Item 4: Adoption of Resolution 5023 Calling a City Election on May 17, 2011, on a Temporary City Income Tax to Raise Funds for Local Schools

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3.Divides the tax revenues (after deducting the costs of implementation) between the two school districts based on the number of students in each district who reside within the city limits; 4.Would reduce or suspend the local income tax if the State either (a) increases state funding of the districts to the point that additional local revenues are no longer needed to restore furlough days or prevent average class size from increasing, or (b) requires that the local income tax revenues decrease the amount of state funding for the districts; 5.Requires the school districts to provide annually a report to the City Council describing how the income tax revenues were spent; and 6.Requires the school districts to establish a review panel, similar in nature to the Citizen Street Repair Review Panel, comprised of four members appointed by the Bethel school district, four members appointed by the Eugene school district, and four members appointed by the Mayor, two of whom should be business representatives and two who opposed the measure. In addition, the council directed the City Manager to ask each school district how much revenue the district would like to receive from the measure to achieve the outcomes. Resolutions: Attachments A and B set out resolutions referring an income tax measure for schools to the May ballot. There are two resolutions included because there is a fundamental policy choice for the council with regard to the measure: will the income tax be structured to attempt to raise a particular dollar amount of revenue, or will it be structured to set tax rates that will generate an amount that may or may not be the dollar amount desired by school districts. Under resolution Option A, included as Attachment A, the council would set the tax rate or tax rates to be imposed under the income tax measure. If the dollar amount that is raised by those rates is below what was desired to be raised, then district budgets will fall short. In this option, taxpayers will have more certainty about what they will pay, and the school districts will bear the risk that revenues do not reach the target amount. Under resolution Option B, included as Attachment B, the council would set the amount desired to be raised by the income tax measure. The council would subsequently set tax rates that are designed to raise that amount of net income to schools. If the actual amount raised comes in different than the desired amount, the council would adjust the next year’s tax rate or rates to raise the desired amount, subject to a maximum rate or rates specified in the ballot measure. The rate could go up or down each year in order to raise that target amount of money, within the maximum rate specified in the measure. In this option, school districts will have more certainty about what revenue they will eventually receive from the measure, but taxpayers will bear the risk that rates may go up in order to reach that target. Both resolutions leave blanks for the particular set of facts needed, such as the tax rate or rates, or the dollar amount to be raised. In addition, the resolutions set out the following key points:  Type of Tax – personal income tax on Eugene residents  Use of Funds – reduce or eliminate furlough days and reduce class size  Funds Split – based on the number of Eugene residents enrolled in each district  Term of Tax Levy – starting for tax year January 1, 2011 and sunsetting after six years, or December 31, 2016 \\Cesrv500\cc support\CMO\2011 Council Agendas\M110214\S1102144.doc