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

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Capital Pavement Preservation Needs - The current five-cent gas tax has allowed the City to complete nearly $22 million in street preservation project work since 2003, with additional contracts in progress. This year, the Pavement Preservation Program (not including bond measure projects or assessable improvement projects) has scheduled more than 32 lane miles of slurry seal projects and 30.8 lane miles ththth of rehabilitation projects, including the overlay of portions of 6 and 7 avenues, West 11 Avenue, Bertelsen Road, Country Club Road, Crescent Avenue, Danebo Road, Fox Hollow Road, McKinley Street, Roosevelt Boulevard, Royal Avenue, and Seneca Road. In order to fully fund and stabilize the annual overlay program and begin to make progress in reducing the substantial backlog of reconstruction projects, it is critical that the City not go backwards by losing the ability to control the two-cent portion of our local gas tax. To ensure continuation of a reliable fuel tax revenue stream, the City Manager is recommending that the council adopt the attached ordinance, which would repeal the sunset provision enacted in 2005 and extended in 2008, a provision which would otherwise cause the tax rate to revert to the three-cent level after February 28, 2011. Implementation Timeframe – If the council wishes to retain the ability to control the two-cent portion of the local gas tax, action must be taken to enact the attached City ordinance within 91 days of the close of the state legislative session. A work session was held on July 15 to allow council discussion of the proposed ordinance repealing the sunset provision on the two-cent portion of the local gas tax. In that discussion, the question was raised as to what the allowed and historical uses were for the proceeds from Eugene’s local gas tax. The Eugene City Code authorizes the use of those revenues as follows: “3.489 Use of Tax Revenues (1) For the purpose of this section, net revenue shall mean the revenue from the tax and penalties imposed by sections 3.465 through 3.489 remaining after providing for the cost of administration and any refunds and credits authorized herein. (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.” As a practical matter, until the current fiscal year, the proceeds from Eugene’s local fuel tax have been used exclusively for capital pavement preservation (street repair) projects. Facing a significant budget shortfall in the funding for ongoing street operations and maintenance activities for FY10, the Eugene City Council for the first time authorized the use of up to $1.4 million of local gas tax proceeds to preserve ongoing operating and maintenance services in the Road Fund for FY10. However, with the eventual realization of new revenue from the state transportation bill, along with new revenue from a small right-of-way use fee on City utility revenue, it is quite likely that in future budget years the council would not need to resort to redirecting any portion of the local gas tax proceeds from high-priority projects in the pavement preservation program. The council in that work session also requested information as to what City engineering overhead rates were and how those compared to private sector rates. The City engineer has prepared a response to that request for information, which is included herein as Attachment B. On July 20, a public hearing was held to gather community input on the proposed ordinance, but no speakers signed up to testify on the proposal to repeal the sunset provision. Council action on the ordinance is scheduled for tonight in order to allow sufficient time for enactment of the City ordinance prior to the effective date of the state transportation bill, with its moratorium on local gas taxes. Z:\CMO\2009 Council Agendas\M090727\S0907274.DOC