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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Board members also expressed concern about how the ballot language would read in terms of the desired classroom outcomes and the board’s ability to influence or achieve those outcomes. Some examples given were: (i) what does a furlough day mean; (ii) classroom time means more than teachers; (iii) the board can only control the "ratios", and cannot control furlough days; and (iv) will having furlough day language in the ballot measure affect the district's ability to successfully negotiate with its teachers? There were no definitive answers to these questions, nor were there any specific suggestions from the board about how the ballot language should read in order to work best for the district. City staff suggested that board members attend the February 14 meeting and present their ideas or concerns to the council directly during the public comment period. Tax Brackets and Revenue Yield: The net revenue that would be available to schools from several different scenarios, along with tax bracket options, is included in Attachment C. These estimates were calculated using a model developed by EcoNW. An explanation of the methodology and more details about the calculations are incorporated in the EcoNW report included as Attachment D. Taxation of PERS and Federal Retirement Benefits: State law prohibits the City from applying an income tax to PERS benefits and federal retirement benefits that are taxable in Oregon. ORS 238.445 prohibits municipal taxation of PERS benefits, but allows the state to apply personal income taxes to such benefits. When Multnomah County implemented their tax, they determined that if Oregon PERS benefits are not taxed, then federal law would prohibit an income tax on federal pension benefits. City staff were unable to obtain information from Multnomah County staff about the impact that the PERS and federal pension income exemptions had on their tax receipts. The revenue projections included in Attachments C and D estimate the impact of the prohibition against taxing PERS and federal retirement benefits on City income tax revenues. The combined estimate of the impact is approximately 6% of taxable income. Implementation and Administration: The cost of implementing and administering the program includes the cost of tax avoidance activities, tax evasion, and administration of the revenue collections. The council will need to consider both the staff effort needed to implement and administer the tax, as well as the cost of having a local income tax program. With regard to the amount of time and effort needed to implement a local income tax, staff has made inquiries of the City of Portland, who administered the Multnomah County income tax for schools in fiscal years 2003-04 through 2005-06 and of the Department of Revenue. We have not done a thorough analysis, given the short timeline, but we have some initial information that will be useful for the current discussions. The Multnomah County tax was approved on the ballot in May 2003, and the tax was effective for the 2003 tax year, timing similar to what Eugene is considering. In Multnomah County, their system was up and running by the end of the calendar year, about seven months after passage of the ballot measure. City of Portland staff told us that they estimate it would take at least six months to implement the new tax. \\Cesrv500\cc support\CMO\2011 Council Agendas\M110214\S1102144.doc