MTC - Final Report 1-22-10 - Laserfiche WebLink

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Meeting the Challenge For the last several years, the City of Eugene’s General Fund has been projected to have large deficits beginning in July of 2012. Four major factors are causing this deficit. 1.The City’s General Fund will be responsible for paying the cost of library operations that are currently paid by a local option levy when it expires in June 30, 2011; 2.The cost of employee wages, benefits and retirement continue to increase; 3.Previously, the City has used one-time money to pay for on-going services that will need to be paid for by the General Fund; and 4.The economic downturn, which began in 2008, has reduced the amount of money the City will be adding to the General Fund. The City Manager’s goal is to resolve this General Fund challenge by looking at a number of different solutions. This could include ways to reduce spending or increase City revenue. Gathering citizen input on service priorities as well as possible revenue sources is critical to this effort. A special committee, the Meeting the Challenge Task Force, was appointed to recommend new revenue sources that, together with existing revenues, would help balance General Fund budget. A description of the Meeting the Challenge process is included in the Appendix. The Task Force developed one recommendation as well three options for revenue. The Task Force also had several considerations they felt should be taken into account as the City moves forward to solve this challenge. Recommendation The Meeting the Challenge Task Force recommends a Restaurant Tax of 5.0%, which would generate about $14 million annually for the City. After filling the General Fund gap, any remaining funds could be used to assist restaurants in covering the costs to implement the tax, to market and promote Eugene as a destination, and to increase high priority services such as public safety. Considerations Economic development and growth will provide the City with an ongoing opportunity for more revenue. City policies and procedures should stay consistent throughout different economic cycles and should encourage economic development and growth to maximize resulting property tax revenue to the General Fund. The Task Force recognizes that this is not a short-term solution, but believes it will bring results over the long-term. The Task Force is sensitive to the efforts of the State to raise revenue by changing the tax rates on personal income and increasing the minimum tax for corporations. The Task Force members acknowledge that an income tax would be a broad-based and equitable alternative for funding City services. In addition, the Task Force recognizes that other state and local governments are discussing new ways to generate revenue. Individual and businesses will be more likely to support additional payments if they know what will be achieved with the money. To maintain the public’s trust, when revenue is associated with services and the revenue is not generated because it lacks public support, the services associated with the revenue should be scaled back or eliminated.