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HomeMy WebLinkAboutItem B - Transportation FundingEUGENE CITY COUNCIL AGENDA ITEM SUMMARY Work Session: Transportation Funding for Pavement Preservation Meeting Date: October 27, 2004 Agenda Item Number: B Department: Public Works Staff Contact: Kurt Corey www. cl. eugene, or. us Contact Telephone Number: 682-5241 ISSUE STATEMENT This work session provides an opportunity for the council to review and discuss two draft ordinances: 1) a proposed revision to Ordinance No. 20278, increasing the Business License Tax on Motor Vehicle Fuel Dealers by an additional 2 cents, to the 5-cent level; and 2) a proposed ordinance establishing transportation systems maintenance fees. Adoption of these two ordinances would enable the City to generate an additional $4.5 million annually to address critical pavement preservation needs. At the September 27 work session on this same topic, the council directed staff to bring back information on bonding alternatives for funding the backlog of pavement preservation projects. This work session will also provide an opportunity for the council to review and discuss those alternatives. BACKGROUND The Pavement Preservation Funding Need The implementation of a 3-cent-per-gallon local motor vehicle fuel tax in August 2003, together with the reimbursement component of the transportation systems development charge and the transfer from Lane County of its new OTIA IH maintenance and preservation monies, has allowed the City to begin addressing the significant backlog of pavement preservation projects in Eugene. However, this backlog continues to grow and is projected to grow from the current level of nearly $94 million to a projected $180 million within the next decade. Additional funding is needed to reverse this trend and to do the repair work necessary to ensure the efficient and safe operation of the city's local transportation system. The new revenue generated by adoption of these two proposed ordinances, together with existing dedicated revenue sources, would provide 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 Budget 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\M041027\S041027B.doc Previous Council Action and History_ In October 2001, the Citizen Budget Subcommittee on Transportation System Funding presented its recommendation that the council implement a transportation funding package consisting of a combination local motor vehicle fuel tax and transportation system maintenance fee for the purpose of generating an additional $9 million annually to address the City's critical transportation system funding needs. On December 9, 2002, the council approved an ordinance establishing a transportation system maintenance fee (TSMF). On January 27, 2003, a related transportation revenue measure, the local motor vehicle fuel tax ("fuel tax"), was approved by the council. On September 8, 2003, the council voted to repeal the TSMF ordinance, citing the recent repeal by Springfield City Council of that city's TSMF and concerns about equity between the two cities, as well as concerns raised by the Eugene Chamber of Commerce about the structure and impact of the TSMF on Eugene businesses. At that time, the council also cited continued hope for collaborative solutions with partner agencies and with Lane County, in particular. On September 27, 2004, the council reviewed the progress to date on pavement preservation program funding efforts, heard updates on cooperative efforts with partner agencies, and discussed the potential implementation of additional funding options, as well as a potential increase in the level of the existing local fuel tax. At that meeting, the council directed staff to bring back draft ordinances increasing the local motor vehicle fuel tax by an additional 2 cents (to 5 cents-per-gallon) and establishing a transportation system maintenance fee. The council also requested at that time that staff bring back information on possible bonding options for funding pavement preservation needs. Proposed Revisions to Ordinance No. 20278 Based on that direction from council, staff is returning with proposed revisions to Ordinance No. 20278, which are outlined in Attachment A. The first of the proposed revisions would increase the level of the business license tax on dealers of motor vehicle fuel within the city limits by an additional 2 cents, resulting in an increase from 3 cents-per-gallon to the 5-cent level. Additionally, at the suggestion of the City's Tax Administrator (the Oregon Department of Transportation Fuels Tax Group), staff is proposing two housekeeping amendments to the ordinance. The first proposed amendment addresses the issue of the interest rate to be charged on delinquent tax payments (i.e., equivalent to 12% per annum) and is consistent with the ORS language applicable to the State motor vehicle fuel tax. The second proposed housekeeping amendment would add language to clarify the intent and practice around granting refunds to purchasers who pay the City's tax for fuel that will not ultimately be used in on- street motor vehicles. This proposed change also helps maintain consistency between the administration of the City fuel tax and the State tax. Our discussions with the Fuels Tax Group in Salem suggest that a minimum of 30-60 days would be required for implementation of the higher level of taxation in order to give adequate notice to the dealers and to make appropriate modifications to the reporting forms and instructions. Proposed Ordinance Establishing Transportation System Maintenance Fees Based on City Council direction at the September 27 work session, staff is returning with a draft ordinance establishing transportation system maintenance fees, included as Attachment C. This ordinance is identical to the ordinance adopted by the council in late 2002 and later repealed in 2003. As with the previous ordinance, this proposed ordinance provides a general rate methodology but does not stipulate rates for specific customer categories. L:\CMO\2004 Council Agendas\M041027\S041027B.doc As has been previously discussed with the council, the exercise of estimating sample monthly fees for a TSMF is a complex one. The annual target revenue to be generated by a TSMF would be controlled through the annual budget process and would be largely dependent on the level of other, offsetting revenues available for pavement preservation projects in a given budget year. Under the rate methodology and with a hypothetical target TSMF revenue level of $3.6 million per year, the average monthly fee which might be imposed on a single-family residential household would be slightly under $3.00. In the non-residential categories, the monthly fee might range from about $9 for a 5,000-sq. ft. office building in a low-use category to about $500 per month for a 35,000-sq. ft. supermarket in the highest system usage category. Staff has prepared a memorandum outlining the principal provisions of the ordinance and the essential elements of the current rate methodology (Attachment B). The decision before the council today is the policy choice of whether or not to proceed to a public hearing on the ordinance as proposed. Bonding Alternatives As part of the work of the Citizen Budget Subcommittee on Transportation System Funding, the members of the subcommittee reviewed a broad-based list of over 20 potential funding sources, from which they selected six for further staff analysis. One of those alternatives was for the use of property taxes to back the issuance of general obligation bonds. The staff analysis of this funding option as presented to the subcommittee, as well as excerpts from the subcommittee's interim report to the council outlining its discussion and conclusions regarding this alternative, are included as Attachment D. Additionally, Attachment E contains information on the bonding alternatives raised by the council at the September 27 work session. This attachment outlines the tax levy needed to support a G.O. bond measure which could supplant the proposed TSMF at a level of $3.6 million per year and also analyzes the financial feasibility of using revenue bonds to "buy down" on the backlog of preservation projects at an accelerated rate, in order to reduce the overall growth trend in the backlog of preservation projects. RELATED CITY POLICIES The council' s Vision and Goals Statement with respect to Fair, Stable and Adequate Financial Resources reaffirms its commitment to "a local government whose ongoing financial resources are based 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 Budget 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." L:\CMO\2004 Council Agendas\M041027\S041027B.doc COUNCIL OPTIONS Option 1: The council may direct the City Manager to discontinue efforts for the adoption of ordinances for the purpose of generating additional pavement preservation funding; Option 2: The council may choose to bring back for discussion a resolution to place a measure on the ballot authorizing the issuance of General Obligation bonds for the purpose of providing funding for pavement preservation projects; Option 3: The council may choose to increase the Business License Tax on Motor Vehicle Fuel Dealers by an additional 2 cents, to the 5-cent level, by moving forward with the proposed amendment to Ordinance No. 20278; Option 4: The council may choose to establish transportation system maintenance fees by moving forward with the proposed ordinance; or Option 5: The council may direct the City Manager to do any combination or variation of these options. CITY MANAGER'S RECOMMENDATION The City Manager recommends implementation of a 2-cent increase to the existing local motor fuel tax and the reinstitution of an ordinance imposing transportation system maintenance fees. The scheduled date for public hearings on the proposed ordinances is November 22, 2004, with the potential opportunity for the council to move ahead with action on the ordinances on December 6. SUGGESTED MOTION I move to direct the City Manager to pursue Options 3 and 4 as outlined above. ATTACHMENTS A. Proposed revisions to Ordinance No. 20278 (Concerning a Business License Tax on Motor Vehicle Fuel Dealers) B. "An Ordinance Establishing Transportation System Maintenance Fees," staff memo dated October 18, 2004 C. Proposed ordinance establishing transportation system maintenance fees D. Excerpt from Citizen Subcommittee materials and report to council regarding the discussion and conclusions on the use of General Obligation bonds for transportation funding E. Bonding Alternatives for Pavement Preservation FOR MORE INFORMATION Staff Contact: Kurt Corey Telephone: 682-5241 Staff E-Mail: kurt. a. corey~ci, eugene, or. us L:\CMO\2004 Council Agendas\M041027\S041027B.doc ATTACHMENT A ORDINANCE NO. AN ORDINANCE CONCERNING MOTOR VEHICLE FUEL DEALER'S BUSINESS LICENSES; AND AMENDING SECTIONS 3.467, 3.474, AND 3.483 OF THE EUGENE CODE, 1971. THE CITY OF EUGENE DOES ORDAIN AS FOLLOWS: Section 1. Subparagraph (b) of Section 3.467 of the Eugene Code, 1971, is amended to provide: 3.467 Amount and Payment. In addition to any fees or taxes otherwise provided for by law, every dealer engaging in the city in the sale, use or distribution of motor vehicle fuel, shall: (b) Pay a license tax computed on the basis of $[.03 (three cents)] .05 (five cents) per gallon of such motor vehicle fuel so sold, used or distributed as shown by such statement in the manner and within the time provided in this code. Section 2. Section 3.474 of the Eugene Code, 1971, is amended to provide: 3.474 Payment of Tax and Delinquency. (1) The license tax imposed by sections 3.465 to 3.489 of this chapter shall be paid to the tax administrator on or before the 25th day of each month. (2) Except as provided in subsections (3) and [(4)] (5) of this section, if payment of the license tax is not paid as required by subsection (1) of this section, a penalty of 1 percent of such license tax shall be assessed and be immediately due and payable. (3) Except as provided in subsection [(4)] (5) of this section, if the payment of the tax and penalty, if any, is not made on or before the 1st day of the next month following that month in which payment is due, a further penalty of 10 percent of the tax shall be assessed. Said penalty shall be in addition to the penalty provided for in subsection (2) of this section and shall be immediately due and payable. (4) If the license tax imposed by sections 3.465 to 3.489 of this code is not paid as required by subsection (1) of this section, interest shall be charged at the rate of .0329 percent per day until the tax, interest and penalties have been paid in full. (45) Penalties imposed by this section shall not apply if a penalty has been assessed and paid pursuant to section 3.470. The tax administrator Ordinance- 1 may for good cause shown waive any interest or penalties assessed under this section. ($6) If any person fails to pay the license tax, interest, or any penalty provided for by this section, the tax, interest, and/or penalty shall be collected from that person for the use of the city. The tax administrator shall commence and prosecute to final determination in any court of competent jurisdiction an action at law to collect the same. (6) In the event any suit or action is instituted to collect the business license tax, interest, or any penalty provided for by this section, if the City is the prevailing party, the City shall be entitled to recover from the person sued reasonable attorney's fees at trial or upon appeal of such suit or action, in addition to all other sums provided by law. Section 3. Section 3.483 of the Eugene Code, 1971, is amended to provide: 3.483 Refunds. Refunds will be made pursuant to applicable refund provisions of Chapter 319 of the Oregon Revised Statutes. In addition to grounds for obtaining a refund under the provisions of Chapter 319, any person who erroneously pays the tax is also entitled to a refund by submitting a claim form obtained from the Tax Administrator's office which shall be processed consistent with the process for refunds of use fuel. A person "erroneously pays the tax" if the person pays the tax for gasoline, diesel, mogas, methanol, or any other flammable or combustible gas or liquid that was not used for the purpose of propelling a motor vehicle upon the highway. Claim forms for refunds may be obtained from the Tax Administrator's office. Section 4. The City Recorder, at the request of, or with the concurrence of the City Attorney, may administratively correct any reference errors contained herein or in other provisions of the Eugene Code, 1971 to the provisions added, amended or repealed herein. Passed by the City Council this Approved by the Mayor this day of ,, 2004 __ day of ,, 2004 City Recorder Mayor Ordinance - 2 ATTACHMENT B Public Works Administration Division City of Eugene 858 Pearl Street Eugene, Oregon 97401 (541) 682-5291 (541) 682-6826 FAX Date: October 18, 2004 To: Mayor Torrey and City Council From: Kurt Corey, Public Works Director Subject: An Ordinance Establishing Transportation System Maintenance Fees Based on Council direction at the September 27, 2004 work session on transportation system funding needs, staff are providing as Attachment C a draft ordinance establishing a transportation system maintenance fee (TSMF). This draft ordinance is identical to Ordinance No. 20273 adopted by Council on December 9, 2002 and subsequently repealed by Council on September 8, 2003. This memo describes the principal provisions of the draft ordinance and provides estimated rates and example customer fees assuming Council adopts the TSMF and Motor Vehicle Fuel Tax ordinances as currently drafted. Overview of the Draft Ordinance Under state law and local code a TSMF would fall into the category of utility or user fees. Authority to establish utility and user fees falls to local governments under state statutes. The draft ordinance establishes a transportation system maintenance fee and provides the following elements: · Purposes of the TSMF, which also control the allowed uses of the fee; · Definitions for terms used in establishing and controlling the TSMF; · Restrictions, beyond the purposes statement, on uses of TSMF revenues; · Authority for imposing, setting and modifying the amount of the fee (ratemaking procedure); · Ratemaking standards which control the basis and methodology for implementing the fee; · Adjustments and appeals; · Mechanisms for billing, payment and collections; and, · Authority for administrative rule making and methodology. The draft ordinance would establish a TSMF to be paid by all customers having possession or control of premises in the city with the purpose of proving funding for operation, maintenance and preservation of the transportation system and, more specifically, to reduce the backlog of needed street repairs. A detailed definition of the transportation system is provided to further clarify those portions of the system which are eligible for use of TSMF revenues. Revenues are to be used in the most cost-effective manner to preserve and maintain the existing street and bikeway system. Use of revenue is restricted to the prescribed purposes and is further prohibited from use for capacity-enhancing improvements of the street system. The draft ordinance has been structured to be generally consistent with adopted wastewater and stormwater service charge (user fee) ordinances. Based on prior Council dlrrection, the TSMF ordinance provides more detail on ratemaking standards and customer categories than ordinances governing stormwater and wastewater user fees. The ordinance as drafted provides a policy framework, fundamental rate structure and specific customer categories, procedures, limitations and a mechanism for implementation of the rates by administrative order of the City Manager. This implementation mechanism provides for public notice and a public hearing prior to the City Manager issuing an order imposing or amending the fee. The ordinance also provides for the Council, if it chooses, to review and hold a hearing on any change proposed by the City Manager. The Council may approve, modify or disallow a proposed fee or fee modification which it reviews. The ordinance provides for customers or the City Manager to initiate an adjustment to a customer' s fee and sets out criteria for determining when an adjustment is appropriate. Methods for billing and collection of the fee are established, with the fee billed on a monthly basis. All customers would receive annual notification of the T SMF rates and the proposed uses of revenues derived from the fee. A standard provision is included to allow the City Manager to adopt rules and methodologies to carry out the provisions of the ordinance. Rate Methodology, Customer Categories, and Example Fees The draft ordinance provides a general rate methodology and potential adjustment factors for the rates. The rate methodology establishes estimated trip generation as the primary measure of a customer's use of the transportation system. Measurement of trip generation is primarily based of the Institute of Transportation Engineers (ITE) Trip Generation manual with adjTustments to estimated usage of the system allowed to recognize additional data related to trip generation or other factors influencing estimated system usage. The ordinance requires a minimum set of customer categories to provide a distinction between levels of estimated use oftl~e transportation system by groups of system users with similar trip generation characteristics. Six residential and four non-residential customer property use categories are specified. Residential categories are distinguished by type of residential units reflecting differing trip generating characteristics. Non-residential categories include uses which are grouped within ranges of trip generation rates, with the amount of charges for customers within a category varying with the size of the development. Resulting rates will be assigned and adjustments applied to customer categories through the administrative ratemaking process. Table A below provides a listing of the ordinance-specified customer categories and the projected rate per unit of size for each category, assuming adoption of a five-cent per gallon motor veh~rcle fuel tax and projections of the total number of vehicle trips to be charged. The following Table B provides examples of fees for individual customers which are estimated based on the draft ordinance and proposals before Council at this time. Future final rates will depend both on revenue requirements established through the budget adoption process and refinements of the actual number, type and size of customers charged. Staff has prepared example estimated fees using a rate model based on the best currently-available data. Rates provided at this time differ from those provided to Council in previous deliberations (July 2002) due to several factors, including use of more specific data on number, type and size of customers to be charged within various residential and nonresidential customer categories, modified assumptions of revenue requirements, and refinement of pass-by and diverted-linked trip adjustments. Page 2 Table A - Proposed Customer Categories and Monthly Fee per Unit of Measure (Assumes a five-cent motor vehicle fuel tax) Category Unit of Daily Fee per Measure Average Unit of Trips Measure per Unit of Measure Residential Customer Categories Single-Family Detached single-family home on an individual lot. Dwelling 10.00 $2.88 Detached Housing Duplexes and triplexes are considered single-family Unit residences. Apartment Rental unit located in the same building with at least Dwelling 6.49 $1.87 three other dwelling units. Includes quadraplexes and all Unit types of apartment buildings. Condominium or Single-family ownership units that have at least one Dwelling 5.69 $1.64 Townhouse other single-family owned unit in the same building. Unit Mobile Home Park Generally consist of mobile homes sited and installed Dwelling 4.77 $1.37 on permanent foundations, typically with community Unit facilities such as laund .ry or community room. Retirement Restricted to adults or senior citizens - contain Dwelling 2.34 $0.67 Community residential units similar to apartments or condominiums, Unit and are usually self-contained villages. Congregate Care Residential assisted living and care facilities - typically Dwelling 2.15 $0.62 Facility contain dining, medical and recreational facilities. Unit Non-residential Customer Categories Low Volume Non- Uses typified by relatively low trip generation rates 1000 Sq. 5.86 $1.69 residential (below 11 average daily trip-ends per thousand gross Ft. Gross (category A) square feet). Includes uses with large facility sizes, Floor Area including warehouses, manufacturing, industrial uses, (or furniture stores and schools, equivalent) Medium Volume Uses with a moderate trip generation rate (from 11 to 30 1000 Sq. 14.20 $4.09 Non-residential per thousand gross square feet) in relation to size of Ft. Gross (category B) development. Includes uses such as churches, medical Floor Area offices and community centers. (or equivalent) Medium-high Uses with a trip generation rate from 30 to 60 per 1000 Sq. 26.73 $7.70 Volume Non- thousand gross square feet*. Includes uses such as car Ft. Gross residential sales, specialty retail centers, general and government Floor Area (category C) office buildings. Rates for category are adjusted for (or pass-by and diverted-linked trips, equivalent) High Volume Non- Uses with a trip generation rates over 60 per thousand 1000 Sq. 48.73 $14.03 residential gross square feet. Includes uses such as super markets, Ft. Gross (category D) restaurants, theaters, service stations and convenience Floor Area markets. Rates for category are adjusted for pass-by and (or diverted-linked trips, equivalent) *prior to pass-by and diverted-linked trip adjustment Table B - Examples of Monthly Fees for Typical Customers - Estimated TSMF Rates with 5-cent Fuel Tax Customer Description Note: Samples fees arc Customer $0.05 Fuel Tax - based on square footage shown. Category (See Projected TSMF Table A) Rate = $0.288/trip Single Family Dwelling Single-Family $2.88 Multi-family Residential - 20 Unit Apartment Apartment $1.87 / $37.40 (per apartment/total) General Office Building (12,000 sq. ft.) A $20.28 Motel (15,000 sq. ft.) A $25.35 Middle School (120,000 sq. ft.) A $202.80 Community Center (10,000 sq. ft.) B $41.00 Building Materials Store (14,000 sq. ft.) C $107.80 Specialty Retail Center (5,000 sq. ft.) C $38.50 Government Office (18,000 sq. ft.) C $138.60 Supermarket (40,000 sq. ft.) D $561.20 Restaurant (6000 sq. ft.) D $84.18 Potential Adjustments and Reductions to Rates In addition to specifying a minimum distinction between categories of residential and non-residential uses, the ordinance provides for the City Manager to consider other factors in the TSMF rates to adjust or reduce the fee for categories of customers. Adjustments and reductions would be specified in the administrative rules adopted by the City Manager. Fee reductions allow for recognition of reduced usage or demand on the transportation system. For example, in implementing the rate methodology, reductions in fees can be allowed for nodal development or for businesses implementing transportation demand management strategies such as providing transit passes to employees. Further analyslrs is required to determine the appropriate types and amount of' reductions to include in the rate methodolo, gy, but it is important to give consideration to providing incentives and recognition for customers efforts to reduce demand on the transportation system. Next Steps Should an ordinance establishing a TSMF be approved, staff will proceed with the substantial work effort required to implement the fees as soon as feasible thereafter. The earliest possible date for implementation is likely July 1, 2005. The critical work elements for implementation include: · Update and evaluate data necessary to implement the rate methodology and establish fee amounts for all customers; · Work with EWEB to implement systems and methods to enable billing of the TSMF; · Develop administrative rules specifying rate methodology and adjustments; · Give notice of proposed fees and hold a public hearing; and · Prepare findings and administrative order implementing the fee. If you have questions regarding the proposed ordinance or the information in this memo, don't hesitate to contact me at 682-5241 or kurt.a, corey~ci.eugene.or.us. ATTACHMENT C ORDINANCE NO. AN ORDINANCE CONCERNING TRANSPORTATION SYSTEM MAINTENANCE FEES AND ADDING SECTIONS 7.750 THROUGH 7.795 TO THE EUGENE CODE, 1971. Section 1. Sections 7.750 through 7.795 of the Eugene Code, 1971, are added to provide as follows: 7.750 Transportation System Maintenance Fee - Establishment; Purpose. (1) Except as otherwise provided in sections 7.755 to 7.790 of this code, each person responsible, as defined in section 7.755 of this code, shall pay a Transportation System Maintenance (TSM) Fee to the city, in an amount to be determined by sections 7.765 and 7.770 of this code. (2) The purpose of the Transportation System Maintenance Fee is to provide stable and adequate funding to: (a) Operate, maintain, preserve and improve elements of the city's transportation system; and (b) Reduce the backlog of needed street repairs as measured by the city's annual pavement condition survey. TSM fee revenue shall be used, to the greatest practical extent, to preserve and maintain the existing street and bikeway system in the most cost effective manner. 7.755 Definitions. For purposes of sections 7.750 to 7.795 of this code, unless the context requires otherwise, words and phrases shall have the meaning ascribed to them in this section. In interpreting the meaning of words in a definition, other definitions of that word in this code may be considered. City manager. The city manager of the City of Eugene, or the city manager's designee. Dwellinq unit. A facility designed for permanent or semi-permanent occupancy by a single family and provided with minimum kitchen, sleeping and sanitary facilities. Non-residential use. Use of a premises for any use other than a dwelling unit or units. Person. An individual, trust, firm, joint stock company, joint venture, consortium, commercial entity, partnership, association, corporation, commission, state and any agency thereof, political subdivision of the state, interstate body or the federal government, including any agency thereof. Person responsible. The water account customer if the charges are billed with the water account billing, otherwise the person having possession or control of a premises. Premises. A parcel or portion of a parcel of land within the limits of the City of Eugene, with structures or other improvements on it, or upon Ordinance - 1 which construction or other activity occurs, the use of which generates usage of the transportation system. Residential use. Use of a premises exclusively as a dwelling unit. Transportation system. All transportation-related components located on city-owned property, city right-of-way, city easements, or which the city is contractually or legally obligated to operate and maintain, or for which the city has accepted responsibility under intergovernmental agreement, but that are not routinely funded by assessments or work that would otherwise be eligible for the improvement fee component of transportation System Development Charges including: (a) Existing streets, alleys, curbs and gutters, improvements and installations which are primarily for motor vehicle use. (b) Existing on-street and off-street and new off-street sidewalks, paths, improvements and installations, which are designated primarily for pedestrian use. (c) Existing on-street and off-street and new off-street paths improvements and installations, which are designated primarily for bicycle or other non-motor vehicle use. (d) Traffic calming devices on existing local streets, sidewalk access ramps on existing local streets, street lighting fixtures on existing local streets, and the stocking and planting of street trees on existing local streets, not to exceed 2 percent of the total fee paid in any year. Usa,qe of the city's transportation system. A measure of consumption of transportation system services resulting from movement of vehicles, people and goods across the city's transportation system as determined by the city manager. Water account. An active account under which a premises receives water services. Water account customer. The person in whose name a water service account exists and who is responsible for payment of the account. 7.760 Transportation System Maintenance Fees - Revenue. (1) All TSM fees collected by the city shall be used only for the purposes described in subsection (2) of section 7.750 of this code and related administrative costs, but shall not be used for capacity-enhancing street improvements. (2) The city manager shall make an annual report to the city council and budget committee of TSM fee revenues and the expenditure of the revenues during the preceding fiscal year. 7.765 Transportation System Maintenance Fee - Rates. (1) Ratemakin,q procedure. (a) Before proposing to impose or amend the TSM fee, the city manager shall conduct an investigation of the revenue needs of the city for the purposes listed in subsection (2) of section 7.750 of this code. Based on that investigation, and using the criteria set out below, the city manager shall develop the proposed TSM fee. Ordinance - 2 (b) Prior to the imposition or amendment of the TSM fee, the city manager shall give notice of the proposed rate or fee as provided in subsection (3) of section 2.020 of this code and, in addition, to the news media. (c) The notice of proposed fee shall state the current and proposed charge, the results of the city manager's investigation, and the time, place and manner in which interested persons may present their views on the intended action. (d) No earlier than ten days after the first publication of notice of the proposed fee, the city manager shall conduct a public hearing on the proposed fee. The city manager shall give interested persons a reasonable opportunity to submit data or views in writing on the proposed charge. (e) The city manager, on the basis of his or her investigation and the comments of interested persons, shall approve, modify or disallow the proposed fee by order. The order shall contain written findings and conclusions based on the standards set forth below. The city manager shall mail copies of the order to all persons who have submitted written or oral comments on the charge or who have requested a copy of the order. The city manager shall also provide copies of the order to the mayor and city councilors. Unless reviewed by the council, the order is final on the eleventh day after it is signed by the city manager. (f) At the request of a majority of the members of the council made within ten days of the city manager's order, the order, or any part thereof, shall be reviewed by the council. The council may conduct a public hearing on the proposed fee or review the order solely on the basis of the administrative record before the city manager. After this review, the council shall approve, modify or disallow the proposed fee. (2) Ratemakinq standards. (a) The amount or rate of the TSM fee shall be based upon the estimated usage of the city's transportation system generated by the use of the premises. The charges for use of the city transportation system shall distinguish between residential and non-residential premises, and shall further distinguish between classes of customers, both residential and non-residential, according to estimated usage of the city's transportation system. Each class of customers shall be assigned an appropriate rate, based on average estimated use of the city's transportation system by customers in that class. The classes of customers shall include, at a minimum, the following classifications of residential and non-residential customers: 1. Residential classifications: A. Single family detached; duplex; triplex; B. Apartment; C. Residential condominium or townhouse; D. Mobile home park; E. Retirement community; F. Congregate care facility. Ordinance - 3 2. Non-residential: A. Low transportation system usage; B. Medium transportation system usage; C. Medium-High transportation system usage; D. High transportation system usage. (b) Estimated usage for each classification of customers shall be based primarily on the estimated number of daily trips generated per dwelling unit, thousand gross square feet, or other unit of measure appropriate to the classification, using the sixth edition of the Institute of Transportation Engineers Trip Generation Manual, or a later edition of that manual or other comparable professional measurement of trip generation adopted by the city manager by rule adopted pursuant to sections 7.795 and 2.019 of this code. Estimated usage for each classification may also take into account additional data, including but not limited to pass-by trips, modes of transportation, heavy vehicle usage, transportation strategies that reduce or increase usage of the city's transportation system, targeted traffic studies and trip generation surveys. (c) In addition to the standards described in subsection (2) of this section, in developing or amending the rates, the city manager shall consider the following: 1. The amount charged for such service in the past; 2. The amounts charged or proposed to be charged by the City of Springfield and other providers for comparable purposes; 3. The revenue needed for the purposes listed in subsection (2) of section 7.750 of this code, taking into account all other revenue available for these purposes; 4. Other relevant adopted policies of the council; 5. The terms of any applicable intergovernmental agreement relating to the city's transportation system; and 6. Applicable federal or state regulations or conditions imposed as part of a federal or state grant or financial assistance agreement. (d) The city manager may provide, by rule, for a list of specific premise characteristics that the city manager has determined correlate with an increase or decrease in usage of the transportation system. The rule shall include the degree to which a fee will be adjusted for each specific premise characteristic. The list may include, but is not limited to, the number of licensed drivers at a residence, size of a residence, and trip-reduction strategies including Lane Transit District group pass program participation if such strategies are demonstrated to be effective. 7.770 Charges - Adjustments. (1) Any person responsible or the city manager may initiate a review of a charge to determine if there is a basis to modify the charge. The person responsible may apply to the city manager for a modification of the charge, and, if applicable, a credit for any excessive charges paid during all or part of the 12 months preceding the application. The application shall be on a form provided by the city and shall be Ordinance - 4 accompanied by the fee set by the city manager under section 2.020 of this code. The city manager shall approve or deny the application using the procedures and criteria set forth in this section. A review initiated by the city manager shall not require an application or fee from the person responsible. (2) The charge shall be modified, and the appropriate credit given, if the city manager finds that: (a) Actual usage of transportation system generated by the use of the premises differs from estimated usage to an extent that actual usage corresponds to the usage in a different customer class; (b) An error has been made in identification of the use or uses of a premises that affects the customer class assigned to the premises; or (c) An error has been made in calculating the number of dwelling units, thousand gross square feet, or other units of measure of the premises. (d) An error has been made in adjusting an individual fee pursuant to subsection (2)(d) of section 7.765 of this code. (3) Any modification given under this section shall continue until the city manager determines the premises no longer qualifies for the modification given. If the city manager determines the premises no longer qualifies for the modification, written notice of that determination shall be given to the person responsible. The city manager's determination may be appealed as provided in section 2.021 of this code. A copy of the decision on appeal shall be mailed to the applicant, parties who have requested a copy, and, if a reduction or elimination is ordered, to the billing agency. 7.775 Char.qes - Collection and Payment. (1) The city manager shall certify the TSM fees to be collected. Collection shall be performed by the city manager or any person or entity with whom the city manager contracts to perform those duties. (2) The TSM fee shall be imposed on a monthly basis and, if an agreement with a utility providing water services so provides, may be included with water account billings if a water account serves the premises. If no water account serves a premises, the charges shall be billed separately to the person responsible. (3) The person responsible for each premises shall be responsible for paying the charges. (4) Each person responsible for a premises shall be notified, in at least one annual billing for the service, of the rate or the amount of the charge and the allocation of revenue expected from application of the charge. 7.780 Charges - Delinquencies. The city manager or contracted person or entity collecting the charges shall enforce the collection of fees by any means of collection provided by the laws of the state and permitted by the charter and ordinances of the city, except that in no event shall electric or water service be discontinued for non-payment of this fee. Fees shall be collected monthly and if not paid on or before 10 days from and after the date the same shall become payable, shall be deemed to be delinquent. Any fee due which is not paid when due may be recovered in an action at law by the city. Ordinance - 5 7.785 Char,qes - Penalty for Nonpayment. (1) In the event a person responsible becomes delinquent in the payment of TSM fees, there shall be added to the charges a penalty in the amount of 10 percent of the delinquency and the total amount due shall bear interest at the rate established in section 2.022 of this code from the date of the delinquency. (2) In the event any suit or action is instituted to enforce this section, if the city is the prevailing party, the city shall be entitled to recover from the person sued reasonable attorney's fees at trial or upon appeal of such suit or action, in addition to all other sums provided by law. 7.790 Charges - Cost of Collection. The person or entity collecting the TSM fees may withhold from payments received a reasonable charge for actual costs of billing, collecting and remitting the fees. The charge shall be established annually by agreement between the city manager and the person or entity and shall be based on actual costs. 7.795 Administrative Requlations and Methodoloqy. The city manager may adopt and amend such rules and methodologies as are necessary for the administration of the duties required by sections 7.750 through 7.790 of this code, as provided in section 2.019 of this code. Section 2. The City Recorder, at the request of, or with the concurrence of the City Attorney, is authorized to administratively correct any reference errors contained herein or in other provisions of the Eugene Code, 1971, to the provisions added, amended or repealed herein. Section 3. The fees required by Section 7.750(1) shall cease 36 months after the fee is first imposed. Passed by the City Council this Approved by the Mayor this day of ,2004. ~ day of ,2004. City Recorder Mayor Ordinance - 6 ATTACHMENT D Transportation System Funding Project Overview of Individual Funding Options Brief Description General Obligation ("G.O.") bonds are backed by a property tax levy upon all property in of Funding the City. G.O. bonds must be approved by the voters. Option Precedence (prior General Obligation bonds are used extensively by local governments across the United Council history, States for a variety of purposes. The City currently has outstanding G.O. bonds issued other for the Hult Center garage, the airport expansion project and the public safety projects. jurisdictions' The City last issued G.O. bonds for transportation projects in 1974, with the issuance of practice, etc.) $3.3 million of Street and Sewer Project bonds. Examples of Oregon localities that have used G.O. bonds for transportation projects are the City of Salem, City of Lake Oswego and the City of Corvallis. Calculation Base The amount ora property tax levy for G.O. bonds depends on the desired capital and Typical Rates spending to be funded with the bonds. The levy calculation will be done annually during the budget process and it will take into account discounts and delinquencies in property tax payments, interest earnings on fund balances, and an Unappropriated Ending Fund Balance to cover any debt payments due during July through November. The rate will be based on the total levy amount divided by the total taxable assessed value for real and personal property in the City. Individual taxpayers will pay the tax rate times their individual assessed value. Estimated To fund $10 million of transportation projects with 20-year G.O. bonds, the City would Revenue Yield, need to levy approximately $1.1 million per year. This would cost approximately Administration/ $0.12/$1000 of assessed value in the first year, or about $17 for the average taxpayer. Enforcement Costs Property tax levies for G.O. bonds are exempt from the $10/$1000 of real market value tax rate cap for all general governments under Measure 5. Property taxes are administered by the County. They prepare the tax bills, collect the funds, and remit the appropriate amount to the City on a regular basis. Enforcement is done by both the County and the City in the foreclosure process. Legal Authority New or additional property taxes must be approved by a majority of the people voting in and Restrictions an election in November of an even-numbered year. In any other election, there must on Use also be at least a 50% turnout of voters (the double-majority requirement of Measure 50). G.O. bonds may only be used for "capital construction" and "capital improvements" but not for "maintenance and repairs, the need for which could be reasonably anticipated" The definition of maintenance and repairs includes an exception for "street and highway construction, overlay and reconstruction" Incidence (who The tax is paid by all property owners within City limits. Property owners include pays?) business and residences. Businesses may choose to pass the tax on to their customers. Fairness/Equity The property tax is a proportional tax on the value of real and personal property for both Issues businesses and residences. It does not take into account the ability of the taxpayer to pay the tax. There are numerous exemptions from the property tax designed to promote a variety of policy goals, including some designed to lessen the impact on low-income owners and tenants. Bond financing is a way to more closely match the users of a capital project with those that must pay for the project. Assessment of This funding source would generate a lump-sum, which would be spent over a period of Financial several years on various projects. Stability and Political The property tax is understandable to the voters (as opposed to a new form of user fee or Feasibility taxes), making it politically feasible from that standpoint. G.O. bond proposals have had mixed success in the Eugene area in recent years. There have been six G.O. bond proposals on the ballot from Eugene 1990, and two of those have passed (Public Safety and Parks & Open Spaces). Council members have expressed dissatisfaction with heavy reliance on property taxes in various forums in recent years. Potential This tax would increase the cost of owning a home or business, and potentially increase Economic the cost of leasing or renting a home or business, if the property owner passes on the tax Impacts increase. Consistency with Council has two financial policies around capital funding and debt issuance, both of Council Goals which are consistent with the use of G.O. bonds for funding transportation projects. and Policies Policy C.4 states that the City will secure a dedicated revenue source to fund general capital projects to the extent possible. Policy D.3 states that the use of G.O. bonds will be limited to major capital construction or improvements in support of general municipal services. Council goals include a desire to foster affordable housing. An additional property tax levy would be contrary to that goal, as it would raise the cost of housing. Other Several cities had G.O. bond proposals on the November ballot and none of them were Jurisdiction successful. The City of Salem had the largest proposal, at $12 million for restoration and Experiences resurfacing projects. They have been successful in the past in securing voter approval for $62 million of G.O. bonds for a variety of transportation projects. Subcommittee Conclusions and Recommendation Excerpt from "Transportation System Funding Interim Report," A report from the Eugene Budget Committee Citizen Subcommittee, dated June 2001 Property Taxes General Obligation (G.O.) Bonds Backed by a Property Tax Levy Subcommittee members expressed concern as to whether the City could generate voter support for a G.O. Bond or Local Option Levy, given the recent failure of the police and fire station ballot measures. It was also noted that renewal of the Library operating levy in two years would create competition on the ballot for a transportation funding tax levy. This concern was countered with the belief that voter opposition could be overcome by identifying specific improvements that would benefit residents in broad geographic areas and also by limiting the increase in the debt tax levy to specific amount. This is similar to the funding approach used by the City of Salem. The subcommittee also acknowledged that the City was very conservative in its debt practices and could afford to "leverage up" slightly for some priority funding issues. Another concern voiced by the subcommittee members was that only property owners would be responsible for paying for this funding, and not necessarily all users of the transportation system. Several subcommittee members expressed doubt as to whether G.O. bonds represented a stable, long- term funding source. The opinion was also expressed that the tax levy mechanism did not lend itself well to funding what essentially is a utility need. The subcommittee continued to examine this alternative, though the December survey showed that this alternative was rated as having a low likelihood of being political feasible. The subcommittee agreed that, regardless of the solution recommended, the Council would have a major task in educating the community about the importance of the need for street improvements. While this option was one of three that made it to the final stages of discussion for a potential funding package, it was the ultimate conclusion of the subcommittee that the City should not resort to G.O. bonds to resolve its transportation funding needs. The six subcommittee respondents assigned a low likelihood of political supportability to this revenue alternative. ATTACHMENT E Bonding Alternatives for Pavement Preservation At the September 27 work session, Council directed staff to look at bonding alternatives for funding the backlog of pavement preservation projects. There are two types of bond- ing alternatives discussed in this attachment: General Obligation ("G.O.") bonds and revenue bonds. General Obligation Bonds Background: Based on the City's adopted Financial Management Goals & Policies, voter-approved General Obligation Bonds would be an appropriate funding source for transportation projects. The policies state that G.O. Bonds are to be used for major capi- tal construction or improvements in support of general municipal services. G.O. bonds must be approved by voters, and approval is subject to the double-majority provisions of Measure 50. The double-majority requirements include an exception if the bond election is held in November of even-numbered years. The next opportunity for a non-double majority election is November 2006. G.O. bonds come with approval for a new revenue source - property taxes. The property tax levy for G.O. bonds is outside of the Measure 5 tax rate limits. G.O. bonds are considered net direct debt of the City. The Budget Committee adopted revised debt policies and debt limits in February 2004. Any G.O. bonds issued for trans- portation projects would have to comply with those policies and limits. Possible Option: One option for bonding transportation projects would be to issue G.O. bonds in a net amount equivalent to what the TSMF would raise over a period of time. For this alternative, it is assumed that the G.O. bond measure should raise a net of $3.6 million per year for a ten-year period. In order to do so, the City would have to ask voters for authority to issue a total of $36,755,000 of G.O. bonds. Due to IRS restric- tions, this amount would have to be issued in four separate series. G.O. bonds in the amount of $36,755,000 would raise net transportation project funding of $36 million, with the balance used for bond issuance costs. The chart below sets out information on the tax levy and the impact on net direct debt over the life of the G.O. bond issues to fund transportation projects. Estimated Tax Rate Estimated Cost to Net Direct Debt as a per $1000 of AV Average Taxpayer % of RMV* FY08 $0.14 $24 0.57% FY13 $0.20 $41 0.74% FY18 $0.25 $59 0.38% FY23 $0.17 $46 0.15% FY28 $0.08 $26 0.03% FY33 $0.03 $12 - FY36 (last year) $0.01 $3 - Average Over the Life of the Issues $0.15 $36 - *Includes projected issuance of $6.79 million for Civic Center amenities, $30 million for Parks, Recreation and Open Spaces, and $70 million for City Hall. As can be seen in the chart, the tax rate and cost to the average taxpayer would increase over time as the four bond issues were sold, and then decrease as the debt is paid off. The peak payment would occur in FY14 at about $62 for the average household. Simi- larly, the net direct debt as a percent of real market value would increase to a peak of 0.99% in FY09, which is just barely under the debt policy limit of 1.00%, and then would decrease as debt payments are made. Other Bonding Alternatives At the September 27 Council work session, the idea of issuing revenue bonds was also mentioned. In order to issue revenue bonds, the City would have to have an available revenue source to repay the bonds, such as an increased gas tax, TSMF or other source. It has been suggested that it might be prudent to issue revenue bonds as a way to either (i) speed up the volume of projects completed in a given period of time; or (ii) legally con- strain future Councils from making changes in the kinds of projects the new revenue source is used to fund. Staff analyzed the possibility of using revenue bonds backed by any new revenue source to try to decrease the backlog faster. For that analysis, staff compared a revenue stream used to complete projects on a pay-as-you-go basis versus a revenue stream that is par- tially used to pay debt service on revenue bonds. At the end of 15 years, the backlog using pay-as-you-go was about $4 million less than the backlog if the revenues were used to repay bonds. This means that issuing revenue bonds to reduce the backlog faster would not work from a financial perspective over a 15-year period because some of the revenues would be used to pay interest and bond issuance costs instead of paying for preservation projects. Additionally, given the constraints on the actual amount of pro- jects that could conceivably be completed in a given year by staff and the construction community and the community's intolerance for having too many streets under construc- tion at any given time, it is unlikely that an extremely accelerated program (for example, doing all the repair work within five years) would be successful. The other reason mentioned for issuing revenue bonds for transportation projects was that some people thought this method might legally prevent future City Councils from chang- ing the use of the revenue to back the bonds. This is not true because of the practicalities of issuing bonds. Although one source of revenue may be pledged to repay bonds, it is not necessary for an entity to actually use that source of funds to repay the bonds if there is another source available. This is the case for the City and the library bonds - the City's General Fund has been pledged to repay the bonds, but since there have been urban renewal funds available to pay the debt service, the General Fund has not been needed to make payments. Although investors care a great deal about the revenue source pledged to repay the bonds, once the bonds are issued, they are indifferent to the actual revenue used to repay the bonds, as long as they get paid. Therefore, if the City Council pledged a new source of revenue to repay bonds, it might be possible for a future City Council to determine that an alternate revenue source should be used to repay the bonds instead, and use the original revenue source for something other than originally intended. Given these constraints on the use of revenue bonds, staff does not believe that the use of revenue bonds would be financially prudent, nor would it achieve the goals stated for the use of bonds.