Item 3: Ordinance Concerning Business License Tax on Motor Vehicle Fuel Dealers

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On September 26, 2005, the council reviewed and discussed the financial status and fund forecast for Eugene’s Road Fund. Based on that discussion, the council directed the City Manager to develop a FY07 Road Fund budget at the current service level and to bring back a proposal for a new revenue funding package which would address the projected ongoing operating deficit in street operations and maintenance, in addition to generating additional revenue for funding the backlog of unfunded projects in the pavement preservation program. On January 22, 2007, the City Council agreed to the formation of a council subcommittee, comprised of four councilors, to study transportation funding options and to bring back within three months a recommendation for a solution or solutions meeting certain specific criteria to adequately fund the transportation system. At that same meeting, the council directed the City Manager to proceed with a public hearing on proposed amendments to City Code which would increase the Business License Tax on Motor Vehicle Fuel Dealers by three cents per gallon to the eight-cent level and repeal the sunset provision on the two-cent fuel tax rate increase enacted in 2005. That public hearing was conducted on February 20, 2007, and the minutes from that meeting are included here as Attachment B. On May 23, 2007, the Council Subcommittee on Transportation Funding Solutions presented its report and recommendations to the full council. At that meeting, the council approved a general course of action that is intended to lead to the implementation of a variety of strategies, including a capital local levy, a street utility fee based on parking, a solid waste collection surcharge, a street and bike path lighting fee, and this proposed increase to the current local motor vehicle fuel tax. The proposed revisions to the Eugene Code with regard to the motor vehicle fuel tax are set out in Attachment A, the proposed ordinance. Funding Needs, Legal Analyses and Implementation Issues Increasing the local motor vehicle fuel tax rate by three cents to the eight-cent level would provide an additional estimated $2 million annually. Together with three other new proposed fees and a capital local option levy recommended by the Council Subcommittee, this package solution would generate new revenue of nearly $16 million per year to address the projected ongoing operating deficits in the Road Fund operations and maintenance activities and provide stable and adequate funding for the $170 million backlog of unfunded capital street repairs. Road Operations and Maintenance Needs - The City’s Road Fund accounts for the operation and maintenance of Eugene’s street system. Due to flat growth in state revenues and loss of historical county road partnership revenues, the Road Fund is expected to have an annual operating deficit of over $1.6 million for FY08 (growing to $2.2 million by FY10) for ongoing activities such as street lighting, pothole patching, street tree maintenance, signing and striping of city streets. Capital Pavement Preservation Needs - The current five-cent gas tax has allowed the City to complete nearly $12.9 million in street preservation project work since 2003, with additional contracts in progress. This year, more than 17.4 lane miles of slurry seal projects and 20.5 lane miles of rehabilitation projects are scheduled, including the overlay of portions of 18th Avenue, Chambers Street and Bailey Hill Road. In spite of these accomplishments, the backlog of needed repair work continues to grow in the face of rapidly rising construction costs and insufficient revenues. In late 2001, the City was facing an estimated $67 million backlog in pavement preservation work. By last month, the estimated cost of that L:\CMO\2007 Council Agendas\M070529\S0705293.DOC