Food and Beverage Tax

The Ashland City Council seeks voter approval of a change to the way the Food and Beverage (F&B) Tax revenue is allocated in order to increase the amount dedicated to City parks and to provide funding for a major street maintenance and rehabilitation program.  This change would not affect the current tax rate of 5% or change the tax’s sunset date of December 31, 2030. 
 
This measure will be on the November 8, 2016 ballot. 

Before reading further, please take a few minutes to watch this very brief video about street maintenance.  It’s critical that everyone understand the City’s street maintenance issues – as explained in the video -- in order to develop an informed opinion on this issue.
 

Background
The F&B tax was approved by voters in 1993.  Voters in 2009 approved an extension of the tax’s sunset date to December 31, 2030.  A 5% tax is charged on all prepared foods and non-alcoholic beverages sold in Ashland by restaurants, grocery store delis, caterers, coffee shops, etc.  The businesses keep 5% of the amount collected to cover accounting expenses associated with collecting the tax.  The remainder is used for debt payment for the wastewater treatment plant (80%) and for the acquisition, planning, development and rehabilitation of open space and City park lands (20%).
 
Largely due to a refinancing at favorable bond rates, for the past few years, the F&B tax revenue collected for the debt has been greater than the amount needed for debt payments. The chart below illustrates the surplus, which is estimated at $1.5 million in total through June 30, 2016. 

 

What is proposed?
Passage of the November ballot measure would modify the current F&B tax allocation in two ways: 1) it would increase the allocation to Ashland Parks and Recreation Commission from 20% to 25%; and 2) it would allocate the tax revenue not required for the wastewater treatment plant to a street repair and rehabilitation program.
 
It would not increase the current 5% tax and does not change the sunset date of December 31, 2030.
 
Why Street Maintenance?
The City uses two sources of revenue to maintain city streets: 1) the gas tax collected by the State and shared with Oregon communities, including Ashland; and 2) the street utility fee, which is paid monthly by Ashland utility customers.  These two sources of revenue provide funding for routine maintenance such as crack sealing, striping, slurry seals, pothole repair, etc., but not for major repair and reconstruction.
 
The cost to bring Ashland’s arterial and collector streets up to “excellent” pavement condition is estimated at $10.5 million, after which the costs of maintenance per mile can be programmed and minimized.   
 
It costs about $285,000 to maintain one mile of road with an overlay, but it costs $1.4 million to reconstruct that same mile of road. Regular maintenance can extend the life of a street for more than 30 years.  Streets without regular maintenance deteriorate after about 15 years as the asphalt cracks, water seeps in and gradually the street fails and must be reconstructed.


 
Why increase the allocation for parks?
Since 1993, the Parks and Recreation Commission has added 367 acres of new park land in Ashland.  Some of the land has been developed, such as the new Ashland Creek Park, and some areas of parks have been rehabilitated, such as the Atkinson Bridge in Lithia Park and the Daniel Meyer pool and building. These projects and others were paid for with F&B tax revenue.  However, as the park inventory and park features increase, funding is needed to repair and rehabilitate aging facilities. An increase from 20% to 25% in the allocation to Parks would help offset these growing expenses.
 
Why not use the excess tax to lower wastewater rates?
The F&B tax is restricted to wastewater debt service.  The F&B ordinance does not permit the use of the tax for operating costs.  If left as is, the excess money would remain, unused, in the waste water fund until new debt is incurred. At that point, the excess funds could be used to offset the cost of paying the new debt.
 
Why not lower the F&B tax rate to 4%?
It would be possible to lower the rate to 4% and still cover the cost of existing wastewater debt service while continuing to provide Ashland Parks and Recreation with the same amount of revenue it currently receives, but not an increase.
 
Should the City then wish to move forward with the street repair and rehabilitation program, an alternative source of funding would be necessary. 
 
Would the F&B tax pay for maintaining and repairing all Ashland streets?
No.  The tax revenue would fund a program whose aim is to bring all arterial and collector streets up to “excellent” pavement condition.  Arterial and collector streets are the more heavily traveled streets in the City, such as Hersey, Oak, North Mountain, Walker and Tolman Creek. 
 
What happens after the current waste water debt is retired?
The current waste water debt will be retired at the end of fiscal year 2022.  Taxes collected after that time could be used only for parks, street maintenance or new waste water debt unless other purposes are approved by the voters.
 





 
 

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