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on a fair and equitable system of taxation and other revenue sources and are adequate to main and deliver municipal services." The 2001-2002 City Council Work Plan Item 1 under this goal called for an effort to "Identify and implement funding sources (including possible reallocation of existing sources) for operation, maintenance and preservation of the transportation system." It was based on this charge that the Citizen' s Subcommittee on Transportation System Funding began meeting in September of 2000 to study this issue and develop its report and recommendation. Additionally, the City's FinancialManagement Goals andPoficy, A. 4, states that the City's municipal service priority Level 2 (second only to the preservation of the public safety system) is to "maintain and replace the City' s fixed assets, which includes.., infrastructure.., so as to optimize their life." COUNCIL OPTIONS Option 1: The council could choose to take no action at this time with regard to the need for additional pavement preservation funding. Option 2: The council could direct the City Manager to bring back for discussion an ordinance to increase the local motor vehicle fuel tax by 7 cents, to a total 1 O-cent tax, to address unmet pavement preservation program funding needs; Option 3: The council could direct the City Manager to bring back for discussion an ordinance to reinstitute a transportation maintenance fee to generate an additional net $4.5 million annually for pavement preservation funding; or Option 4: The council could direct the City Manager to bring back for discussion ordinances which would implement a combination increase in the motor vehicle fuel tax, along with a more modest transportation system maintenance fee, in order to generate an additional net $4.5 million annually for pavement preservation funding. Each one-cent incremental increase in the fuel tax is estimated to generate $650,000 to $700,000 in additional net revenue. Attachment A illustrates the projected consequence of no additional funding for the pavement preservation backlog. CITY MANAGER'S RECOMMENDATION The City Manager recommends that the council hold additional work sessions and public hearings prior to the end of the calendar year to consider the implementation of a two-cent increase to the existing local motor fuel tax and the reinstitution of an ordinance imposing a Transportation System Maintenance Fee. The goal for this initiative would be to raise an additional $4.5 million annually for critical pavement preservation needs. This new revenue, together with existing dedicated revenue sources, would generate approximately $9 million annually to address this high-priority funding need. This overall target revenue goal is consistent with the funding level recommended by the Citizen Subcommittee on Transportation System Funding in its report to the council in October 2001. This funding level continues to be an appropriate target because it would allow the City to make effective progress in addressing the backlog of pavement preservation projects while also mitigating the disruption to the transportation system and the community due to the number of street projects going on in any one construction season. L:\CMO\2004 Council Agendas\M040927\S040927B.doc