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K u ~+CF~n~.~~ ~ EUGENE CITY COUNCIL AGENDA ITEM SUMMARY Action: Ordinance Concerning Business License Tax on Motor Vehicle Fuel Dealers Meeting Date: January 28, 2008 Department: Public Works www. eugene-or.gov Agenda Item: A4 Staff Contact: Kurt Corey Contact Telephone Number: 682-5241 ISSUE STATEMENT Council action tonight would amend or repeal sections of the Eugene City Code dealing with the Business License Tax on Motor Vehicle Fuel Dealers. The action recommended by the City Manager and illustrated in the proposed ordinance offered as Attachment A would extend the sunset provision on the two-cent per gallon fuel tax rate increase enacted in 2005 for three additional years, with the effect of keeping the tax rate at five cents per gallon through February 28, 2011. This would hopefully allow sufficient time for state legislative efforts to increase road funding for local jurisdictions and also for development and implementation of other elements of the council package funding strategy. As an alternative, council could choose tonight to repeal the sunset provision entirely, effectively leaving the fuel tax rate at five cents per gallon indefinitely. This alternative draft ordinance is offered as Attachment B. In either case, council action on this item is needed tonight if the intent is 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 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 has generated nearly $1.4 million annually, and all proceeds from that tax increase have gone to fund the city's Pavement Preservation Program, paying for the preservation and/or reconstruction of a significant number of city streets. Until other reliable funding , sources are secured, continuation of the local motor vehicle fuel tax at the five-cent level is an integral component in a package strategy endorsed by the Eugene City Council to ensure a stable revenue stream to support ongoing operations, maintenance and preservation of the city street system. BACKGROUND Previous Council Action and History The city's first motor vehicle fuel tax was enacted in January 2003, based on a recommendation from the Citizen's Subcommittee on Transportation System Funding. That first fuel tax was implemented at three cents per gallon and has generated almost $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. 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. Those solutions have not yet come to fruition, leading council to reconsideration of the option to let the additional two-cent tax expire.