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

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schedule this work session to consider additions or alterations to the proposed funding strategy, including a TSMF, a gas tax, a bond levy and a commuter tax. The council’s direction to consider a TSMF is the result of a process that began in 2001 when the Citizen’s Subcommittee on Transportation System Funding presented its recommendation that the council implement a transportation funding package consisting of a combination local motor vehicle fuel tax and transportation system maintenance fee for the purpose of generating an additional $9 million annually to address the City’s critical transportation system funding needs. A copy of that subcommittee report and final recommendation is included here as Attachment D. Subsequently, the council in December 2002 approved an ordinance establishing a TSMF. In September 2003, the council voted to repeal the TSMF ordinance, citing concerns about the impact on local businesses and the hope for collaborative solutions with partner agencies, including Lane County. In January 2003, the council approved a related transportation revenue measure, a 3-cent-per-gallon local motor vehicle fuel tax. A 2-cent increase to the motor vehicle fuel tax was approved in January 2005, along with a sunset provision that would cause the tax to revert to 3 cents-per-gallon on February 29, 2008. The council added the sunset provision in the third year of the increase, citing the hope that three years would allow sufficient time to complete a comprehensive review of available funding options in the effort to develop a more permanent funding strategy for transportation system needs. Alternative Funding Options In an effort to provide a diversified and adaptable funding strategy for addressing the city’s highest- priority transportation system service needs, the council could consider the implementation of one or more alternative funding options, including but not limited to the ones discussed below. Property Tax Funding Options Attachment A provides a comparison and contrast of two potential sources of property tax funding for pavement preservations projects: General Obligation Bonds (GO Bonds) and a 10-year Capital Local Option Levy. Additionally, Attachment B provides a more complete overview of these two funding options. For the reasons articulated in Attachment A, staff recommends the use of a capital local option levy over a GO bond as the preferred property tax funding mechanism, should the council decide to include a property tax component in a pavement preservation funding package. Proceeds from these funding options could be used for both pavement overlay and reconstruction projects. However, staff is recommending, should the council move forward with a property tax funding option, that the proceeds be directed to reconstruction projects, since the council has other pavement preservation funding sources for overlay projects (e.g., the 5-cent gas tax and the reimbursement component of transportation SDCs). Increase in Motor Vehicle Fuel Tax The council could consider raising the motor vehicle fuel tax (gas tax) from the current 5 cents-per-gallon to 8 cents-per-gallon and earmarking the revenue generated from the additional 3 cents to Road Fund operations and maintenance activities (about $2 million per year). To ensure continuation of a reliable tax revenue stream at that level, staff recommends that the council repeal the sunset provision enacted in 2005, which would otherwise cause the tax to revert to the 3-cent level as of February 29, 2008. L:\CMO\2007 Council Agendas\M070122\S070122B.doc