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Committee approves forwarding local motor-fuel tax increase to council, adds CPI cap
Summary
Committee voted to send an ordinance raising Urbana's local motor-fuel tax in staged increases (7.5¢ → 10¢ → 12.5¢) and indexing thereafter to CPI, with an amendment capping annual CPI adjustments at 5%. The motion passed by roll call and will go to City Council.
The Committee of the Whole reviewed a draft ordinance amending Urbana City Code Chapter 22 to increase the local motor-fuel tax and authorize a phased schedule of rate increases. Staff summarized options that would raise the current rate (5¢) incrementally — example paths discussed included steps to 7.5¢, 10¢ and 12.5¢, followed by indexing to the consumer price index (CPI).
Finance staff described revenue and fairness implications, noting that even stepped increases would not fully close the city's road-funding gap but would slow pavement deterioration. The committee discussed caps and phasing; several members favored a gradual approach. Concerns were raised about automatic CPI indexing in perpetuity. Councilmember James moved to cap future CPI adjustments at the lesser of CPI or 5% annually; Mary Alice seconded and the amendment passed by roll-call.
With the amendment in place (CPI adjustments capped at 5% annually), the committee approved forwarding the ordinance to City Council on the regular agenda with a recommendation for approval. Staff noted the ordinance would take effect with staged increases beginning 01/01/2025 if adopted by the Council.
Next steps: the ordinance, as amended, will be included on the City Council agenda for consideration; staff will provide supporting fiscal exhibits and notices to local fuel retailers as part of implementation steps if the Council adopts the change.
