Item 4: Ordinance on Business License Tax on Motor Vehicle Fuel Dealers

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However, the City still lacks adequate funding for major street repair projects, and the backlog of needed street repairs has grown to over $170 million. While the five-year street repair bond approved by Eugene voters last fall will fund 32 projects that will repair an estimated 70 lane miles of streets and three miles of off-street bike and pedestrian paths, the City still has not resolved its long-term street repair funding problem. Continuation of the City motor vehicle fuel tax at the five-cent level is a key component in a package strategy endorsed by the council to ensure a stable, locally-controlled revenue stream to allow the City to continue to make progress on that $170 million backlog of needed street repairs. BACKGROUND Previous Council Action and History The City’s first motor vehicle fuel tax was enacted in January 2003, based on the recommendation from the Citizen’s Subcommittee on Transportation System Funding. The subcommittee’s recommendation was for a combination local motor vehicle fuel tax and transportation system maintenance fee for the purpose of generating an additional $9.0 million annually to address the City’s critical transportation system funding needs. That first fuel tax was implemented at three cents per gallon, and that portion has generated an average of $2.0 million per year since 2003. The other revenue mechanism in that funding recommendation, a street utility fee designed to generate an additional $6.5-$7.0 million per year, was adopted but later repealed before it could be fully implemented. A two-cent increase to the motor vehicle fuel tax was approved in January 2005, along with a sunset provision that would cause the tax to revert to three cents per gallon on February 29, 2008. On January 28, 2008, the council voted to extend the sunset provision for three additional years to February 28, 2011, in order to allow sufficient time to see what new funding might result from the state legislation and also to allow for the development and implementation of other elements of the council’s locally- controlled package funding strategy. One element of that strategy, a three-cent increase to the local gas tax, was not approved by the voters at the polls in November 2007. Additionally, the council declined last month to approve a garbage-hauler surcharge which would have generated $900,000 per year for street operations and maintenance services. As a result of the defeat of these efforts for additional street funding, it is now more important than ever that the City retain the ability to control the level of its five- cent local gas tax, now and into the future. Funding Needs, Legal Analyses and Implementation Issues Retaining the two-cent portion of the local motor vehicle fuel tax rate would provide continuation of over $1.2 million in annual revenue currently received by the City. Together with the proceeds from the five-year street repair bond and one-time federal stimulus monies for pavement preservation projects, continuation of this local funding source should provide funding through the life of the street repair bond sufficient to at least begin to reduce the rapid rate of growth and stabilize 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 services for Eugene’s street system. Last year, the City received over $6.5 million in State Highway Trust Fund monies to fund these critical street services. If the new state legislation were to provide another $2.0-$3.0 million to the City upon full implementation of the bill, together with revenue from a small right-of-way fee on City utilities, it is possible that Eugene could stabilize funding for its street operations services for the first time in many years. Z:\CMO\2009 Council Agendas\M090727\S0907274.DOC