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Bend's War On Roads 

Searching for remedies to Bend's failed fuel tax measure

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Much like drivers grip their steering wheels to brace themselves for Bend's renowned, axle-eating potholes, controversy surrounding a proposed five-cent per gallon fuel tax gripped the local community this past March.

Money from Measure 9-105 was to be used exclusively for road repairs and improvements in Bend. Estimated to generate about $2.5 million—it was a solution to bridge a gap between the proposed budget of $1.8 million and $6 million, a goal to tackle the problem of Bend's critical, backlogged work and insufficient long-term revenue.

At times spun as a "sneak attack" on voters, the early-ballot measure was an expedited attempt to capture this summer's tourist revenue to chase what the City portrayed as an accelerating deficit of funding for ailing streets. Poor roads in desperate need of repair, mistrust of government, and disagreement about the lines of public responsibility dominated conversations leading up to the special early election.

Despite indications that the public favored a fuel tax in the City of Bend 2015 community survey, the measure was soundly thumped by voters, nearly 64 percent no to 36 percent yes.

Post-defeat, the City has managed to garner funding close to that $6 million goal without the tax. Final figures for the 2015-2016 budget come in at $5.2 million, according to Bend City Councilor Victor Chudowsky, who opposed the measure. The aftermath and seeming recovery raise the question of how necessary a fuel tax is, and whether there are better solutions moving forward.

The Agony of Defeat

City Manager Eric King attributed the measure's defeat to a lack of education prior to the more-costly special election, compounded by overall public confusion about how local government services are funded. He feels people unfortunately don't readily see the connection between their tax dollars and investment in community.

"I think there's an underlying mistrust in government on all levels," he reflected. Unfortunately, we didn't have time to tell these stories and paint the picture."

King faces the same challenge as many other city managers across the state: a struggle to find sustainable funding for streets that can keep up with rising costs while working within constrained state and local revenue streams. Many Oregon cities have ushered in a fuel tax as a revenue generator. Just this May, Portland became the 25th city in Oregon to pass (marginally) a fuel tax, proving that Bend is not alone in seeking solutions to fund transportation budgets.

According to King, Bend's road repair budget is running at a deficit, partly because of low revenue bases from the Oregon state gas tax revenue and Bend's low frozen property tax rate, due to Propositions 5 and 50, passed in the 1990s.

"You kind of have three legs to the stool: income, property and sales (tax). The state takes all the income tax, we don't have a sales tax, and our only tax that the city gets are property taxes...which are frozen (at a low rate)," he said. "The biggest misunderstanding we see from voters is that we (the City) lack increasing revenue from property taxes. It's been hard for the City of Bend to have growth pay for these (road) services. That might happen if we didn't have these (legal) restrictions."

Chudowsky, one of two City councilors opposed to the fuel tax, stands on the other side of the road. He says it is true "...that the city's rate, the rate per every one thousand dollars for your home, is fairly low here compared to other Oregon cities. But it's not just the rate that matters; it's the value of your home. People like to say that our rate is much lower than it is in Eugene, for example. It's true that the rate is lower, but our values are higher, much higher. And so in the end, it's kind of a wash. Not only are our values higher, but (so is) our taxable assessed value, the sum total of everything we tax within the city limits that is growing very, very rapidly because of all of the real estate investment that's pouring into Bend. That makes up, I think, to a large extent for the low tax rate."

In fact, the City significantly underestimated property tax revenues for the 2015-2016 fiscal year that just ended July 1. According to Chudowsky, "The budget was built around a 5.5 percent increase in property taxes. And then last fall we were informed that it wasn't going to be 5.5 percent, it was going to be 7.1 percent. So that was money that the City wasn't counting on."

Tourist Trap: Get a Room!

Chudowsky opposed the fuel tax from the beginning, saying that not enough was looked at before jumping to a gas tax solution. As he combed through all the sources of revenue to see what was rising, he said, "What really caught my eye in particular, along with the property taxes, was the tourism tax. It's been growing incredibly. And my position was, 'look, why are we looking at new sources of revenue when you have this existing one that is going up far beyond anybody's expectations?"

In fact, the City's bare minimum budget needed to stop the bleeding was not only met without the tax, but came close to its $6 million dollar goal through the transient room tax and higher than expected revenues from property taxes.

"Revenues came in much higher than expected," said Chudowsky. "The room tax revenue has been going up like crazy. Their projections were like eight to ten percent increases in revenues. And this year we'll be 26 percent higher than last year. The 2015-16 fiscal year, the budgeted amount was $1.8 million; from these other sources, we found another $3.4 million."

Budget Cuts vs. Reality

Noting compelling growth numbers in both the Transient Room Tax revenue, as well as Bend's rapidly rising taxable assessed value, Chudowsky feels tourism and the boomtown growth is Bend's ticket to drive without a tax at the pump.

King takes a more conservative view, saying that this past year was a fortunate one, but future solutions are needed to prevent cuts that compromise other essential services' budgets.

"We're so tightly constrained with resources," he reflected. "We're always in this reactive mode, unfortunately, to these issues. We can barely keep the roads up. Our police and fire are stretched thin."

To make ends meet this time around, he says, "We made some cuts to citywide administrative support...We cut some programs within streets and redirected it to maintenance. So we filled about $785,000 of that gap. To meet the goal (this year), we're going to wait to see what kind of tourist season we have."

Long Term Funding Solutions

More People and Pot and Potholes

Despite different viewpoints, Chudowsky and King both agree that sustained funding will be needed to continue fixing and improving Bend's roads. Chudowsky believes Bend's growing assessable tax base and tourism dollars, combined with a new revenue opportunity from marijuana, will remedy the gap long term.

"We're in this situation where tourism is growing beyond anybody's expectations. Right now, we're getting close to $6 million per year in room tax revenue. Why not take the path of that, along with some other sources of savings that we found, devote it specifically to street maintenance, and allow that to grow at the same rate that the tourism receipts come in?"

Revenue from a pot tax is also a viable source, he says. "Currently weed is taxed at 25 percent, but next year the state will reduce that percentage to 17 percent. We have the option to add another 3 percentage points back.  We could get roughly $340,000 a year extra revenue for streets—pot for potholes—and cannabis consumers would still get a tax cut!"

Who's Driving the Bus? Transit Service District

King believes removing transit from the General Fund with a separate funding levy seems to be the best long-term solution, freeing up just enough from the budget to bring sustainability to street funding.

"Transit could be that solution. It could provide a little more breathing room in the fund, three percent, about $1.5 million. If we can get that OUT of the general fund, and the voters approve a special transit district, that's the way to get around (Propositions) 5 and 50. You can take a chunk of your service and put it out for a new taxing district. The county has been aggressive, in the 90s, as they saw measures 5 and 50 coming. They chunked out their services into separate taxing districts."

King also says that funding a separate transit district would support the City's long-range vision for a multi-modal community, revealing a side of the City's intent that some may not pause to consider: livability and interconnectedness. The City's long-term goal is creating a dispersed, grid road system that creates more movement and more connection.

With a booming tourism season already underway, voters may be content to kick the can down the road—and swerve around the potholes—a little bit longer.

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