Gas prices Thursday at the Newport Conoco Phillips 76 station were 33 cents higher than the national average of $2.465 for regular grade and 13 cents higher than the Oregon average for regular grade, according to AAA. The Newport City Council is considering enacting a fuel tax that would raise prices and create funds for street improvements. (Photo by Larry Coonrod)

Newport gas tax discussion fuels questions, city council still exploring options



City Attorney Penelope McCarthy presented the Newport City Council with a local fuel tax draft ordinance during Monday’s session, but council decided that more fact-finding was in order.

No motions were made either for or against the proposed tax.

The recently adjourned 2009 Oregon Legislature passed a bill that prohibits new local fuel taxes until Jan. 2, 2014.

HB 2001 won’t take effect until October, however, which gives municipalities a narrow window of opportunity to enact fuel taxes.

“This was an opportunity to explore the option,” said Mayor Bill Bain. “We agreed to think on it, find some structure and make a decision to go forward or not at a later time.”

Should Newport enact a fuel tax, funds would be used solely for much-needed street improvements. Marine, aircraft and off-road fuels would likely not be taxed.

“A fuel tax would have a dedicated purpose for transportation-related items such as paving, and bicycle and pedestrian paths,” Bain said. “It would be nice to have it fund parts of the General Fund, but that is not the goal. The goal is to find a way to address streets.”

With funding from the state gas tax allocation dwindling each year, the city has had to supplement the Street Fund with money from the General Fund, McCarthy said.

“The FY09-10 budget includes a transfer of approximately $374,000 from the General Fund to the Street Fund,” she said.

The result is that only a small portion of street improvements are being met, and the city is finding itself farther and farther behind.

The city’s choices for a fix are limited, Bain said. Street utility fees are basically a property tax surcharge, and a fuel tax would affect everyone, not just residents who live on a certain street.

“Newport could anticipate approximately $80,000 to $100,000 annually for every one cent of fuel tax levied,” said City Manager Jim Voetberg.

The city received $230,000 of “Obama bucks this year for paving, but we’ll be probably be using a lot of that for the Bay Boulevard project,” Bain said. “That money has to be used for federally approved projects.”

City Engineer Lee Ritzman said Newport has 42 miles of paved streets, 12 miles of graded gravel roads and a number of miles of unimproved streets. To overlay a 33-foot-wide paved street would cost about $100,000 per mile.

McCarthy’s draft was based on similar ordinances in other communities. It recommends a 2 or 3 cent fuel tax. Collection and distribution would be handled by the state.

Coquille has had a 3-cent-per-gallon fee for a little over a year, with no pattern of fuel sales reduction. Gas is still cheaper than neighboring communities.

“When Veneta implemented a local fuel tax fee, they did not see a drop in sales, nor did they see an increase in the cost per gallon,” McCarthy reported.

Dundee has a 2-cent-per-gallon tax. There has been virtually no change between FY08-09 and FY 07-08. Warrenton and Astoria both implemented a 3-cent gas tax last year. Warrenton did not see any reduction in sales.

Several local gas station managers and owners, as well as other residents, were invited to share their thoughts.

Community member George Lewis asked for an explanation regarding wholesale gas prices versus retail.

“The papers say retailers are buying fuel for $1.79 wholesale, and it was selling at $2.799 today,” he said. “That’s more than a dollar a gallon over resale.

“Why do we allow our retailers to manipulate a higher price than other areas?”

Newport Chevron owner Craig Kjeldsen said the quoted $1.79 price is misleading. That’s the East Coast price, and it doesn’t reflect federal and state taxes.

“When you add the cost of freight, we make about 20 cents per gallon over what we pay for labor, maintenance, expenses and taxes,” he said. “”If people use a credit card, that costs 11 cents. That cuts our profit to 9 cents a gallon.

“When I opened my first station in 1987, there were 13 gas stations in Newport. Now there are six. There aren’t many stations that can operate on a 4-percent gross profit margin. It’s really unfortunate that the public doesn’t understand this.”

Kjeldsen and Steve Carver, the manager of Truax Oil and Carson Oil, said that local folks will travel to Depoe Bay, Waldport or Toledo to buy less expensive gas if Newport’s prices are higher.

“Lincoln County is one of the lowest income per capita counties in the state,” Kjeldsen said. “In the summer, it wouldn’t matter. Transient traffic will pay 2 to 3 cents more.

“In the wintertime, when we’re down to local people, we’d lose a lot of volume because they would buy their fuel elsewhere.”

Coquille may not be hurting from its fuel tax, but stations there are buying a lower-priced fuel, he said.

“They’re not buying branded fuel with all the additives,” he said. “If our suppliers didn’t give us a break, we’d be out of business. If we add 2 or 3 cents, now we’re even less competitive.

“I understand where the city’s coming from, but this puts us at a disadvantage.”

Fred Houghton, manager of a Newport Shell station, said he was blessed because his company has numerous stations that can spread the load.

“A penny isn’t going to keep us going or close us,” he said.

Shell has a station in Veneta, he said, and according to the council’s packet information, an implemented fuel tax did not cause a drop in sales.

“They didn’t see an increase either,” Houghton added. “Right now is the time of year fuel prices are down, and people are traveling. Veneta was expecting a 5- to 10-percent increase in fuel sales, and it’s not happening.

“Yeah, they’re breaking even with last year, which is mighty poor because gas prices were $4 a gallon. Yet if you go a few miles outside of Veneta, prices are about four cents less. Same station, same company, and they’re making a fortune.”

Houghton suggested making the fuel tax county-wide.

Local resident Eileen Obteshka asked if it would be legal to impose an ordinance that would only collect a fuel tax during high tourist season.

“That’s something we need to check out to see if it’s a possibility,” McCarthy said.

Bain said that enacting the tax during June, July, August and September would make sense. Those are the highest months for room tax collection as well, he said.

Councilor Patricia Patrick commented that she would like to know why the city has been deferring maintenance on roads that need work in the first place.

“I’d like to know how we got here,” she said. “Obviously, there’s got to be a reason why we’re at this juncture, and I think we owe it to our citizens to give them an answer.”

Bain said the issue could be rehashed on the Aug. 3 agenda.

“Unfortunately, it probably won’t change much as to where we are now, but maybe it would be somewhat satisfying to find out exactly how we painted ourselves into this corner,” he said.

“We’ll contact other county communities, look into doing it just during the summer months and consider dual rates. There’s a number of possibilities. We’ve got to find out whether we can do some of these things. They may not be legal.”



Contact Kate Rowland at krowlandstayton@gmail.com.

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