HomeMy WebLinkAboutItem A: Ordinance on Businesss License Tax on Motor Vehicle Fuel Dealers
ECC
UGENE ITY OUNCIL
AIS
GENDA TEM UMMARY
Work Session: An Ordinance Concerning Motor Vehicle Fuel Dealers’ Business
License Tax and Repealing Section 3 of Ordinance No. 20337
Meeting Date: July 15, 2009 Agenda Item: A
Department: Public Works Staff Contact: Kurt Corey
www.eugene-or.gov Contact Telephone Number: 682-8421
ISSUE STATEMENT
This work session is an opportunity for the council to discuss a potential amendment to the sections of
the Eugene City Code dealing with the Business License Tax on Motor Vehicle Fuel Dealers. This
potential action, outlined in the proposed ordinance offered as Attachment A, would repeal the sunset
provision on the two-cent fuel tax rate increase enacted in 2005, and later extended in 2008, with the
effect of keeping the City’s local gas tax rate at five cents per gallon indefinitely.
The state legislature recently enacted a transportation bill which will increase the state gas tax by six
cents per gallon, in addition to increasing vehicle title and license fees and weight-mile taxes on heavy
trucks. Eventually, Eugene and other Oregon cities are expected to realize increased funding from the
State Highway Trust Fund as a result of this new legislation, but the increase in the state gas tax would
not become effective until the state sees two straight quarters of economic growth, or January 2011,
whichever comes first. Realistically, the City would not expect to see a significant increase in annual
revenue as a result of this bill until at least FY11 or FY12. In addition, another provision of the bill
prevents local governments from approving new gas taxes or increasing existing ones until January 2,
2014. After January 2, 2014, voter approval will be needed for any new or increased local gas tax. The
moratorium provisions of the bill take effect on September 28, 2009.
In 2005, the Eugene City Council added two cents to Eugene’s existing three-cent-per-gallon City gas
tax, with a three-year sunset provision which would have taken effect in February 2008. But instead of
letting the two-cent portion of the tax lapse last year, the council voted to renew the two cents for
another three years by extending the sunset date to February 28, 2011. However, unless the council
elects to take action to repeal the sunset provision on the local gas tax before September 28, 2009, the
council will lose the option to renew the two-cent portion of the tax beyond 2011 once the legislative
moratorium on local gas taxes becomes effective. If by September 28 the council has enacted an
ordinance repealing the sunset provision, then the state moratorium will not impact the council’s ability
to retain the five-cent local gas tax.
Prior to the passage of the state transportation bill, the annual deficit for street operation and
maintenance services in the Road Fund was projected to exceed $3 million in FY11, growing to over $4
million by FY13. However, with the new state transportation bill, the City could eventually expect to
receive $2.0-$3.0 million in additional state highway funding each year. Together with the ability to
charge right-of-way use fees on City utilities, Eugene may, for the first time in many years, have the
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ability to stabilize funding for street operations services such as street lighting and signals, street signage
and striping, and pothole patching and crack sealing.
However, the City still lacks adequate funding for major street repair projects, and the backlog of needed
street repairs has grown to over $170 million. While the five-year street repair bond approved by Eugene
voters last fall will fund 32 projects that will repair an estimated 70 lane miles of streets and three miles
of off-street bike and pedestrian paths, the City still has not resolved its long-term street repair funding
problem. Continuation of the City motor vehicle fuel tax at the five-cent level is a key component in a
package strategy endorsed by the council to ensure a stable, locally-controlled revenue stream to allow
the City to continue to make progress on that $170 million backlog of needed street repairs.
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. The subcommittee’s recommendation
was for a combination local motor vehicle fuel tax and transportation system maintenance fee for the
purpose of generating an additional $9.0 million annually to address the City’s critical transportation
system funding needs. That first fuel tax was implemented at three cents per gallon, and that portion has
generated an average of $2.0 million per year since 2003. The other revenue mechanism in that funding
recommendation, a street utility fee designed to generate an additional $6.5-$7.0 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. On January
28, 2008, the council voted to extend the sunset provision for three additional years to February 28,
2011, in order to allow sufficient time to see what new funding might result from the state legislation
and also to allow for the development and implementation of other elements of the council’s locally-
controlled package funding strategy. One element of that strategy, a three-cent increase to the local gas
tax, was not approved by the voters at the polls in November 2007. Additionally, the council declined
last month to approve a garbage-hauler surcharge which would have generated $900,000 per year for
street operations and maintenance services. As a result of the defeat of these efforts for additional street
funding, it is now more important than ever that the City retain the ability to control the level of its five-
cent local gas tax, now and into the future.
Funding Needs, Legal Analyses and Implementation Issues
Retaining the two-cent portion of the local motor vehicle fuel tax rate would provide continuation of
over $1.2 million in annual revenue currently received by the City. Together with the proceeds from the
five-year street repair bond and one-time federal stimulus monies for pavement preservation projects,
continuation of this local funding source should provide funding through the life of the street repair bond
sufficient to at least begin to reduce the rapid rate of growth and stabilize 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 services for Eugene’s street system. Last year, the City received over $6.5 million in State
Highway Trust Fund monies to fund these critical street services. If the new state legislation were to
provide another $2.0-$3.0 million to the City upon full implementation of the bill, together with revenue
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from a small right-of-way fee on City utilities, it is possible that Eugene could stabilize funding for its
street operations services for the first time in many years.
Capital Pavement Preservation Needs - The current five-cent gas tax has allowed the City to complete
nearly $22 million in street preservation project work since 2003, with additional contracts in progress.
This year, more than 32 lane miles of slurry seal projects and 30.8 lane miles of rehabilitation projects
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are scheduled, including the overlay of portions of 6 and 7 avenues, West 11 Avenue, Bertelsen
Road, Country Club Road, Crescent Avenue, Danebo Road, Fox Hollow Road, McKinley Road,
Roosevelt Boulevard, Royal Avenue, and Seneca Road. In order to fully fund and stabilize the annual
overlay program and begin to make progress in reducing the substantial backlog of reconstruction
projects, it is critical that the City not go backwards by losing the ability to control the two-cent portion
of our local gas tax. To ensure continuation of a reliable fuel tax revenue stream to support ongoing
street preservation and rehabilitation, the City Manager is recommending that the council repeal the
sunset provision enacted in 2005 and extended in 2008, a provision which would otherwise cause the tax
rate to revert to the three-cent level after February 28, 2011.
Implementation Timeframe – If the council wishes to retain the ability to control the two-cent portion of
the local gas tax, action must be taken to enact the attached City ordinance within 91 days of the close of
the state legislative session. A public hearing has been scheduled for July 20 to gather public input on
the proposed ordinance repealing the sunset provision on the two-cent tax, and potential council action
has been scheduled for July 27 to allow sufficient time for enactment of the City ordinance prior to the
effective date of the state transportation bill, with its moratorium on local gas taxes.
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, the 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
When this proposed ordinance comes before the Eugene City Council for potential action on July 27, the
council will have the following options:
?Option 1: The council could decline to take action on the ordinance, choosing to make no
changes to the Eugene Code and effectively allowing the City’s motor vehicle fuel tax rate to
revert to three cents per gallon after February 28, 2011;
?Option 2: The council could approve the proposed code amendment as shown in Attachment A
to repeal the sunset provision enacted in 2005 and extended in 2008, effectively leaving the fuel
tax rate at five cents per gallon for an indefinite period, or
?Option 3: The council could choose to extend the sunset for an additional three years to
February 28, 2014 (beyond the four-year moratorium period), after which time any additional
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extensions on the two-cent tax would need to be referred to the voters, with the attendant election
costs.
CITY MANAGER’S RECOMMENDATION
The City Manager recommends Option 2 for the adoption of these proposed amendments to the motor
vehicle fuel tax code to repeal the sunset provision and preserve the council’s ability to keep the local
City gas tax at the five-cent level.
SUGGESTED MOTION
No motion is offered at this time, as this is only a work session, with a public hearing and potential
council action scheduled for later this month.
ATTACHMENTS
A. An Ordinance Concerning Motor Vehicle Fuel Dealers’ Business License Tax and Repealing
Section 3 of Ordinance No. 20337
FOR MORE INFORMATION
Staff Contact: Kurt Corey
Telephone: 682-8421
Staff E-Mail: kurt.a.corey@ci.eugene.or.us
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ATTACHMENT A
ORDINANCE NO. ______
AN ORDINANCE CONCERNING MOTOR VEHICLE FUEL DEALERS’
BUSINESS LICENSE TAX AND REPEALING SECTION 3 OF
ORDINANCE NO. 20337.
The City Council of the City of Eugene finds that:
A.
On January 24, 2005, the City Council enacted Ordinance No. 20337 which
amended subsection (b) of Section 3.467 of the Eugene Code, 1971, by increasing the motor
vehicle fuel dealer tax from three to five cents per gallon. Section 3 of Ordinance No. 20337
contained a sunset provision to cause the tax to revert to three cents per gallon on February 29,
2008.
B.
On January 28, 2008, the City Council enacted Ordinance No. 20401 which
amended Section 3 of Ordinance No. 20337 by extending the sunset provision. The amendment
provided that “Unless otherwise extended by the City Council, the amendment to Subsection (b)
of Section 3.467 shall sunset on February 28, 2011, and the tax will revert to three cents per
gallon.”
C.
Although substantial street preservation work has been completed utilizing the
five-cent per gallon motor vehicle fuel tax, the backlog of needed repair work continues to grow
and construction costs continue to rise.
D.
The City Council finds it is in the public interest to repeal the sunset provision in
Section 3 of Ordinance No. 20337, and allow the motor vehicle fuel dealer’s business license tax
as set forth in Section 3.467(b) of the Eugene Code, 1971, to remain at five cents per gallon.
NOW, THEREFORE, based on the above findings,
THE CITY OF EUGENE DOES ORDAIN AS FOLLOWS:
Section 1.
Section 3 of Ordinance No. 20337 (the sunset provision) is repealed.
Section 2.
A copy of this Ordinance shall be appended to Ordinance No. 20337 and
Ordinance No. 20401.
Passed by the City Council this Approved by the Mayor this
______ day of _____________2009 _____ day of _______________ 2009
___________________________ _____________________________
City Recorder Mayor
Ordinance - Page 1 of 1
S090715A-attA.DOC