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

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backlog had grown to nearly $170 million and, with no new funding, is projected to grow to $282 million within the next 10 years. However, with additional pavement preservation funding as recommended by the Council Subcommittee last week, the City could fully fund and stabilize the annual overlay program and begin to make considerable progress in reducing the substantial backlog of reconstruction projects. Legal Uses of Revenue - The restrictions on the use of local fuel tax revenues for street system operations, maintenance and preservation is provided in Eugene City Code 3.489 (2): “The net revenue shall be used only for the reconstruction, repair, maintenance, operation and preservation of city-owned roads and streets within the city, roads and streets for which the city is contractually or legally obligated to operate and maintain, or roads and streets for which the city has accepted responsibility under intergovernmental agreement. No revenue shall be used for capacity-enhancing street improvements.” Use of local motor vehicle fuel taxes is also limited by the Oregon Constitution (Article IX, Section 3a), which states that “revenue from taxes on motor vehicle use and fuel … shall be used exclusively for the construction, reconstruction, improvement, repair, maintenance, operation and use of public highways, roads, streets and roadside rest areas in this state.” The proposed eight-cent per gallon local motor vehicle fuel tax is one component in a recommended package solution to adequately fund Eugene’s transportation system for a variety of users. To ensure continuation of a reliable fuel tax revenue stream to support ongoing street operations, maintenance, and preservation, staff also recommends that the council repeal the sunset provision enacted in 2005, which would otherwise cause the tax rate to revert to the three-cent level as of February 29, 2008. Implementation Timeframe - Staff discussions with the City’s tax administrator, the ODOT Fuels Tax Group in Salem, suggest that a minimum of 30 to 60 days from the date of adoption would be required for implementation of the increased fuel tax in order to give adequate notice to the dealers and to make appropriate modifications to the reporting forms and instructions. RELATED CITY POLICIES The council’s Vision and Goals Statement with respect to Fair, Stable and Adequate Financial Resources reaffirms commitment to “a local government whose ongoing financial resources are based on a fair and equitable system of taxation and other revenue sources and are adequate to maintain and deliver municipal services.” In January 2007, council identified a new council goal to “Develop mechanisms to adequately fund our transportation system for cars, trucks, bikes, and pedestrians including maintenance and preservation and capital reconstruction.” Additionally, the City’s Financial Management Goals and Policy, A.4, states that the City’s municipal service priority Level 2 (second only to the preservation of the public safety system) is to “maintain and replace the City’s fixed assets, which includes… infrastructure…so as to optimize their life.” COUNCIL OPTIONS The council has the following options: Option 1: The council could decline to take action on the ordinance, choosing to make no changes to the Eugene Code concerning business license tax on motor vehicle fuel dealers. L:\CMO\2007 Council Agendas\M070529\S0705293.DOC