue would be approximately doubled. Enforcement 1.Approximately $3.8 million per 0.25% tax rate applied to non-resident payroll. Costs 2.Approximately $2.5 million per 0.25% tax rate on non-resident personal income. 3.Approximately $1 million for each $25 annual per capita non-resident business license fee imposed. Administration and enforcement mechanisms and costs are as yet undetermined and will vary for each method. Currently the State of Oregon Department of Revenue (DOR) collects a payroll tax on behalf of Lane Transit District, at a cost to LTD of about $300,000 per year. However the LTD payroll tax is not based upon place of residence of the workers, and furthermore is governed by state statutes specific to transit districts. State statutes require the DOR to collect the tax on behalf of LTD. In recent years the DOR collected an income tax for Multnomah County under existing statutes permitting such an arrangement, but the tax was based upon total taxable income of the taxpayer, rather than where a portion of personal income was earned. It is an open question as to whether the DOR would administer and collect a payroll or personal income commuter tax on behalf of the City. The City would most likely have to administer and enforce a business privilege fee itself, probably requiring the addition of up to several FTE. It may be reasonable to assume that, depending on the method used, administration and enforcement of a commuter tax would cost the City something in the range of $300,000 to $500,000 a year. Legal Authority The City Attorney is reviewing the City’s legal authority to establish a tax or fee solely on and Restrictions non-residents and restrictions, if any, on the use of proceeds from a commuter tax. on Use Incidence (who This depends on the method used for a commuter tax. pays?) 1.Employers located in Eugene who employ non-resident workers would be liable for the employer payroll tax or per capita business license fee. 2.Individuals who live outside but who earn income within the City would be liable for a non-resident personal income tax. Fairness/Equity A commuter tax is based on the idea that non-residents who work in the City should be Issuestaxed so they contribute a share of tax revenue towards the cost of services from which they benefit. Using this as a basis, potential equity issues are as follows. 1.Employers within the City are already subject to property taxes, unless exempt by state law, and also generally pay the City’s fuel taxes. A commuter payroll tax or a per capita business license fee would also be paid by employers and would in all likelihood not be passed on exclusively to non-resident workers. 2.An income tax on non-residents would directly tax workers who commute to Eugene and who do not pay Eugene property taxes. These workers do pay City motor vehicle fuel taxes to the extent that they buy their gas within the City limits. If the revenue helps fund services that benefit commuters, then this method is more likely to advance fairness or equity than the other methods. 2