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

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will incur significant annual operating deficits and eventually sustain significant service cuts, and the backlog of needed road repairs will rapidly continue to grow. Option 2: The council could direct the City Manager to conduct a public hearing on February 20, 2007, on a proposed amendment to Ordinance No. 20278, increasing the Business License Tax on Motor Vehicle Fuel Dealers by 3 cents to the 8-cent level and repealing the sunset provision on the 2-cent fuel tax increase enacted in 2005, with the intent that the proceeds from the additional 3 cents be dedicated to funding Road Fund operations and maintenance activities. Option 3: The council could direct the City Manager to bring back a resolution directing that a measure be placed on the November 2008 ballot asking voters to authorize property tax levy (bond or capital local option levy) for the purpose of providing funding for pavement reconstruction capital projects. Option 4: The council could adopt the proposed TSMF ordinance, in its current proposed form or with modifications, in order to generate annual revenue to fund pavement preservation capital projects. Option 5: The council could direct the City Manager to bring back for further council consideration additional information regarding an ordinance establishing a commuter tax. Option 6: The council could direct the City Manager to do any combination or variation of the above options. CITY MANAGER’S RECOMMENDATION The City Manager recommends that the council take action to approve a combination of options 2, 3 (in the form of a capital local option levy) and 4 in order provide a diversified and adaptable funding strategy for addressing the city’s highest-priority transportation system service needs now and into the future. Increasing the local motor vehicle fuel tax by 3 cents to the 8-cent level would provide an additional $2 million annually to address the projected ongoing operating deficits in the Road Fund operations and maintenance activities. While the projected operating deficit is $1.5 million for FY08, that annual deficit is projected to exceed $2 million by FY10. Voter authorization for a capital local option levy in combination with a TSMF would provide the council with a flexible funding strategy by which to size the revenue target in any one year or for a period of years, in order to provide sufficient ongoing capital funding to reduce the pavement preservation backlog. SUGGESTED MOTIONS 1) Move to direct the City Manager to conduct a public hearing on February 20, 2007, on a proposed amendment to Ordinance No. 20278, increasing the Business License Tax on Motor Vehicle Fuel Dealers by 3 cents to the 8-cent level and repealing the sunset provision on the 2-cent fuel tax increase enacted in 2005, with the intention that the proceeds from the additional 3 cents be dedicated to Road Fund operations and maintenance activities. L:\CMO\2007 Council Agendas\M070122\S070122B.doc