Item 3: Ratification of IGR Committee Actions and Direction on Legislative Policy

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IGR BILL REPORT February 4, 2009 CITY OF EUGENE HB 2072 Relating Clause: Relating to carbon tax; appropriating money; prescribing an effective date; providing for revenue raising that requires approval by a three-fifths majority. Title: Imposes tax on each fuel supplier and utility based on amount of carbon in carbon-based fuel that is sold by fuel supplier to consumers in state or that is used to produce carbon- generated electricity supplied by utility to consumers in state. Limits tax on certain oil and natural gas to six percent of market value of oil or natural gas. Distributes moneys collected from tax to State Highway Fund, Common School Fund, Energy Crisis Trust Fund and Renewable Energy Resources Account. Creates Renewable Energy Resources Account to fund development of renewable energy resources. Appropriates moneys from General Fund to Department of Revenue and State Department of Energy for purpose of funding first year of administration of tax. Applies to carbon-based fuel sold to consumers or used to produce carbon-generated electricity on or after January 1, 2011. Takes effect on 91st day following adjournment sine die. Sponsored by: at the request of House Interim Committee on Revenue URL:http://www.leg.state.or.us/09reg/measpdf/hb2000.dir/hb2072.intro.pdf ContactRespondentDept Updated Priority Policy Poli Numb Recommendation Larry Hill CS-FIN 1/15/2009 Pri 1 Yes YesIII. A1 Monitor Comments: HB 2072 would impose a new tax on carbon-based fuels based on carbon content. As intriduced, this would be in addition to existing state and local motor vehicle fuel taxes, as the measure does not propose to repeal or restrict those taxes. While this measure has important environmental goals and social impacts, I'll restrict my comments to near-term financial impacts on the City. There would have two significant financial impacts on the City of Eugene. First, it would increase costs for motor vehicle fuel for operation of the City's fleet and would increase costs of electricity and natural gas for operation of City facilities. Simple changes in program operations, such as lowering facility temperatures or limiting operating hours, might mitigate some of these increased costs. If justified by lifecycle cost-benefit analyses, ongoing increased costs could also be mitigated by capital outlay to purchase more fuel effecient vehicles for the City fleet, or by making capital investmente in City facilities to decrease consumption of carbon-based fuels. The amount of taxation proposed by the measure is not yet stated, but in either of these instances costs to the City will increase by more than an incidental amount. Second, the new tax on motor vehicle fuel would likely increase revenue to the state Highway Trust Fund, of which the City receives a share. This could help address the Road Fund's operational shortfall. However, these revenues will likely decrease over time as the higher tax burden on motor vehicle fuel discourages use of carbon-based fuels. This measure should be closely monitored for the specific tax amount or any amendment that would limit or repeal existing state and local motor vehicle fuel tax revenue received by the City. ContactRespondentDept Updated Priority Policy Poli Numb Recommendation Eric Jones PW-ADM 1/14/2009 Pri 1 Yes Yes Monitor Comments: This proposes a significant change in fuel taxation that could have profound effects on funding for streets and highways (council policy III A) and affordable housing (via utility rates). It is not clear from the bill, as introduced, what effect a carbon tax would have on the existing state motor vehicle fuel tax/weight mile tax. City of Eugene objectives regarding 1