Item A: FY10 Budget Strategies to Maintain Road Fund Service Levels

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well as completing the necessary actions to implement both the right-of-way use fee on City-owned utilities and a transportation surcharge on solid waste (garbage) haulers. Responding to the challenge of identifying opportunities for ongoing cost savings, Public Works is proposing a $178,000 reduction in the FY10 Road Fund operating costs achieved through the redeployment of several employee positions from traditional Road Fund work (street debris removal, development review, night call response) to address emerging needs in other City programs. We believe these cost savings are both achievable and sustainable without significant reductions in service or public response. Staff continues to explore more opportunities for restructuring Road Fund programs to increase efficiencies and reduce costs. Acknowledging that a budget-balancing strategy based on street service reductions alone would have a detrimental and long-lasting impact on the City’s transportation system, the City Manager has directed that staff to move forward to prepare the necessary draft ordinances and actions to support the implementation of both an 8% right-of-way use fee (similar to a franchise fee) on City-owned stormwater and local wastewater utilities, as well as a new 10% transportation surcharge on solid waste (garbage) haulers. Right-of-Way Use Fees on City-Owned and Operated Utilities – The City has made a significant investment in the road right-of-way over the years and has historically charged a variety of utility providers for the use of those rights-of-way. Fees for the commercial use of the right-of-way are currently assessed by the City in the form of franchise fees, license fees and permits to privately-owned utility providers. EWEB pays contributions-in-lieu-of-taxes (CILT) at a similar rate. The ROW fees and CILT payments are currently receipted into the City’s General Fund and used to support general municipal services. However, Eugene has never imposed right-of-way use fees on its own City-owned wastewater and stormwater utilities. At least 15 cities in Oregon assess right-of-way or franchise fees on utilities providing water, wastewater and/or stormwater services. For example, the City of Bend charges a right- of-way franchise fee on the gross revenues of the City's Water and Water Reclamation Funds to help fund a shortfall in Bend's transportation budget. The fee generates around $825,000 annually and costs the average ratepayer in Bend an additional $2.88 per month. Staff projects that at the 8% level (telecom companies in Eugene currently pay a 7% franchise fee for use of the City rights-of-way) a Eugene right-of-way use fee imposed on City-owned sewer and stormwater $1.7 million for FY10 utilities would generate an estimated for operation, maintenance and repair of city streets. This fee would be treated as an integral business expense of the City utilities and would be reflected in the overall user charge rates, adding an additional estimated $1.44 to the monthly bill for a typical Eugene residential customer beginning July 1, 2009. Next Steps: It is the City Manager’s intention that the new right-of-way use fee would be reflected in City stormwater and local wastewater utility rate increases effective July 1, 2009. To that end, the City Manager intends to schedule a public hearing on March 9, to receive public comment on proposed amendments to the Eugene City Code that would specify revenue from the new right-of-way use fees imposed on City-owned and operated utilities be used for the repair, maintenance, operation and preservation of City-owned roads and streets (see Attachment A). If the council so chooses, there would also be opportunity to take final action on the code amendments that evening, which would allow staff to proceed with confidence in initiating the Administrative Order process to set the level of the City utility rates for FY10—a process which typically would be initiated in early April while the council is on break. Under Eugene City Code, the City Manager sets wastewater and stormwater utility charges by Administrative Order. However, because the use of the 8% wastewater and stormwater right-of-way use Z:\CMO\2009 Council Agendas\M090218\S090218A.doc