HomeMy WebLinkAboutItem 3: Ordinance Concerning Business License Tax on Motor Vehicle Fuel Dealers
ECC
UGENE ITY OUNCIL
AIS
GENDA TEM UMMARY
Action: An Ordinance Concerning Motor Vehicle Fuel Dealer’s Business Licenses;
Repealing Section 3 of Ordinance 20337; and Amending Section 3.467
of the Eugene Code, 1971
Meeting Date: May 29, 2007 Agenda Item: 3
Department: Public Works Staff Contact: Kurt Corey
www.eugene-or.gov Contact Telephone Number: 682-5241
ISSUE STATEMENT
This action would adopt an ordinance amending sections of the Eugene City Code dealing with the
Business License Tax on Motor Vehicle Fuel Dealers. The two proposed amendments would increase
by three cents the existing Eugene motor vehicle fuel tax rate (to eight cents per gallon) and, at the same
time, repeal the sunset provision on the two-cent fuel tax rate increase enacted in 2005.
Eugene lacks adequate funding to operate, maintain, and preserve its local street system. For FY08, the
annual deficit for operation and maintenance activities in the Road Fund is projected to exceed $1.6
million, and the backlog of unfunded capital street repairs has grown to over $170 million. On May 23,
2007, the Eugene City Council approved the recommendations of the Council Subcommittee on
Transportation Funding Solutions and directed implementation of those recommendations, including
tonight’s proposed action to increase Eugene’s motor vehicle fuel tax by three cents per gallon to
generate an additional $2 million annually to operate, maintain and preserve the city’s street system.
BACKGROUND
Previous Council Action and History
The city’s first motor vehicle fuel tax was enacted in January 2003, based on the recommendation from
the Citizen’s Subcommittee on Transportation System Funding. Its recommendation was for 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. That first fuel tax was implemented at three cents per gallon and has generated about $2 million
per year since 2003. The other revenue mechanism in that funding recommendation, a street utility fee
designed to generate an additional $6.5-$7 million per year, was adopted but later repealed before it
could be fully implemented.
A two-cent increase to the motor vehicle fuel tax was approved in January 2005, along with a sunset
provision that would cause the tax to revert to three cents per gallon on February 29, 2008. The council
added the sunset provision, to be effective in the third year of the increase, citing the hope that three
years would allow sufficient time to complete a comprehensive review of available funding options in
the effort to develop a more permanent funding strategy for transportation system needs.
L:\CMO\2007 Council Agendas\M070529\S0705293.DOC
On September 26, 2005, the council reviewed and discussed the financial status and fund forecast for
Eugene’s Road Fund. Based on that discussion, the council directed the City Manager to develop a
FY07 Road Fund budget at the current service level and to bring back a proposal for a new revenue
funding package which would address the projected ongoing operating deficit in street operations and
maintenance, in addition to generating additional revenue for funding the backlog of unfunded projects
in the pavement preservation program.
On January 22, 2007, the City Council agreed to the formation of a council subcommittee, comprised of
four councilors, to study transportation funding options and to bring back within three months a
recommendation for a solution or solutions meeting certain specific criteria to adequately fund the
transportation system. At that same meeting, the council directed the City Manager to proceed with a
public hearing on proposed amendments to City Code which would increase the Business License Tax
on Motor Vehicle Fuel Dealers by three cents per gallon to the eight-cent level and repeal the sunset
provision on the two-cent fuel tax rate increase enacted in 2005. That public hearing was conducted on
February 20, 2007, and the minutes from that meeting are included here as Attachment B.
On May 23, 2007, the Council Subcommittee on Transportation Funding Solutions presented its report
and recommendations to the full council. At that meeting, the council approved a general course of
action that is intended to lead to the implementation of a variety of strategies, including a capital local
levy, a street utility fee based on parking, a solid waste collection surcharge, a street and bike path
lighting fee, and this proposed increase to the current local motor vehicle fuel tax. The proposed
revisions to the Eugene Code with regard to the motor vehicle fuel tax are set out in Attachment A, the
proposed ordinance.
Funding Needs, Legal Analyses and Implementation Issues
Increasing the local motor vehicle fuel tax rate by three cents to the eight-cent level would provide an
additional estimated $2 million annually. Together with three other new proposed fees and a capital
local option levy recommended by the Council Subcommittee, this package solution would generate
new revenue of nearly $16 million per year to address the projected ongoing operating deficits in the
Road Fund operations and maintenance activities and provide stable and adequate funding for the $170
million backlog of unfunded capital street repairs.
Road Operations and Maintenance Needs - The City’s Road Fund accounts for the operation and
maintenance of Eugene’s street system. Due to flat growth in state revenues and loss of historical
county road partnership revenues, the Road Fund is expected to have an annual operating deficit of over
$1.6 million for FY08 (growing to $2.2 million by FY10) for ongoing activities such as street lighting,
pothole patching, street tree maintenance, signing and striping of city streets.
Capital Pavement Preservation Needs - The current five-cent gas tax has allowed the City to complete
nearly $12.9 million in street preservation project work since 2003, with additional contracts in progress.
This year, more than 17.4 lane miles of slurry seal projects and 20.5 lane miles of rehabilitation projects
are scheduled, including the overlay of portions of 18th Avenue, Chambers Street and Bailey Hill Road.
In spite of these accomplishments, the backlog of needed repair work continues to grow in the face of
rapidly rising construction costs and insufficient revenues. In late 2001, the City was facing an
estimated $67 million backlog in pavement preservation work. By last month, the estimated cost of that
L:\CMO\2007 Council Agendas\M070529\S0705293.DOC
backlog had grown to nearly $170 million and, with no new funding, is projected to grow to $282
million within the next 10 years. However, with additional pavement preservation funding as
recommended by the Council Subcommittee last week, the City could fully fund and stabilize the annual
overlay program and begin to make considerable progress in reducing the substantial backlog of
reconstruction projects.
Legal Uses of Revenue - The restrictions on the use of local fuel tax revenues for street system
operations, maintenance and preservation is provided in Eugene City Code 3.489 (2): “The net revenue
shall be used only for the reconstruction, repair, maintenance, operation and preservation of city-owned
roads and streets within the city, roads and streets for which the city is contractually or legally obligated
to operate and maintain, or roads and streets for which the city has accepted responsibility under
intergovernmental agreement. No revenue shall be used for capacity-enhancing street improvements.”
Use of local motor vehicle fuel taxes is also limited by the Oregon Constitution (Article IX, Section 3a),
which states that “revenue from taxes on motor vehicle use and fuel … shall be used exclusively for the
construction, reconstruction, improvement, repair, maintenance, operation and use of public highways,
roads, streets and roadside rest areas in this state.”
The proposed eight-cent per gallon local motor vehicle fuel tax is one component in a recommended
package solution to adequately fund Eugene’s transportation system for a variety of users. To ensure
continuation of a reliable fuel tax revenue stream to support ongoing street operations, maintenance, and
preservation, staff also recommends that the council repeal the sunset provision enacted in 2005, which
would otherwise cause the tax rate to revert to the three-cent level as of February 29, 2008.
Implementation Timeframe - Staff discussions with the City’s tax administrator, the ODOT 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.
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.” In January 2007, council identified a new council goal to “Develop
mechanisms to adequately fund our transportation system for cars, trucks, bikes, and pedestrians
including maintenance and preservation and capital reconstruction.” Additionally, the City’s Financial
Management Goals and Policy, 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
The council has the following options:
Option 1: The council could decline to take action on the ordinance, choosing to make no changes to
the Eugene Code concerning business license tax on motor vehicle fuel dealers.
L:\CMO\2007 Council Agendas\M070529\S0705293.DOC
Option 2: The council could divide the ordinance and approve one or the other of the proposed
amendments.
Option 3: The council could approve both of the proposed amendments to the Eugene Code, including
an increase to the Business License Tax on Motor Vehicle Fuel Dealers of an additional three
cents and repeal of the sunset provision enacted in 2005.
CITY MANAGER’S RECOMMENDATION
The City Manager recommends Option 3 for the adoption of these proposed amendments to the motor
vehicle fuel tax code to provide an additional estimated $2 million annually as part of a comprehensive
funding package recommended by the Council Subcommittee on Transportation Funding Solutions.
SUGGESTED MOTION
Move to adopt an ordinance concerning motor vehicle fuel dealer’s business licenses; repealing Section
3 of Ordinance 20337; and amending Section 3.467 of the Eugene Code, 1971.
ATTACHMENTS
A. Proposed amendments to the Eugene City Code (Concerning a Business License Tax on Motor
Vehicle Fuel Dealers)
B. Minutes from Public Hearing held February 20, 2007
FOR MORE INFORMATION
Staff Contact: Kurt Corey
Telephone: 682-5241
Staff E-Mail: kurt.a.corey@ci.eugene.or.us
L:\CMO\2007 Council Agendas\M070529\S0705293.DOC
ATTACHMENT A
ORDINANCE NO. __________
AN ORDINANCE CONCERNING MOTOR VEHICLE FUEL DEALER’S
BUSINESS LICENSES; REPEALING SECTION 3 OF ORDINANCE
20337; AND AMENDING SECTION 3.467 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 $.0[5 (five] 8 (eight 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 of Ordinance 20337, passed by the City Council on
January 24, 2005 and approved by the Mayor on January 26, 2005 is repealed as of
the effective date of this Ordinance.
Section 3.
This Ordinance shall take effect on July 1, 2007.
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 ____________, 2007 ____ day of ______________, 2007
___________________________ _____________________________
City Recorder Mayor
Ordinance