City of Ferndale CITY COUNCIL STAFF REPORT MEETING DATE: June 16, 2014 SUBJECT: Border Gas Tax Resolution to Voters DATE: June 4, 2013 FROM: Sam Taylor, City Clerk PRESENTATION BY: Staff RECOMMENDATIONS: Council votes to approve forwarding a ballot measure to voters with a question of whether or not to add a penny per gallon of gasoline for transportation projects within Ferndale City limits. BACKGROUND: For several years in a row, the Ferndale City Council has considered whether to place a penny-per-gallon gasoline tax on the ballot for consideration of local voters. The council would not be authorizing the tax, but only asking voters if they want to approve it. In 2013, the council majority initially approved sending this issue to the November ballot. However, Councilmember Zimmerman who was on the prevailing side of the vote requested reconsideration based on information from Councilmember Mutchler related to whether or not the City could provide for an exemption of a certain amount of fuel by ordinance, or whether that exemption had to be adopted by voters. This information came from the Municipal Research Services Center, which provided conflicting information to staff and Councilmember Mutchler. In the end, MRSC clarified they concurred that providing for an exemption by ordinance was allowed but that it didn t mean it wouldn t be challenged in court (as anything the council adopts can be). It is clear to staff and to the City Attorney s Office that an exemption of a certain amount of gallons can be placed in ordinance as the City of Blaine is already doing this and has done so for more than 20 years. MRSC also pointed this out to us. Regardless, in 2013 due to reconsideration of the issue it was voted down by the City Council. Councilmember Mutchler and Counclimember Olson have now jointly proposed to bring this measure back, though this time the ballot measure itself would directly include a 60,000 gallon per month per station exemption for the tax.
As Blaine collected $250,000 in penny gas taxes in 2013, Councilmember Mutchler estimates that Ferndale would collect approximately $178,000 after the exempt fuel is accounted for. For perspective, Blaine has nine gas stations and Ferndale has 10, Councilmember Mutchler notes. However, the state Department of Revenue has different figures that indicate Ferndale has even more stations (more below). In 1991, the Washington state Legislature authorized a motor vehicle fuel and special fuel excise tax in cities within 10 miles of the U.S.-Canada border as well as for Transportation Benefit Districts that have an international border crossing within their boundaries. Qualifying jurisdictions are allowed to levy the tax in increments of one-tenth of 1 percent up to a total of 1 cent per gallon of gasoline. A jurisdiction must receive a majority support of registered voters in an election in order to levy the tax, and the revenue collected must only be used for street maintenance and construction. The City of Ferndale is nearly the only qualifying border community not levying this excise tax. Blaine, Nooksack, Sumas and the Point Roberts Transportation Benefit District all have implemented the full 1-cent-per-gallon tax. Blaine collects the most funding out of all of those communities, with about $98,000 collected in 2007, and more than $180,000 collected by November 2012. Ferndale is approximately 8.15 miles south of the U.S.-Canada border at its northernmost post, qualifying the city to also levy the tax with voter approval. ANALYSIS: The City of Ferndale has considered levying this tax for at least 21 years, with one ballot measure sent to City voters in 1993 to implement the tax for purposes of street maintenance and construction. A total of 401 registered voters participated in the election, with 59.6 or 239 voting no. For perspective, during the February 2012 election regarding the Transportation Benefit District sales tax 2,936 voters participated in that election. A total of 1,842, or 62.74 percent voted yes to approve the sales tax measure. The border gas tax was considered again in 2006, 2007, 2011, 2012 and last year in 2013. In those last five discussions on this topic, the council has never ended up sending the issue to voters as a ballot measure. The City has a significant amount of capital improvements needed on its streets for the purposes of public safety and quality of life. Please see the attached exhibit rating the city s street infrastructure, including cost estimates. Ferndale faces approximately $15.3 million in street improvements, however the list does not include cost estimates for sidewalks, drainage improvements or frontage improvements. Unfortunately, the state Department of Revenue does not have a way to calculate how much revenue this excise tax might generate for the city.
Because Ferndale would be the largest jurisdiction to implement the tax if the council chose to do so, but also because Blaine is directly on the border, it is estimated that Ferndale would not bring in as much revenue compared to Blaine from the tax. But general statistics from the state Department of Revenue show that Ferndale may be competitive with the other border community. The City of Ferndale Finance Department roughly estimates that Ferndale would generate between $50,000 and $100,000 annually from the excise tax. This conservative figure was estimated without any exemption considered. According to the state Department of Revenue s reports, Blaine is identified as having 10 gas stations with pumps in its boundaries (or quantified as units ), and Ferndale has 15 (units). Staff is unsure how DOR calculates those figures. While the figures include all taxable retail sales for gas stations, Ferndale s stations had about $6.05 million in taxable retail sales in 2013 ($6.4 million in 2012 with 16 stores, according to DOR), according to the Department of Revenue. That figure does not separate out gasoline sales from other merchandise sales in the stations, but the figures are for stations specifically with gas pumps. By comparison, Blaine s stations had $3.3 million in taxable retail sales in the same time period ($2.7 million in 2012), according to the DOR. In discussions with Blaine City Manager Gary Tomsic in 2011, he indicated that the penny gas tax in Blaine does not appear to deter gas purchasers. On June 3, 2014 the average price of gas in Blaine was $4.08 per gallon. By comparison the average price reported at GasBuddy.com for Ferndale was $3.84 per gallon. For comparison purposes, the average gasoline price in Vancouver, B.C. on June 4, 2014, was approximately $5.15 per gallon. Overall, this is not a decision by the council to approve the tax increase. This is, instead, a choice by the council to allow voters have a say on this tax. By approving a resolution, the council is merely deciding to place a question before voters during an election as to whether or not they believe this tax is a good means to help pay for necessary street maintenance and construction within the City. The Whatcom County Auditor s Office has provided a rough cost estimate (please, again, note this is only an estimate and may not be accurate once we receive the bill) for the November 2014 general election of about $7,226. This figure includes a potential ballot measure from the City of Blaine, as well. Should Blaine not participate in the election, the City s costs will increase by $1,000 or more. The Auditor s Office believes the overall costs to Ferndale will be below $10,000 for participating in the November 2014 election. For reference, our normal, odd-year local election costs (we have no choice and pay these every odd year because we will always have local elected official spots seeking office) is about $4,000 to $4,500. The previous special election to approve the New Ferndale Library bonds cost $45,552.04 in 2013.
ALTERNATIVES CONSIDERED: Approve a resolution allowing voters to decide whether or not to levy the tax for the purposes of street maintenance and construction; do not approve the resolution allowing voters to decide whether or not to levy the tax. Other alternatives in approving the ballot measure include removing any sort of exemption from the ballot title language or modifying the amount of the exemption. LEGAL REVIEW: The City Attorney s Office has reviewed the ballot measure and issues surrounding a potential exemption and agrees the City can levy this tax with voter approval and include an exemption in ordinance or by ballot measure. CONCLUSION: Staff sees a large need for additional revenue to help pay for significant road maintenance and construction revenues. Ultimately, the council will need to decide whether or not to allow voters to make this decision.
RESOLUTION NO. 14-06-16-A A RESOLUTION OF THE FERNDALE CITY COUNCIL PROVIDING FOR A BALLOT PROPOSITION TO BE SUBMITTED TO QUALIFIED VOTERS AUTHORIZING THE IMPOSITION OF A ONE ($0.01) CENT PER GALLON EXCISE TAX ON THE RETAIL SALE OF MOTOR VEHICLE FUEL AND SPECIAL FUEL WITHIN THE CITY LIMITS WHEREAS, the City of Ferndale, Washington, is a "Border Area Jurisdiction" being located within ten (10) miles of a U.S./Canada border crossing; and WHEREAS, the current year-to-year financial support for City street maintenance and construction has not been sufficient to adequately fund the City's street maintenance and construction needs; and WHEREAS, Title 82.47 RCW, authorizes the City to impose an excise tax of up to one cent ($0.01) per gallon on the retail sale of motor vehicle fuel and special fuel sold within the Ferndale City Limits, if the tax is approved by the majority vote of the registered voters within the City, voting on the tax at a general or special election; NOW THEREFORE, the City Council of the City of Ferndale do resolve as follows: Section 1. The Ferndale City Council shall present to the Whatcom County Auditor's Office a proposition to be placed on the ballot for the election to be held on the 4 th day of November, 2014; and said proposition shall state as follows: FERNDALE STREET CONSTRUCTION AND MAINTENANCE TAX ON THE RETAIL SALE OF MOTOR VEHICLE FUEL AND MOTOR VEHICLE SPECIAL FUEL Shall the City of Ferndale impose a tax of up to one cent ($0.01) per gallon on the retail sale of motor vehicle fuel and motor vehicle special fuel, exempting the first 60,000 gallons per month, per fuel station, from collection of the tax in accordance with RCW 82.47, within city limits to be used for construction and maintenance of streets as specified in Ferndale City Council Resolution No. 14-06-16-A? YES NO ADOPTED at the regular meeting of the City Council of the City of Ferndale, Washington held on this 16 th day of June, 2014. ATTEST: Mayor Gary S. Jensen Sam Taylor, City Clerk