Item A: Ordinance on Businesss License Tax on Motor Vehicle Fuel Dealers

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ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Work Session: An Ordinance Concerning Motor Vehicle Fuel Dealers’ Business License Tax and Repealing Section 3 of Ordinance No. 20337 Meeting Date: July 15, 2009 Agenda Item: A Department: Public Works Staff Contact: Kurt Corey www.eugene-or.gov Contact Telephone Number: 682-8421 ISSUE STATEMENT This work session is an opportunity for the council to discuss a potential amendment to the sections of the Eugene City Code dealing with the Business License Tax on Motor Vehicle Fuel Dealers. This potential action, outlined in the proposed ordinance offered as Attachment A, would repeal the sunset provision on the two-cent fuel tax rate increase enacted in 2005, and later extended in 2008, with the effect of keeping the City’s local gas tax rate at five cents per gallon indefinitely. The state legislature recently enacted a transportation bill which will increase the state gas tax by six cents per gallon, in addition to increasing vehicle title and license fees and weight-mile taxes on heavy trucks. Eventually, Eugene and other Oregon cities are expected to realize increased funding from the State Highway Trust Fund as a result of this new legislation, but the increase in the state gas tax would not become effective until the state sees two straight quarters of economic growth, or January 2011, whichever comes first. Realistically, the City would not expect to see a significant increase in annual revenue as a result of this bill until at least FY11 or FY12. In addition, another provision of the bill prevents local governments from approving new gas taxes or increasing existing ones until January 2, 2014. After January 2, 2014, voter approval will be needed for any new or increased local gas tax. The moratorium provisions of the bill take effect on September 28, 2009. In 2005, the Eugene City Council added two cents to Eugene’s existing three-cent-per-gallon City gas tax, with a three-year sunset provision which would have taken effect in February 2008. But instead of letting the two-cent portion of the tax lapse last year, the council voted to renew the two cents for another three years by extending the sunset date to February 28, 2011. However, unless the council elects to take action to repeal the sunset provision on the local gas tax before September 28, 2009, the council will lose the option to renew the two-cent portion of the tax beyond 2011 once the legislative moratorium on local gas taxes becomes effective. If by September 28 the council has enacted an ordinance repealing the sunset provision, then the state moratorium will not impact the council’s ability to retain the five-cent local gas tax. Prior to the passage of the state transportation bill, the annual deficit for street operation and maintenance services in the Road Fund was projected to exceed $3 million in FY11, growing to over $4 million by FY13. However, with the new state transportation bill, the City could eventually expect to receive $2.0-$3.0 million in additional state highway funding each year. Together with the ability to charge right-of-way use fees on City utilities, Eugene may, for the first time in many years, have the Z:\CMO\2009 Council Agendas\M090715\S090715A.DOC