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

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Motor Fuel Tax Imposed on Distributors/Dealers Cities have home rule authority to levy a motor vehicle fuel tax, and Council could impose the Legal Authority tax by ordinance, under powers granted in the City Charter. Counsel has advised us of the and Restrictions following limitations around the City?s ability to tax motor vehicle fuel distributors: on Use Due to constitutional limitations, the City would likely be unable to tax fuel distributed < outside of its jurisdiction. Although the City can tax sales of fuel that occur inside its limits, it cannot tax sales that < occur outside its limits. The Oregon Constitution forbids the City from imposing a tax based solely on < geographic location. Therefore, the City could not legally impose a tax solely on sales to customers located outside of the limits. The City?s authority to tax is confined within its territorial boundaries. If a distributor?s < facility is outside the City limits, then it has no ?nexus? or connection with the City that would justify its taxing of either the facility or transactions occurring at that facility. A tax on fuel storage may be an option that would serve the City?s needs, should further < analysis of such a tax be desired. Additionally, Article IX, Section 3a of the Oregon Constitution imposes restrictions on the use of the tax, in that it provides that revenue from gas and other vehicle-related taxes may be used only ?for the construction, reconstruction, improvement, repair, maintenance, operation and use of public highways, roads [and] streets.?The strict test is that an expenditure of gas taxes must ?primarily and directly facilitate motor vehicle traffic.? In justifying the use of motor vehicle fuel taxes, an expenditure must be used directly for transportation services within the public right-of-way, and there must be a direct and close connection between the expenditure and vehicular use. Although the tax is collected and remitted to the taxing jurisdiction by the distributors and/or Incidence (who retailers, it is ultimately passed through to the motor vehicle owner/operator as a component of pays?) their cost of motor vehicle fuel purchases. This tax would apply to motor fuel purchases by residents as well as by non-residents who commute or do business in Eugene and purchase fuel inside the City limits. A motor vehicle fuel tax is a proportionaltax on a commoditywhich, to some degree, is Fairness/Equity discretionary. In practice, this tax is generally regressive. However, since the use of the tax is Issues statutorily restricted to expenditures which primarily benefit vehicular traffic, it truly is a ?user fee.? This tax would generate funding on a ?pay-as-you-go? basis, rather than providing lump-sum Assessment of funding on the front end of projects. The level of excise tax revenue generated would be subject Financial to fluctuation with changes in consumer consumption patterns for motor vehicle fuel. Growth in Stability and the revenue yield would mirror growth in the volume of fuel sales which, in turn, would reflect Political increased usage of the public roadways. Feasibility This tax failed in six out of six counties in Oregon in the November 1998 election. Survey resultsfroma 1992 Eugene citizen survey indicated that 48% of those surveyed favored this form of tax. I10