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HomeMy WebLinkAboutItem C: Strategies for Transportation Funding ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Work Session: Strategies for Long-Term Financial Stability for Transportation System Operations, Maintenance, and Preservation Meeting Date: February 15, 2006 Agenda Item: C Department: Public Works Staff Contact: Kurt Corey www.eugene-or.gov Contact Telephone Number: 682-5241 ISSUE STATEMENT This work session provides an opportunity for the council to review and discuss potential revenue strategies to address not only the projected ongoing operating deficit in street operations and maintenance (O&M) but to also generate additional revenue to be dedicated to the backlog of unfunded projects in the Pavement Preservation Program. BACKGROUND In September 2001, the Citizen Budget Subcommittee on Transportation System Funding presented its “Final Recommendation on Transportation Funding Issues” which contained among its conclusions the assertion that “In the face of projected O&M shortfalls and service reductions beginning in FY03, ensuring adequate funding for the operation and maintenance activities of the City’s transportation system is absolutely essential.” At that time, the Citizen Budget Subcommittee also 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, which included $8.5 million for the backlog of road preservation work plus an additional $425,000 for off-street bike paths. 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 January 24, 2005, the council approved a two-cent increase to the city’s local motor vehicle fuel tax, which has allowed the City to continue to make progress on the backlog of pavement preservation projects in Eugene. This tax increase was approved with a sunset date of February 29, 2008, at which time the tax is scheduled to revert to $.03 per gallon. L:\CMO\2006 Council Agendas\M060215\S060215C.doc On September 26, 2005, the council reviewed and discussed the financial status and fund forecast for Eugene’s Road Fund. At that time, the council reviewed an illustrative list of program reductions and eliminations which would be required if a strategy of service reductions alone were employed to correct the structural deficiency between Road Fund revenues and expenditures and to eliminate the $2 million projected annual deficit. 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 not only address the projected ongoing operating deficit in street operations and maintenance but which would also generate additional revenue to be dedicated to the backlog of unfunded projects in the Pavement Preservation Program. At that same work session, staff was directed to come back with a list of the new street-related projects included in the FY2006-2011 Capital Improvement Program (CIP) which were expected to be funded with money that could have otherwise been used for operations, maintenance and preservation of the street system. That information is being provided here as Attachment A. In summary, within the framework of existing City Council policies, Metropolitan Policy Committee (MPC) policies, State law, Federal legislation and intergovernmental restrictions, the only projects in the FY2006-2011 CIP funded with monies that could otherwise have been used for street operations, maintenance and preservation (OM&P) are the $30,000 annual allocation ($180,000 over the six-year CIP) of General Fund monies which are directed by City Council policy to traffic calming. Financial and/or Resource Considerations Road Fund - The Road Fund accounts for operations and maintenance (O&M) of the city’s street system. The majority of the Road Fund revenue comes from Eugene’s share of the State Highway Trust Fund, which is derived from Oregon motor vehicle fuel taxes as well as state motor vehicle registration fees and weight-mile taxes. Revenue growth in the State Highway Trust Fund has been relatively flat since FY00, when the city was receiving about $6.0 million per year in allocations. The projected revenue for FY07 is less than $6.2 million, which equates to only a 3% growth over the entire seven-year period. The second major source of revenue for this fund is the County/City Road Partnership Agreement that once contributed $2.5 million per year and more recently has been providing about $1.2 million in annual street maintenance funding to Eugene. The current agreement expires in FY07, and the Board of County Commissioners has adopted a five-year Capital Improvement Plan which discontinues the partnership payments to Lane County cities after FY07, which means that Eugene would lose over $1 million in annual street maintenance funding beginning in FY08. In the meantime, Eugene continues to look for opportunities to cooperate with the County in identifying sustainable mechanisms and agreements for funding OM&P for all of the regional transportation system. Cost reductions of $850,000 were implemented in the Road Fund in FY04, primarily through elimination of the in-house street overlay program and organizational restructuring and consolidations of Public Works divisions and work crews, which resulted in the elimination of supervisory positions. These cost reductions were implemented as a partial remedy for stabilizing the O&M activities for the city’s road system, with the hope that additional revenue sources for O&M activities would eventually be realized as an outcome of the council’s ongoing work with transportation funding. However, insufficient additional resources have been identified to date, while at the same time the fund continues to experience growth in operating costs. In FY07, the Road Fund is expected to generate an operating deficit of nearly $540,000 in the course of providing basic O&M activities such as street lighting, pothole patching, street tree maintenance, signing and striping. Based on current projections, that annual deficit would grow to nearly $2 million in FY08 when the County/City Partnership transfer is scheduled to be discontinued. L:\CMO\2006 Council Agendas\M060215\S060215C.doc Pavement Preservation Program - On the capital side of the program, the implementation of a three-cent- per-gallon local motor vehicle fuel tax in August 2003 (raised to 5 cents in January 2005), along with revenue from the reimbursement component of the Transportation SDC and Eugene’s share of the Lane County OTIA III maintenance monies, have allowed the City to begin addressing the significant backlog of pavement preservation projects in Eugene. During the 2005 construction season, the City completed rehabilitation of approximately 12 lane miles of streets. Four contracts were awarded on eight different street segments, including the completion of one additional project made possible due to the two-cent increase in tax. However, the pavement preservation backlog, projected at $102 million as of the end of 2005, continues to grow. Additional funding is still needed to reverse this trend and to do the repair work necessary to ensure the efficient and safe operation of our local transportation system. In its report to the council in October 2001, the Citizen Budget Subcommittee recommended a street pavement preservation program revenue target of $8.5 million annually to address this high-priority funding need. An additional estimated $4.7 million is needed to meet that target funding goal for FY07, once the county OTIA III revenue-sharing agreement ends. That funding gap grows to $5.8 million per year by FY09, when the two-cent motor vehicle fuel tax increase is scheduled to sunset. Citizen Budget Subcommittee Conclusions, June 2001 - As part of its two-year study of Eugene’s transportation funding issues and deliberations on possible new funding alternatives for the City’s unmet transportation needs, the Citizen Budget Subcommittee reviewed over 20 potential revenue sources in broad categories ranging from assessment mechanisms, property tax-based options, various forms of excise taxes, utility/user fees, as well as more traditional general municipal revenue sources. Additional revenue sources were suggested by subcommittee members and researched by staff. Staff prepared more in-depth analysis on those alternatives selected by the subcommittee for further study, and these were further studied and discussed at subsequent subcommittee meetings. At the end of their deliberations, the subcommittee members agreed that “the most effective transportation funding package would consist of a transportation utility fee and a motor vehicle fuel tax. These measures are capable of raising adequate levels of revenue and most closely conform to the subcommittee’s guiding principles.” (Transportation System Funding Interim Report, dated June 2001). Excerpts from the subcommittee report entitled “Subcommittee Discussion – Transportation Funding Alternatives” are included here as Attachment B. Potential Alternative Revenue Options, January 2006 - As an alternative to implementing service reductions in the operations and maintenance (O&M) component of the city’s transportation service system for FY07, the council could consider the implementation of one or more alternative revenue options, such as those that follow: ? Street Lighting Fee – Under this concept, the City would levy a city-wide street lighting fee to fund the operation, maintenance and enhancement of the City’s street lighting system along arterial, collector and neighborhood streets, a program which is budgeted at about $800,000 for FY07. The revenue would be dedicated to paying the cost of maintaining light fixtures, replacing fixtures and parts, and utilities. This revenue mechanism would also potentially allow the council to begin addressing the issue of missing street lights along arterial and collector streets if the fee were implemented with a capital component. More detailed information is provided on this potential new revenue mechanism in Attachment C. L:\CMO\2006 Council Agendas\M060215\S060215C.doc ? Shift Funding for Street Trees/Median Maintenance Program to Other City Funds – The council could consider transferring specific programs which are now supported by dedicated Road Fund dollars to one or more other City funds. Specifically, the Street Trees/Median Maintenance Program with an FY07 Proposed Budget of $1,310,000 and 14.9 FTE (which includes a $150,000/2.0 FTE service enhancement package for restoration of preventive maintenance pruning services) could be transferred to the Stormwater Fund and other City funds. Historically, the Street Tree Program was funded with General Fund resources, but this program was transferred from the General Fund to the Road Fund in the early 1990s in an effort to reduce budgetary pressure on the General Fund service system. However, it may now be appropriate to consider returning a portion of the financial obligation for street tree/median activities back to the General Fund. Significant justification also exists for funding a portion of the cost of street tree and median vegetation maintenance through stormwater user charges. Urban forests, including street trees, have proven benefits in reducing stormwater runoff, with increased rainfall interception of as much as 4,000 gallons per tree annually. Tree shading also cools curbed and open waterway runoff. Trees and vegetated medians stabilize soils through their root systems and help prevent erosion and sedimentation in the storm drainage system. Water absorption by tree and plant roots drains surface water, resulting in less surface runoff. Generating sufficient additional stormwater program revenue to fund 50% of the street trees/median program in the Stormwater Fund would require a one-time rate increase in the neighborhood of 6.5 – 7.0%. ? As an alternative to shifting all of the funding for street trees/median maintenance to other City funds, the council could consider partially funding specific road-related activities through a fee-based system. Early in its discussions, the Citizen Subcommittee considered a conceptual Eugene Livability Fee (ELF) to fund programs that enhance community livability and transportation alternatives. Examples presented for possible uses of the ELF included the street tree/median program, traffic safety elements (accessible pedestrian signals, photo red light, traffic enforcement), the street lighting program, a neighborhood traffic program (traffic calming, enhanced sidewalk/pedestrian facilities), as well as traffic demand management coordination and incentives (bicycle/alternative modes programming and marketing, off-street bike/pedestrian paths OM&P). ? Transportation System Maintenance Fee (TSMF) - This funding option was recommended by the Citizen Budget Subcommittee on Transportation System Funding and was implemented by City Council ordinance but later repealed. The concept behind this fee is that the city’s transportation infrastructure is a utility system, not unlike the stormwater utility system, which delivers transportation service to all users of developed real property throughout the city. Under this concept, a monthly fee is charged to each user to recover their allocable share of the overall system cost, including operations and maintenance activities. While the council originally enacted the Eugene fee as a dedicated funding source for the Pavement Preservation Program, a portion of the revenue generated from a TSMF could be directed by policy to fund street O&M activities as well as pavement preservation efforts at the level directed by council. This is realistically the only option presented with the potential to move beyond funding the annual operating deficit in street O&M activities and also enable the City to address the funding gap related to the backlog of pavement preservation projects. An overview of this funding option as studied by the Citizen Budget Subcommittee in late 2000 is included here as Attachment D. L:\CMO\2006 Council Agendas\M060215\S060215C.doc RELATED COUNCIL GOALS AND 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 maintain and deliver municipal services.” In previous years, the council has identified specific work plan items to “identify and implement funding sources (including possible reallocation of existing sources) for operation, maintenance and preservation of the transportation system.” 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 strategies contemplated here are intended to help achieve greater long-term financial stability for the operations, maintenance and preservation of the city’s transportation service system. Option 1: The council could direct the City Manager to include in the FY07 Proposed Budget a shift in a portion of the funding for the Street Trees/Median Maintenance Program (total program costs of approximately $1,310,000) from the Road Fund to the Stormwater Fund, with the remainder of the program funding to be provided from other City fees or funds. Option 2: The council could direct the City Manager to bring back a proposal for the implementation of a Eugene Livability Fee (ELF) to fund programs that enhance community livability and transportation alternatives, including funding for the street trees/median maintenance program. Option 3: The council could direct the City Manager to bring back a proposal for the implementation of a city-wide Street Lighting Fee to fund the operation, maintenance and enhancement of the City’s street lighting system along arterial, collector and neighborhood streets. Option 4: The council could direct the City Manager to bring back a proposal for reestablishing the previously repealed Transportation System Maintenance Fee to address not only the projected ongoing operating deficit in Road Fund street operations and maintenance, but also to generate additional revenue to address the remaining annual funding gaps in the pavement and off-street bike path preservation programs. Option 5: The council could take no action at this time with regard to providing additional funding for the operations, maintenance and preservation of city streets, which would result in service reductions of approximately $2 million to be phased in during the FY07 and FY08 fiscal years. Option 6: The council could direct the City Manager to do any combination or variation of the above options. L:\CMO\2006 Council Agendas\M060215\S060215C.doc CITY MANAGER’S RECOMMENDATION The City Manager recommends that the council take action to approve a combination of Options 1, 2, 3 and 4 in order provide a diversified and adaptable funding strategy for addressing the City’s highest- priority transportation system service needs now and into the future. SUGGESTED MOTION Move to direct the City Manager to: a) Include in the FY07 Proposed Budget a shift in 50% of the funding for the street trees/median maintenance program from the Road Fund to the Stormwater Fund; b) Bring back a proposal for the implementation of a Eugene Livability Fee (ELF) to fund programs that enhance community livability and transportation alternatives, including funding for the street trees/median maintenance program; c) Bring back a proposal for the implementation of a citywide Street Lighting Fee to fund the operation, maintenance and enhancement of the City’s street lighting system along arterial, collector and neighborhood streets; and d) Bring back to the council a draft ordinance for reestablishing the previously-repealed Transportation System Maintenance Fee to address not only the projected ongoing operating deficit in Road Fund street operations and maintenance, but also to generate additional revenue to address the remaining annual funding gap in the pavement and off-street bike path preservation programs. ATTACHMENTS A. Staff Memo: Response to Council Request for List of Street-related CIP Projects B. Excerpt from “Transportation System Funding Interim Report” of the Eugene Budget Committee Citizen Subcommittee, dated June 2001 C. Overview of Alternative Funding Option – Street Lighting Fees D. Overview of Individual Funding Options – Transportation Utility Fee (2000) FOR MORE INFORMATION Staff Contact: Kurt Corey Telephone: 682-5241 Staff E-Mail: kurt.a.corey@ci.eugene.or.us L:\CMO\2006 Council Agendas\M060215\S060215C.doc ATTACHMENT A Public Works Engineering City of Eugene 858 Pearl Street M Eugene, Oregon 97401 EMORANDUM (541) 682-5291 (541) 682-5032 FAX www.ci.eugene.or.us Date: February 6, 2006 To: Mayor Piercy and City Council From: Mark Schoening, P.E., 682-5243 City Engineer Subject: FY06 – FY11 Capital Improvement Program – Transportation – Allocation of Funds to Operations, Preservation and Maintenance At its work session held on September 26, 2005, the City Council directed staff to provide a list of the new projects in the Capital Improvement Program (CIP) funded with money that could be used for operations, preservation and maintenance. Table 1 shows the funding account, source, project category, and fund restrictions for the transportation element of the FY2006 – FY2011 Capital Improvement Program. The entirety of the local gas tax ($16,545,000), Lane County ($505,000), Transportation SDC – reimbursement fee ($3,091,000) and Federal STP-U-preservation ($2,638,000) funds are allocated to preservation and maintenance projects. These funding sources total $22,779,000 over the six years of the CIP. With the exception of the Federal STP-U-preservation funds, all of these monies are allocated to preservation and maintenance of the street system. The Federal STP-U-preservation funds are allocated to preservation and maintenance of the off-street bike path system. Other federal, state and regional funding sources have specific restrictions that preclude the use of the funds for operation, preservation or maintenance activities. Riverfront Research Park Urban Renewal funds may be used for preservation and maintenance with some restrictions. However, in the FY2006-FY2011 CIP funds from this source are allocated to the Patterson Street Underpass per a Memorandum of Understanding with McKenzie Willamette Medical Center. The only projects in the FY2006-2011 CIP funded with monies that could otherwise be used for operation and maintenance are traffic calming projects. The traffic calming program is funded with General Fund monies at $30,000 annually ($180,000) over the six years of the CIP. Attachment A - Table 1 FY06-FY11 Capital Improvement Program - Transportation Project CategoryRestrictions AmountSource State law restricts the use of gas tax revenue to operation, maintenance, preservation and capital improvements within public Preservation/Maintenance right of way $16,545,000Local Gas Tax Preservation/MaintenanceIGA limits spending to preservation and maintenance $505,000Lane County State law limits spending to the system for which the fees were Preservation/Maintenance collected. $3,091,000Transportation SDC - Reimbursement Fee Preservation/MaintenanceMPC policy limited funding to preservation projects. $2,638,000Federal STP-U Preservation Upgrades/Capacity EnhancementCouncil action allocated General Fund monies for traffic calming $180,000Property Taxes (General Fund) Upgrades/Capacity Enhancement & State law limits spending to the improvements that increase New Capital Facilitiescapacity $7,038,000Transportation SDC - Improvement Fee Upgrades/Capacity EnhancementMPC policy limited funding to modernization projects $3,060,000Federal STP-U Modernization New Capital FacilitiesFederal legislation limits funding to a specific project $4,463,000Federal SAFETEA LUA Earmark New Capital FacilitiesFederal legislation limits funding to specific types of projects $898,000Federal Transportation Enhancement New Capital FacilitiesIGA limits spending to a specific project $15,000Lane Transit District State grant criteria limits funding to bicycle and pedestrian New Capital Facilities improvements $125,000Oregon Department of Transportation State law restricts assessments to the specific improvement Upgrades/Capacity Enhancement constructed. $2,566,000Assessments State law restricts assessments to the specific improvement Upgrades/Capacity Enhancement constructed. $1,052,000Delayed Assessments State law limits spending to the improvements that increase Upgrades/Capacity Enhancement capacity $811,000Stormwater SDC MOU with MWMC specified the use of the funds to a specific New Capital Facilities project. $11,413,000Urban Renewal - Riverfront Research Park Lane County or City of Springfield were potential sources of funds Upgrades/Capacity Enhancement for portions of the Game Farm Road project. $225,000Other $54,625,000Total Transportaton CIP Projects for FY2006-2011 (Excerpted from the Transportation Funding System Interim Report, Pages 18-26, Prepared by the Eugene Budget Committee Citizen Subcommittee, Dated June 2001) SUBCOMMITTEE DISCUSSION - TRANSPORTATION FUNDING ALTERNATIVES In the September 29 meeting, the subcommittee adopted guiding principles for their work and endorsed the idea of bringing to the Council a package proposal or combination of funding alternatives, rather than a single alternative. The Guiding Principles were intended to provide a set of criteria against which various alternative revenue options could be evaluated and compared. Additionally, the subcommittee requested a copy of all council policies and goals, either adopted or currently proposed, which would be relevant to their consideration of transportation funding options. Those policies and goals considered are included in this report as Appendix G. Staff next offered for consideration a broad-based Guiding Principals list of potential funding sources which might be Diversification of Revenue Sources used by the City to generate additional revenue for An overall funding strategy for transportation system service needs. This list transportation system service needs included over 20 potential revenue sources in should include multiple funding broad categories ranging from assessment sources, which will adequately mechanisms, property tax-based options, various address the full range of identified forms of excise taxes, utility/user fees, as well as transportation system service needs. more traditional general municipal revenue Consistency with Goals and Policies sources (see Funding Alternatives for All proposals for sources and uses of Transportation System Needs, Appendix H). funds, overall funding strategies and Additional revenue alternatives were suggested by other subcommittee products should subcommittee members in the course of be consistent with adopted City subsequent discussions. The subcommittee Council Goals and City policies. directed staff to provide further analysis on several Legal Defensibility alternatives, listed below: The City must have clear and Property taxes (both local option ÿ incontrovertible authority and ability levy and general obligation bonds) under state and federal statutes to Expanded assessment ÿ implement the proposed revenue practices/local improvement sources and uses. districts Financial Feasibility Broadened use of systems ÿ Funding sources must be able to development charges (SDCs) produce timely, adequate revenue Motor fuel tax on distributors ÿ streams with a high degree of long- (including sales outside city) term sustainability. Transportation utility fee ÿ Politically Supportable Street improvement fee ÿ An overall funding strategy for transportation system service needs Staff prepared analyses, attached as Appendix I, must be deemed politically acceptable on the alternatives selected by the subcommittee. by both the City Council and the These were presented and discussed at the general public in terms of appropriate November 13 and December 11 meetings. uses of public resources, general fairness to system users, and level of acceptance for funding proposals. The funding strategy and specific revenue sources must also be easily understood by citizens and have a direct relationship to specific community transportation system service needs. In December, individual subcommittee members also completed a survey in which they evaluated the various revenue alternatives against the subcommittee’s Guiding Principles. Members were asked if each alternative merited further discussion. The survey results were provided to the subcommittee. After further discussions, the subcommittee took straw polls on five revenue alternatives that had received considerable member attention. The results were as follows: (12/11/00) Subcommittee Straw Poll Results, Revenue Alternatives Local Option Levy7:0 opposed General Obligation Bonds6:1 opposed Parking Tax 5:2 opposed Fuel Tax on Distributors4:3 in favor Transportation Utility Fee 6:1 in favor Staff continued to develop analyses and provide information as the subcommittee members proceeded with their considerations of revenue alternatives. The alternative for a motor fuel tax on distributor sales outside the city was found not to be allowable under state law, so a local motor fuel tax was discussed instead. In the January 29 meeting, the transportation utility fee continued to be the revenue alternative with the highest level of member support. A local motor fuel tax also received majority support. Staff were asked to prepare funding scenarios incorporating combinations of a transportation utility fee, a motor fuel tax and G.O. bonds. The remaining revenue alternatives were not discussed further. Consensus was reached that all residents and visitors, whether motor vehicle drivers or non-drivers, have an important stake in maintaining the City’s transportation infrastructure. Even non-drivers have mail delivered and require access to mass transit, city bicycle lanes and off-street bike paths. Whether walking to visit friends, bicycling to work, driving to the doctor’s office, or traveling by bus to school, everyone depends on the city transportation network and should rightly contribute to its upkeep. The subcommittee was interested in revenue alternatives that would result in non-residents paying a share, along with city residents. A transportation utility fee (TUF) is applied universally and is an equitable revenue source to which all property users contribute according to their share of impact on the system. The fee paid by retail and commercial property users will be partially passed on to non-resident visitors shopping or working in the city. All property within the city, whether currently exempt from property taxes or not, would be subject to a TUF. This includes the University of Oregon, as well as other state and federal property. The fact that all property users in the city would contribute their share increases the fairness of the TUF as a way to cover costs of the transportation system. The TUF revenue is also very flexible and, unlike a motor fuel tax, can be used for off-street bicycle paths and other off-street uses because it does not fall under the constitutional provision limiting its use to roads only. In initial discussions, some members questioned whether a transportation utility fee would be somewhat regressive because low income people purchase less and use the transportation system less. However, people with higher disposal income typically purchase more goods and services, and so would pay more of the pass-through of a commercial and retail transportation utility fee. Also, the fee amount for apartment residents typically is less than that paid by residents of single-family homes, because surveys of apartment dwellers show they typically use the transportation system less. The constitutional limitation referred to earlier does apply to a local motor fuel tax, such that all revenue raised from a motor fuel tax may only be spent within the road rights-of-way. Since the motor fuel tax is paid by users of motor vehicles, this dedication of revenue from motor fuel taxes seems appropriate. Like the transportation utility fee, the motor fuel tax will also capture revenue from non-residents. Several funding scenarios involving combinations of the transportation utility fee, motor fuel tax and G.O. bonds were reviewed and discussed by the subcommittee at the February 12 meeting. A . preliminary target of net revenue to be generated was established at $9 millionThe preferred funding package follows: Motor Vehicle Fuel Tax two-cent per gallon tax A would be expected to produce net revenue of approximately $1.3 million per year. All motor fuel tax revenue is restricted to activities related to the road rights-of- way. Bicycle paths and other off-street activities could not be funded from this source. Transportation Utility Fee The remaining $7.7 million of the total funding target could be raised with a TUF. Per household residential fee levels would be about $4 per month. the most effective transportation funding package would The subcommittee agreed that consist of a transportation utility fee and a motor vehicle fuel tax . These measures are capable of raising adequate levels of revenue and most closely conform to the subcommittee’s guiding principles. The subcommittee agreed that the most effective transportation funding package would consist of a transportation utility fee and a motor vehicle fuel tax. These measures are capable of raising adequate levels of revenue and most closely conform to the subcommittee’s guiding principles. A revised transportation service system financial forecast was prepared showing the effects of the proposed new funding package on the six-year outlook for the Road Fund. That forecast is included as Appendix J. Below are listed the individual revenue options which were raised and/or considered, along with salient points based on subcommittee discussion and the December survey results. The Compiled Member Survey Results from the December survey are attached as Appendix F. Assessments Broadened Assessment Practices/Local Improvement Districts Subcommittee members suggested that this funding option could perhaps be part of a combination of solutions for funding street improvement projects in neighborhoods, along with matching grant programs and other sources. Similar to the street improvement fee concept, this approach would be focused on improving currently unimproved streets to urban standards. However, the December survey showed that this alternative was seen as having quite a low likelihood of being politically supported in the community. Broadened Use of Systems Development Charges Subcommittee members noted that this option would not be available for preservation projects, but did acknowledge the equity in having SDCs pay for improving capacity rather than funding those improvements from the Road Fund. One concern expressed was that a recommendation to include improvements to streets within the Urban Growth Boundary and under County jurisdiction in the City’s transportation SDC could become another item of dispute or contention with the County. The County has not yet elected to pursue a proposal to levy a transportation SDC for similarly planned County-funded improvements within the Urban Growth Boundary. Members also voiced that encouraging out-of-city development may be a poor choice in light of the potential implications of Measure 7 for development of county tracts. The December survey revealed that members saw this alternative as providing for diversification of revenue sources, being consistent with City goals and policies, and being legally defensible. However, concern was expressed about political supportability and that it was limited to new improvements that are capacity oriented (arterials/collectors). Staff reported that the City Roads Advisory Committee (RAC) is currently reviewing the City’s transportation system development charge methodology. A recommendation under consideration by the RAC may result in implementation of a reimbursement component to the transportation system development charge to cover costs that new development impose upon the existing road system. 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. Local Option Property Tax Levy (LOL) The subcommittee reiterated concern that, as with G.O. bonds, the City might find it difficult to generate voter support for this option, given the competition for other levy-funded needs, such as the Library operating levy. In fact, many of the same concerns were raised around this potential funding option as for a G.O. bond levy. As with the G.O. bond option, doubt was expressed as to whether an LOL fits the criteria as a stable, long-term funding source. Five of six respondents assigned a low likelihood of political feasibility to the LOL alternative. Excise Taxes Business Tax on Fuel Distribution (Outside City Limits) At the request of the subcommittee, this option was identified for further staff analysis. The main question to be explored was whether or not the City can legally impose a tax on motor vehicle fuel distributors for sales of motor vehicle fuel to customers located outside the legal city limits. Legal counsel’s opinion was that, although the City can tax sales of fuel that occur inside its limits, it cannot tax sales that occur outside its limits. Given that the City’s authority to tax is confined within its territorial boundaries, the subcommittee saw essentially no distinction between this and a local option motor fuel tax, which is discussed in the next section. Local Option Motor Vehicle Fuel Tax Subcommittee members suggested that a two-to-three cent motor vehicle fuel tax (gas tax) could be a viable second funding source along with a transportation utility fee. It was noted that, if one of the goals is to assess the cost of the system to system users, then an argument in support of the gas tax is that it would be assessed at the point of purchase on those who choose to drive. Members debated whether the revenues from a gas tax could potentially be undermined by market flight. Member Howie Bonnett conducted a survey of local gas prices and found a several-cent difference in retail gasoline prices in a limited geographic section of town--indicating that a two-to-three cent gas tax would probably not have much impact on consumer choices around gas purchases. Members agreed with this conclusion. On multiple occasions, members discussed the desirability of coordinating with Springfield with regard to that city’s consideration of and deliberations around a motor vehicle fuel tax. Members noted that the last time the council had considered the option of a gas tax was in 1995, during discussions related to stormwater funding and associated impacts of the transportation system on stormwater quality. Concern was expressed by the subcommittee that the Legislature might take another run at a statewide gas tax increase. A Summary of Oregon Local Motor Vehicle Fuel Taxes is included in this report as In early polls of members, the TUF and the motor vehicle fuel tax were the Appendix K. only options which received majority support. Parking Tax While the parking tax was viewed by the subcommittee as having some potential in promoting City land use goals, it was noted that previous attempts by the City to change development choices and driver behavior through parking policy were not successful. It was noted that parking spaces are not as directly tied to the use of the transportation system as would be a transportation utility fee based on trip rates. For example, a manufacturing use may have the same numbers of spaces as a retail use but a much lower trip rate and, therefore, a lower use of the transportation system. The December survey showed that the parking tax alternative was seen as having a low likelihood of being financially feasible and an even lower likelihood of being politically acceptable to the community. In December, members’ surveys indicated by a 5:2 margin that the idea should be dropped, and staff was directed to do no further analysis on this revenue option. Carbon-based Fuel Tax While both this and the Parking Tax funding option generated some discussion by the subcommittee, the opinion was expressed that it might be more appropriate for the council to address the feasibility and appropriateness of either a carbon-based fuel tax or the parking tax, rather than for the subcommittee to do so. Proponents for the carbon tax voiced support on the basis that this is one of the few options that most directly targets the users of the transportation system. It was also pointed out, however, that unless the City were willing to apply the carbon- based tax to heating fuels, there would be very little distinction between it and a motor vehicle fuel tax. Ultimately, no direction was given for further analysis of this option. A majority of members felt that the carbon-based fuel tax was not very financially feasible nor politically supportable and indicated by a 5:2 margin that it should not be explored further. The alternative was dropped at that point. Motor Vehicle Excise Tax Vehicle Registration Fees Both of these revenue options generated little interest by the subcommittee. The primary concern voiced around the vehicle registration fee was that, by State law, the City would be reliant on Lane County to levy the fee. Additionally, neither of these options were perceived to address the issue of out-of-city residents who use Eugene’s transportation system. Neither alternative was seen as politically feasible. Survey results showed subcommittee opposition to further work on the motor vehicle excise tax by a 6:1 margin, and opposition by a 5:2 count to further consideration of the vehicle registration fee. User/Utility Fees Transportation Utility Fee Subcommittee members indicated early interest in this option. Some members were particularly interested if the focus of the utility fee was on preservation and reconstruction rather than primarily for “extras,” such as street trees and traffic calming. Members expressed support for the fact that the fee would assess revenue for people who were driving in from out of town for work or to do business. There was also specific support for the idea of maintaining the transportation system through the cost of driving a car. The fact that users of all property, including the University of Oregon and other tax-exempt property, will contribute their share under a TUF was also identified as an attractive feature of the TUF. The subcommittee recommended not using “ELF” (Eugene Livability Fee) or other “cute” names for this fee, arguing instead for a simple descriptor of “ transportation utility fee.” In the December survey, members gave the transportation utility fee a high likelihood of being consistent with goals of diversifying revenue sources, being legally defensible and financially feasible. Members assigned a low rating for political supportability. Nevertheless, by a 6:1 count, members chose to pursue discussions on the TUF. A Summary of Oregon Transportation In early polls of members, the TUF and Utility Fees is included in this report as Appendix L. the motor vehicle fuel tax were the only options which received majority support. Members said it would be helpful to illustrate some of the initial projects that would be funded by the utility fee so citizens would be able to see what services the fee would provide. Members also noted that, based on initial yield estimates, this revenue option on its own could potentially solve the City’s transportation funding shortfall. Some members expressed concern that the fee was, or might be perceived as, regressive. Other members opined that it was not regressive but, instead, was a true user fee based on the estimated use of the transportation system. It was also pointed out that the fee could be structured to reduce somewhat any perceived regressiveness. The point was also made that the community may accept use of TUF revenues for transportation system operational needs because the TUF is a utility fee based on use of the system, and operation and maintenance of the existing system are clearly necessary. Community acceptance of the fairness of other utility fees was noted in discussions. Over the course of several meetings, the subcommittee discussed the basis for and possible implementation of a transportation utility fee. As discussed, a simple Eugene TUF would be based on the actual use made of property. Property use categories would be the same or very similar to the categories used in the City’s Transportation SDC methodology. Each property use category would be assigned a trip generation rate, using the Institute of Transportation Engineers’ Trip Generation Manual. For non-residential property uses, this trip generation rate is usually expressed as a number of trips per 1,000 square feet, or an equivalent unit of measure. The trip rate would be multiplied by the number of units, and that product would be multiplied by the fee per trip to generate the utility fee for a particular property. Residential rates would be per dwelling unit. TUF revenue would be used for operation, maintenance and preservation, not capacity related projects. Street Improvement Fee The focus of this option was directed towards addressing the unimproved transportation network. The concept was to establish a fee that all owners adjacent to unimproved streets would pay for a period of time (ten years), with the funds to be used to improve streets in a priority order during a specified period of time. The subcommittee was informed that the Council Subcommittee on Street Improvement Financing had explored this concept, which was subsequently presented to the council as part of that subcommittee’s report. Council concluded that the approach was one they did not wish to pursue. Since this funding option does not address the preservation and maintenance needs of the transportation system and the council has not chosen to pursue this option, the subcommittee discontinued any further review of this alternative. The December survey showed that this option was medium to low in the area of financially feasibility. The subcommittee indicated its opposition to this alternative by a 5:2 count. Municipal Sticker Fee (Local Vehicle Public Parking Permit) This idea, introduced by a subcommittee member based on practice in other municipalities, was a proposal to have a municipal “sticker” attached to a vehicle that would give the owner the privilege of parking in areas associated with city facilities, such as the Library parking lot. Staff analysis of two sample cities showed that alternative was more like a city vehicle registration requirement, which is not permitted under Oregon state law, rather than an optional parking sticker program. Tolls This funding source generated very little discussion from the subcommittee.While some members liked the idea of capturing toll money from commuters driving in from outside the city, there was a sense that the mechanism would be too much of a stretch in terms of public opinion at this time. This alternative received lower ratings in the subcommittee survey and no recommendation for further staff analysis. Fees to Compensate for Dedicated Use of Traffic Lanes for Transit Purposes This potential funding source also generated little discussion from the subcommittee. The dedicated lane fee was viewed as somewhat contrary to the City’s goal of supporting transit. It also received lower ratings in the subcommittee survey and no recommendation for further staff analysis. Employer Payroll Tax This general municipal revenue source received little discussion from the subcommittee, and staff received no direction for further analysis of this option. ATTACHMENT C Street Lighting Fees Brief Description of Fees, levied on occupants of properties benefited by the city’s Funding Option street lighting services, to fund operation, maintenance and enhancement of the city’s street lighting system. Fee revenue would be accounted for in a separate fund and dedicated to provision of street lighting. Precedence (other The Oregon cities of Nyssa, Klamath Falls and Wilsonville jurisdictions’ practices) currently levy fees for street lighting. Calculation Base and The City of Eugene expects to spend about $800,000 to Typical Rates operate and maintain the city’s street lighting system in FY07 at the current level of service. Of this total, about $440,000 is for lighting on arterial/collector streets, and $360,000 is for lighting on neighborhood streets. An additional amount will be needed to cover fee administration and collection costs. Final administrative costs will depend upon whether the method of assessment is simple or complex and how the fee is collected. This estimate assumes a fairly simple fee is implemented, which still differentiates among levels of service. The most efficient way to collect this fee will be to include it in billings for the city’s wastewater fee. All properties with active water accounts receive wastewater billings. In this example the fee would have three components: a citywide base assessment for lighting services on arterial/collector streets reflecting citywide benefits of those services, a citywide component covering fee administration and collection costs, and a local area lighting assessment reflecting the level of service on neighborhood streets. There could be several different local assessment areas reflecting substantially different levels of local lighting service. With this assessment methodology administrative and fee collection costs are estimated to be about $200,000. There will be about 58,000 active water accounts in the city in FY07, so the average total monthly fee would be about $1.44 per month. However the amount actually assessed on a particular property’s occupant would be higher or lower depending on the local area lighting service level. Using FY07 estimated street lighting costs, under this three component approach the citywide base fee for arterial and collector street lighting would be about $0.63, and the citywide administrative component would be about $0.29. Depending on the level of local area lighting service, the local service assessment would range from zero (for no local lighting services at all) to a level reflecting the highest level of local service, with an average of $0.52. ATTACHMENT C Calculation Base and The administrative costs would be higher for more complex Typical Rates (cont’d) methods. If the street lighting service fee were collected separately from wastewater billings, collection costs will also be higher. Before implementing a street light assessment program, a more in-depth examination will need to be made of assessment methodology, collection methods, administrative costs, and resulting fee levels. Estimated Revenue Total fees assessed would be set to generate enough revenue Yield, Administration to cover street light operating, maintenance, enhancement and and Enforcement Costs administrative costs, net of other revenue that may be available for street lighting services. Legal Authority and Under Oregon’s constitutional home rule powers the Eugene Restrictions on Use City Charter grants the City Council broad authority over matters within the city’s boundaries. The City Council may levy fees or assessment on occupants of property benefited by particular city services. Service fees are usually authorized by ordinance, and fee levels are set to meet annual service costs. Revenue is dedicated to the purpose of the fee. A citywide fee for citywide services may be implemented without use of a special services district. The City’s Stormwater and Wastewater service fees are examples of citywide fees for citywide services assessed according to benefit received by occupants of property. For services to limited areas of the city a special services district is used. Currently, the City has two Special Service Districts formed under this authority, in the Downtown area and in the West University area, to fund particular services provided to those areas. It would be possible, though not necessary, to use a special services district that extends citywide to assess fees for street lighting service. Service fees are assessed on the benefit of the service to the occupant of the property, not on the value of property, and so do not fall under constitutional tax limitations. Service fees assessments do not contribute to property tax compression. Incidence (who pays?) The occupant of record of each property receiving benefit from street lighting services will be liable for the fee on the property. If street lighting fees are collected along with wastewater fees, the person responsible for the water service bill will also be liable for both wastewater and street lighting fee. Fairness & Equity Fairness and equity will be advanced by adopting a fee assessment methodology that results in fees that reflect substantially different level of street lighting services in different areas of the city, as well as citywide benefits from arterial/collector lighting. ATTACHMENT C Assessment of Financial The service fee revenues will grow naturally as new homes Stability & Political and commercial/industrial construction occurs. New Feasibility development therefore can be expected to cover its own street lighting service cost.. Revenue will also be quite stable because occupancy is not subject to large swings from year to year. These characteristics are highly desirable in funding a growth-impacted and infrastructure-dependent service such as street lighting. Street lighting provides convenience and safety for motorists, pedestrians and bicyclists. Most people will probably agree that some level of street lighting is an essential service and should be funded, especially on arterial/collector streets. Establishment of a street lighting service fee would probably be politically accepted if citizens feel that the alternative may be an unacceptable reduction of street lighting services, and the fee is seen to fairly allocate costs of the service. The discussion of a street lighting fee would take place within the context of a broader discussion of the range of services that are now funded by the city’s Road Fund. Potential economic Adverse economic impact will be minimal. The monthly fee Impacts will be small and unlikely to discourage economic activity. On the other hand, street lighting services reduce personal and property damage from accidents, discourage criminal activity and encourage business and industry during night hours, Insofar as this service is made possible with revenue from the proposed fee, it will have a positive economic impact. Consistency with Council The following Council Goals apply to discussions of the Goals & Policies desirable level of operation and maintenance of street lighting services and possible implementation of a fee to support those services: ? Safe Community: A community where people feel safe, valued, and welcome ? Effective, Accountable Local Government: A government that works openly, collaboratively, and fairly with the community to achieve measurable and positive outcomes ? Fair, Stable and Adequate Financial Resources: A government whose ongoing financial resources are based on a fair and equitable system of revenues and are adequate to maintain and deliver municipal services ATTACHMENT C Consistency with Council The following City Financial Management Policy also applies: Goals & Policies (cont’d) Policy C.2. (Cost Recovery--Fee Supported Services): The City Council will establish cost recovery policies for fee supported services which consider the relative public/private benefits received from the services being provided and/or the desirability of providing access to services for specialized populations. These policies will determine the percent range of full service costs to be recovered through fees. The level of cost recovery will be routinely adjusted to ensure that rates are current, equitable, and competitive and cover that percentage of the total cost deemed appropriate. Other The cities of Nyssa, Klamath Falls and Wilsonville currently Jurisdictions’Experience levy fees for street lighting. A monthly service fee is typically assessed on the occupant of each property receiving service and is collected as part of utility billing. Unserved or vacant properties are typically assessed a zero amount. Since 1991 the City of Nyssa has had a street lighting fee with no reported opposition. Nyssa increased the fee in FY06, and now assesses a monthly flat fee of $2.50 per residence and $3.75 per commercial/industrial property. Vacant property is not subject to the fee. Klamath Falls created its fee in 1994 after street lights were turned off due to lack of funds. As the fee was imposed on areas of the city, lighting was restored. Klamath Falls assesses $2 monthly for each occupied property regardless of type of use. The fee is collected with water billings. Upon application, a resident can have the fee reduced to $1 if no occupant owns or operates a motor vehicle. Neighborhoods of at least 4 city blocks may be excluded from street lighting services if at least 51% of the water customers sign a petition to be excluded. The fee has had no substantial opposition. For the last two years Klamath Falls has waived collection of the fee due to availability of electric cogeneration revenue, but the fee ordinance remains in effect and may again be collected when required. Wilsonville has assessed a monthly street lighting fee since 1991. It is based on the level of lighting service provided to a neighborhood, ranging from $0.80 to $5.01 per residence. Commercial/industrial property is assessed based on the number of employees or number of commercial/residential units. There had been no significant opposition. By contrast, the City of Ashland operates street lighting as part of the City’s electrical utility services. It does not levy a separate fee for the service, which is part of the operating cost ATTACHMENT C of the electrical utility. Ashland reports it has had no opposition to the inclusion of costs of street lights in electric billings. Policies Choices The following list identifies some of the major policy choices which would need to be considered in order to develop an ordinance for implementation of a street lighting fee: ? What level of street lighting services within the city is desirable? ? Should the City continue to operate and maintain street lighting or should the service be provided by an independent separate district? ? Should street lighting services continue to be funded from the Road Fund, or should a new funding source be implemented? ? Is a fee for city street lighting services, assessed according to benefits provided by those services, an appropriate revenue source? ? How should a fee be assessed to best balance fairness in allocating service costs with efficiency in fee administration and collection? ? Should the fee be collected along with current city wastewater billings, or by another method? ? Is there to be an appeal process? ? Should there be a method for local areas to request higher or lower levels of street lighting service, with accompanying adjustment of fees assessed? ? Will fee levels be adjusted from time to time by ordinance, resolution or by administrative order?