Item 6: Public Hearing - Tax on Vehicle Fuel Dealers

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ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Public Hearing: An Ordinance Concerning Motor Vehicle Fuel Dealer’s Business License Tax and Repealing Section 3 of Ordinance No. 20337 Meeting Date: January 14, 2008 Agenda Item: 6 Department: Public Works Staff Contact: Kurt Corey www.eugene-or.gov Contact Telephone Number: 682-5241 ISSUE STATEMENT Tonight’s public hearing is for the purpose of gathering community input on a proposed ordinance amending sections of the Eugene City Code dealing with the Business License Tax on Motor Vehicle Fuel Dealers. The proposed amendments would repeal the sunset provision on the two-cent per gallon fuel tax rate increase enacted in 2005, with the effect of keeping the tax rate at five cents per gallon after February 29, 2008. Council action on this ordinance is needed by January 28, 2008, in order to prevent administrative implementation of the two-cent roll-back in the tax rate collected by the city. 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 now projected to exceed $1.8 million, and the backlog of unfunded capital street repairs has grown to over $170 million. The two-cent per gallon increase enacted in 2005 generates approximately $1.4 million annually to operate, maintain and preserve the city’s street system. To ensure continuation of a reliable fuel tax revenue stream to support ongoing street operations, maintenance, and pavement preservation, the City Manager recommends that 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. 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. Their 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. 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, unless further action is taken by the council to prevent that roll-back. 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, including regional and statewide solutions. Those solutions have not yet come to fruition. F:\CMO\2008 Council Agendas\M080114\S0801146.doc