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Urbana staff recommend raising local motor fuel tax to 12¢ with CPI indexing; council debates phased approach, diesel capture and equity
Summary
Public Works Director Tim Cowan recommended increasing Urbana’s local motor fuel tax from 5¢ to 12¢ per gallon with a CPI‑U inflation index, projected to yield about $1.08 million per year; councilmembers asked for options for staged increases, a diesel component and information on equity impacts for low‑income residents.
Urbana Public Works Director Tim Cowan presented a comparative analysis and the need for a local motor fuel tax market‑rate adjustment, recommending the highest option considered: a gasoline component of 12¢ per gallon together with a CPI‑U inflation factor (Option 4).
Cowan said the city's pavement condition index has declined into the "poor" category and that state and federal special funding (including Rebuild Illinois) created temporary spikes in recent years that are now waning. He noted construction costs have risen significantly since 2015 and that local motor fuel tax revenue should be increased to slow the network’s decline.
Cowan outlined four alternatives: (1) increase to 10¢ (no CPI); (2) 10¢ with CPI adjustment; (3) 12¢ (no CPI); and (4) 12¢ with CPI adjustment. He said Option 4 would add roughly $1.08 million per year based on an assumption of 12.8 million gallons sold per year in Urbana and projected that a 12¢ rate with CPI would cover about 5% of a $21.7 million infrastructure gap identified in the CIP asset‑management summary.
Councilmembers asked whether neighboring communities were considering similar increases and whether the proposal should be staged over several years rather than taken in a single large step. Several members urged consideration of fairness: Tim Cowan acknowledged the tax is regressive and recommended discussions about complementary mechanisms to address equity concerns. Councilmembers also asked about adding a diesel component to capture heavy‑vehicle wear, how CPI indexing would be applied ("it would increase incrementally based on CPI‑U changes"), and how electric vehicles affect fuel‑tax revenue; Cowan noted state registration fees for EVs are a partial offset but do not fully make EV owners pay the equivalent share for road use.
Cowan outlined the schedule: gather feedback through Sept. 16, bring an ordinance to the Committee of the Whole on Sept. 16, and, if forwarded, seek council action on Sept. 23 for an effective date of Jan. 1, 2025.
Next steps: staff will provide additional analyses about staged increases, diesel options and equity impacts ahead of the Committee of the Whole review on Sept. 16.
