HomeMy WebLinkAboutItem 5 - PH/Ord.on Trans.FundngEUGENE CITY COUNCIL
AGENDA ITEM SUMMARY
Public Hearing: An Ordinance Concerning Motor Vehicle Fuel Dealer's Business
Licenses; and Amending Sections 3.467, 3.474, 3.480, 3.483, and 3.484 of the
Eugene Code, 1971
Meeting Date: November 22, 2004 Agenda Item Number: 5
Department: Public Works Staff Contact: Kurt Corey
www. cl. eugene, or. us Contact Telephone Number: 682-5241
ISSUE STATEMENT
This public hearing provides an opportunity for council to hear input from the community with regard to
proposed amendments to the Eugene Code concerning the motor vehicle fuel dealer's business license
tax. The principal change council is currently considering is an increase in the Business License Tax on
Motor Vehicle Fuel Dealers from the current 3-cent level. The purpose of this increase would be to
generate additional annual revenue to address critical pavement preservation needs.
BACKGROUND
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 January 27, 2003, the local motor vehicle fuel tax ("fuel tax") was approved by the council at
the 3-cent level.
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.
On October 27, 2004, the council reviewed and discussed the two draft ordinances and also reviewed
bonding alternatives for funding the backlog of pavement preservation projects. At that meeting, the
council directed that the amendments to the fuel tax code be moved forward to public hearing with no
amount specified on the level of tax at this time. The council further determined by majority vote to
discontinue efforts to establish a transportation system maintenance fee.
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The Pavement Preservation Funding Need and Estimated Revenue Yields
The implementation of a 3-cent local motor vehicle fuel tax in August 2003, together with the
reimbursement component of the transportation SDC and the transfer from Lane County of new OTIA
II! maintenance and preservation monies, has allowed the City to begin addressing the significant
backlog of pavement preservation projects. However, this backlog 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 to ensure the efficient and safe operation of the local transportation system.
In its report to the council in October 2001, the Citizen Budget Subcommittee on Transportation System
Funding determined that the appropriate level of new revenue to provide adequate funding for Eugene's
transportation system was $9 million per year, with $8.5 for pavement preservation and another
$500,000 for the off-street bicycle system and traffic calming elements. This funding level of $8.5
million for the pavement preservation program 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 disruption to the transportation system and to the community due to construction.
Using the most updated information on actual local fuel tax collections, staff estimates that a Eugene
fuel tax generates annual revenue of approximately $725,000 per one cent of tax. This is somewhat
higher than initial yield estimates for this revenue source but is an accurate reflection of Eugene's first
14-months of actual collections. Extrapolating this data to various levels of tax, Eugene could anticipate
the following total revenue yields at the various tax levels shown:
Motor Vehicle Estimated Annual
Fuel Tax Level Revenue Yield
3 cents (current) $2,175,000
5 cents (2-cent increase) $3,625,000
7 cents (4-cent increase) $5,250,000
10 cents (7-cent increase) $7,250,000
In addition to the current 3-cent fuel tax, dedicated pavement preservation revenues from transportation
reimbursement SDCs (estimated at $500,000 per year) and from the new County/City OTIA II! revenue
sharing agreement (estimated at approximately $1.0 million per year through FY06) are expected to
provide around $1.5 million per year in dedicated pavement preservation funding. To address the $7
million remaining pavement preservation revenue gap with a local motor vehicle fuel tax alone would
require that the council adopt a local fuel tax in the 1 O-cent-per-gallon range. The goal of revenue
generation aside, other fiscal and public policies which may weigh in this decision are outlined below.
Other Considerations, Goals and Principles
Diversification of Revenue - One of the Guiding Principles used by the Citizen Budget Subcommittee in
the development of its recommendation for new, locally-controlled revenue sources for transportation
funding was the principle of diversification of revenue sources. The concept adhered to by the
subcommittee was that an overall funding strategy for transportation system service needs should
include multiple funding sources which will adequately address the full range of identified
transportation system service needs. For that reason, the subcommittee was reluctant to consider
transportation funding recommendations which relied on only one primary source of revenue. This
resulted in a recommendation by the subcommittee for a combination funding package consisting of a
transportation utility fee and a small local motor vehicle fuel tax.
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Another concern discussed by the subcommittee with regard to relying on a motor vehicle fuel tax as the
primary source of locally-controlled transportation funding was the fact that historically, and across the
nation, motor fuel taxes have been a slow-growing revenue source that has not proved able to keep up
with funding needs. The level of fuel tax revenue generated is subject to fluctuations reflecting changes
in consumer consumption patterns as well as newer, more energy-efficient motor vehicle fuel sources
which reduce the overall volume of fuel sales.
Another consideration in a discussion of relying on the motor vehicle fuel tax as the primary source of
locally-controlled revenue for transportation funding is the fact that the City's revenue objective with
respect to this tax (i.e., generating more funding) may conflict with other public policy goals--such as
federal, state and local policies and transportation plans aimed at reducing reliance on the automobile by
increasing other transportation choices available in the region.
Equity with Other Local Jurisdictions - In previous discussions by both the City Council and the Citizen
Budget Subcommittee on Transportation System Funding, there was a concern expressed that, as much
as possible, a "level playing field" be maintained with other local jurisdictions with regard to the level of
the local fuel tax. At this time, Springfield is not considering additional increases to its local fuel tax,
primarily because Springfield is achieving its initial revenue target, which is providing sufficient
funding for that city to manage its relatively smaller backlog of pavement preservation projects.
Currently, no other local jurisdiction in Oregon is administering a local motor vehicle fuel tax in excess
of 3 cents, although nearly a dozen cities and counties have enacted such ordinances.
Members of the Budget Subcommittee and the council have expressed concern in the past about the
potential for a several-cent difference in Eugene's fuel tax from that imposed by neighboring
jurisdictions to both undermine Eugene' s revenue stream due to potential "market flight," and at the
same time to also create a competitive disadvantage for Eugene fuel retailers and businesses. In those
discussions, it was generally acknowledged that a relatively small difference in fuel tax levels (2-to-3
cents) would probably not have much impact on consumer choices around fuel purchases, given the
existing differential in retail gas prices at various service stations in the metropolitan area.
There has also been discussion at the council level about the possibility of Lane County adopting a
county-wide motor vehicle fuel tax to provide transportation system funding for Lane County cities. A
county-wide fuel tax would eliminate the issue of inequities in the level of fuel taxes among local
jurisdictions and would also provide a locally-controlled revenue source for Lane County municipalities
which are struggling to find ways to address this high-priority funding need. However, in the most
recent discussions of this topic, at a regional transportation summit convened by the Lane County Board
of County Commissioners in December 2003, the board chose not to pursue exploration at this time for
either a county-wide motor vehicle fuel tax or a county-wide motor vehicle registration fee.
Proposed Revisions to the Eugene Code
The proposed revisions to the Eugene Code concerning motor vehicle fuel tax are outlined in
Attachment A. The first of the proposed revisions would increase the level of the business license tax
on motor vehicle fuel dealers by an additional amount yet to be specified by council. Staff's discussions
with the Fuels Tax Group in Salem suggest that a minimum of 30 to 60 days from the date of adoption
would be required for implementation of the increased fuel tax in order to give adequate notice to the
dealers and to make appropriate modifications to the reporting forms and instructions.
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Additionally, in consultation with the City's tax administrator (the Oregon Department of Transportation
Fuels Tax Group), staff is proposing a few housekeeping amendments to the code. The first proposed
housekeeping 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 expands the language for
the exemption of exported fuels to include export transactions in any quantity, since the intention was to
not tax any exported fuel on the basis that such fuel would not ultimately be used in propelling a motor
vehicle on Eugene city streets. The third 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. These proposed changes are intended to clarify
council's intent around the application of the city fuel tax and also to help maintain consistency between
the administration of the city fuel tax and the state tax.
Additional Considerations Regarding the Taxing of Diesel Fuel
When the council enacted the local fuel tax in 2003, diesel fuel was included among the motor vehicle
fuels to be taxed in an effort to equitably distribute the local fuel tax burden between automobile and
truck traffic. As adopted, the ordinance applies to all motor vehicle diesel fuel, including fuel used in
vehicles which are also subject to the State's "weight-mile tax". The State, by contrast, exempts from its
fuel tax those vehicles with a gross vehicle weight of over 26,000 pounds. Instead, such vehicles are
subject to a separate tax calculation based on the weight of the vehicles and the number of miles traveled
in the state (the "weight-mile" tax).
In July of this year, the Springfield City Council considered testimony showing that a relatively large
number of companies with bulk diesel fueling facilities which service their own fleets within the
Springfield city limits traveled only a minor proportion of their mileage on Springfield streets. As a
result, it was concluded that the local companies operating these vehicles were likely paying a
disproportionate share of the local fuel tax in that city, compared to the miles driven on local streets.
The Springfield council subsequently adopted an amendment to its fuel tax ordinance (see Attachment
B) that authorized an 80% refund of city tax for diesel fuel sold for vehicles which were also subject to
the state weight-mile tax and were fueled at their owner's own bulk fueling facility within the city limits.
A number of local companies in Eugene also have bulk diesel fuel facilities servicing their own fleets
within the Eugene city limits. Some of these companies have compiled data to support their assertion
that the majority of the miles driven by their diesel-fueled fleets are not driven on Eugene streets. As
was the situation in Springfield, this results in a disproportionate tax burden to these companies. Like
the bulk fuelers in Springfield, these local business owners are concerned about the competitive
disadvantage created by Eugene's fuel tax when applied to their weight-mile fleets which are being
driven primarily outside the city limits of Eugene.
In addition to revisions previously discussed, the council could consider adoption of an amendment,
similar to Springfield' s, granting partial tax refunds to holders of weight receipts (i.e., those paying state
weight-mile taxes) on motor vehicle fuel purchased in bulk for distribution at the holder's own fueling
facility within the city limits. The maximum financial impact of a refund at the 80% level is estimated
to be in the $20,000 to $25,000 range for each level of 1-cent fuel tax imposed in Eugene--or
approximately $60,000 to $75,000 annually at the current 3-cent tax level. In all likelihood, the revenue
impact of such refunds would be significantly less, as not all diesel fuel sales are made to bulk fuelers.
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RELATED CITY POLICIES
The council' s Vision and Goals Statement with respect to Fair, Stable and Adequate Financial
Resources reaffirms 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 maintain 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 and Poficy, 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
This is a public hearing and, as such, the council is not required to take any action, as action is currently
scheduled for December 6. However, the council could choose to do the following:
Option 1: The council could choose to make no changes to the Eugene Code concerning business
license tax on motor vehicle fuel dealers and decline to take any action on December 6.
Option 2: The council could direct the City Manager to move forward with the proposed amendments
to the Eugene Code, increasing the Business License Tax on Motor Vehicle Fuel Dealers by
an additional [amount to be specified] cents;
Option 3: The council could choose not to specify the exact amount of the fuel tax in the amending
ordinance but, instead, make provision in the ordinance to allow the fuel tax level to be
adjusted administratively to support the pavement preservation funding target determined
each year in the annual budget process and approved by council; and/or
Option 4: The council could provide direction for additional amendments prior to adoption, including
consideration of a refund provision for bulk fueling facilities servicing vehicles already
subject to the weight-mile tax.
CITY MANAGER'S RECOMMENDATION
The City Manager recommends implementation of a 2-cent increase to the existing local motor fuel tax
and implementation of a provision for 80% refunds to the specified diesel users. The scheduled date for
action on the ordinance is December 6.
SUGGESTED MOTION
I move to direct the City Manager to pursue Options 2 and 4, moving forward the proposed amendments
to the Eugene Code and increasing the motor vehicle fuel tax by 2 cents, and also proposing
amendments to the code to authorize an 80% refund of city tax for fuel sold for vehicles fueled at their
owner's own facility which are also subject to the state weight-mile tax.
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ATTACHMENTS
A. Proposed amendments to the Eugene Code (Concerning a Business License Tax on Motor Vehicle
Fuel Dealers)
B. Springfield City Council ordinance, adopted July 26, 2004, authorizing partial refunds of motor
vehicle fuel tax for holders of a weight receipt
FOR MORE INFORMATION
Staff Contact: Kurt Corey
Telephone: 682-5241
Staff E-Mail: kurt. a. corey~ci, eugene, or. us
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ATTACHMENT A
ORDINANCE NO.
AN ORDINANCE CONCERNING MOTOR VEHICLE FUEL DEALER'S
BUSINESS LICENSES; AND AMENDING SECTIONS 3.467, 3.474,
3.480, 3.483, AND 3.484 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)]
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 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.
($7) 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. Subsections (1)(b) and (6) of Section 3.480 of the Eugene Code,
1971, are amended to provide:
3.480 Exemption of Export Fuel.
(1) The license tax imposed by section 3.466 shall not be imposed on
motor vehicle fuel:
(b) Sold by a dealer [;"'
for export by the purchaser to an area or areas outside the city
in containers other than the fuel tank of a motor vehicle, but
every dealer shall be required to report such exports and sales
to the city in such detail as may be required.
(6) In support of any exemption from taxes on account of sales of motor
vehicle fuel [~'-' ~'-"~,,~'~. ,°' ..... +~+~'~o '-'~: :nn ,-,o.. ..... ,,~ool for export by
the purchaser, the dealer shall retain in his/her files for at least three
years, an export certificate executed by the purchaser in such form and
containing such information as is prescribed by the tax administrator.
This certificate shall be prima facie evidence of the exportation of the
motor vehicle fuel to which it applies only if accepted by the dealer in
good faith.
Section 4. Section 3.483 of the Eugene Code, 1971, is amended to provide:
3.483 Refunds. Refunds of tax on motor vehicle fuel will be made pursuant to
[applic-al~] any refund provisions of Chapter 319 of the Oregon Revised
Statutes, including but not limited to ORS 319.280 and 319.831. Claim
forms for refunds may be obtained from the Tax Administrator's office.
Section 5. Section 3.484 of the Eugene Code, 1971, is amended to provide:
3.484 Examinations and Investiqations. Pursuant to section 2.019 of this code,
the tax administrator, or duly authorized agents, may make any examination
Ordinance - 2
of accounts, records, stocks, facilities and equipment of dealers, service
stations and other persons engaged in storing, selling or distributing motor
vehicle fuel or other petroleum product or products within this city, and such
other investigations as it considers necessary in carrying out the provisions
of sections 3.465 through 3.489. If the examinations or investigations
disclose that any reports of dealers or other persons theretofore filed with the
tax administrator pursuant to the requirements herein, have shown
incorrectly the amount of gallonage of motor vehicle fuel distributed or the tax
accruing thereon, the tax administrator may make such changes in
subsequent reports and payments of such dealers or other persons, or may
make such refunds, as may be necessary to correct the errors disclosed by
its examinations or investigation. The dealer shall reimburse the city for the
reasonable costs of the examination or investigation if the action discloses
that the dealer paid 95 percent or less of the tax owing for the period of the
examination or investigation. In the event that such an examination or
investigation results in an assessment by and an additional payment due to
the city, such additional payment shall be subject to interest at the rate of [~8]
.0329 percent per [yea~] day from the date the original tax payment was due.
Section 6. 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 - 3
ATTACHMENT B
ORDINANCE NO.
AN ORDINANCE AUTHORIZING PARTIAL REFUNDS FROM THE
BUSINESS LICENSE TAX ON MOTOR VEHICLE FUEL DEALERS FOR
PERSONS CERTIFIED BY THE CITY FOR SPECIAL REFUNDS,
PROVIDING FOR ADMINISTRATION, ENFORCEMENT AND
COLLECTION OF THE TAX; AMENDING SECTIONS 7.500 AND 7.536
OF THE SPRINGFIELD MUNICIPAL CODE, AND ESTABLISHING AN
EFFECTIVE DATE.
THE COMMON COUNCIL OF THE CITY OF SPRINGFIELD FINDS AS
FOLLOWS:
A. When the Council enacted a local fuel tax in 2003 it included diesel fuel
among the fuels to be taxed.
B. The Council included diesel to assure that there was an attempt to
equitably apportion the burden of the local fuel tax among both
automobile and truck traffic. As enacted the ordinance applies to all
vehicles using diesel fuel, including those subject to the weight-mile tax.
Vehicles subject to the weight-mile tax are exempt from the State fuel tax.
C. Staff has advised the Council that a relatively large number of companies
have bulk diesel fuel facilities serving their own fleets within the
Springfield City limits and that, as a result, these companies may be
paying a disproportionate portion of the local fuel tax, when compared to
other cities in the state having local fuel taxes.
D. Information provided to the staff indicates that these vehicles are subject
to the weight-mile tax and travel only a minor portion of their mileage on
City states. Accordingly, the Council finds and determines that operators
of the vehicles should be relieved of a major portion of the local fuel tax.
E. In consideration of the relative impact of the vehicles on City Streets,
given their weight and size, the relatively small portion of their mileage
traveled on City streets, and the fact that the vehicles described in Finding
C are subject to the weight-mile tax the Council finds and determines that
all but 20 percent of the fuel tax collected should be eligible for refund.
F. It would be confusing and potentially create an excessive refund if
vehicles eligible for this special refund program were also permitted to
claim refunds under ORS Chapter 319 for off-road uses, since operators of
off-road vehicles can purchase dyed fuel for which no tax is assessed.
NOW, THEREFORE, THE COMMON COUNCIL OF THE CITY OF SPRINGFIELD
ORDAINS AS FOLLOWS:
Section 1. Section 7.500 of the Springfield Municipal Code, as amended, is further
amended by adding thereto a definition for the term "weight receipt" to read as follows:
"Weight Receipt. A receipt issued by the Oregon Department of Transportation, under
authority of ORS 825.450, or any successor provision of law, or a temporary receipt
issued under authority of ORS 825.470, or any successor provision of law authorizing the
holder to use fuel in this state."
Section 2. Section 7.536 of the Springfield Municipal Code, as amended, is further
amended as follows:
"Refunds. (A) Refunds will be made pursuant to applicable Chapter 319 of the Oregon
Revised laws. Claim forms for refunds may be obtained from the Tax
Administrator's office.
(B) (1) ,,Is an alternative to refunds provided under subdivision (g), holders of a
weight receipt as defined in Section 7. 500, may, not more frequently than
quarterly, receive a refund of SO percent of the tax imposed hereunder on
motor vehicle fuel purchased on or after September 1, 2004, in bulk for
distribution at the holder's own facility located within the City.
(2) Upon apphcation by the holder of a weight receipt, the City shall certify
that a holder of a weight receipt is qualified for the refund provided
herein. Such certificate shall identify the name of the holder and the
address of the bulk fuehngfacihty which is eligible for the refund.
(3) ,,Ill claims for refund under this subdivision (B) shall be filed not more
than 15 months after the date the fuel was purchased. The minimum claim
for refund filed under this subdivision (B) shall be not less than $25.00."
Section 3. If any portion of this ordinance is for any reason held invalid or
unconstitutional by a court of competent jurisdiction, such portion shall be deemed a separate,
distinct and independent provision and such holding shall not affect the validity of the remaining
portions of this ordinance.
Section 4. This Ordinance shall become effective thirty days after its adoption by the
Council and approval by the Mayor.
Passed by the City Council this Approved by the Mayor this
__day of ,2004 __day of .,2004
City Recorder Mayor