CC RES 2014-050 RESOLUTION NO. 2014-50
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES AUTHORIZING THE INDEFINITE SUSPENSION OF COLLECTION OF
UTILITY USER TAX BY TELECOMMUNICATION PROVIDERS FROM THE CITY'S
TAXPAYERS UNTIL SUCH TIME AS REVISIONS TO THE CITY'S UTILITY USER TAX
ARE APPROVED BY THE CITY'S VOTERS AND CREATING A SEPARATE
ACCOUNT COMMITMENT ENCUMBRANCE OF THE GENERAL FUND REFERRED
TO AS THE "UTILITY USERS TAX TELECOMMUNICATION CLAIM ACCOUNT"
WHEREAS, in 1993, the City Council adopted the City's Utility Users Tax ("Tax" or
"UUT"). The amount of the Tax is 3%. It is imposed on City residents who use telephone
service, electricity, co-generated electricity, natural gas, and water; and
WHEREAS, subsequently, the voters of the State of California adopted Proposition
218; and
WHEREAS, to comply with Proposition 218, in 2004, the City Council placed the
Tax on the ballot, and the voters ratified the existing Tax at the same 3% rate; and
WHEREAS, the City's Tax originally was imposed upon all telephone services that
were subject to the Federal Excise Tax ("FET"). In response to litigation, in 2006, the
Internal Revenue Service issued a ruling stating that the FET does not apply to most
common telephone billing plans. This invalidated the basis for the City's Tax as applied
to telephone service; and
WHEREAS, in response to these events, some cities, including Rancho Palos
Verdes, amended their ordinances without voter approval to delete the reference to the
FET and replaced it with other terms to cover telephone services that had been subject
to the FET. Other cities placed their UUT measures on the ballot, and some cities took
no action. Subsequent litigation and court rulings clarified that such changes to the UUT
ordinances require voter approval; and
WHEREAS, since 2006, many changes have occurred with respect to telephone
services that have caused the definitions in the UUT to become outdated. Some types of
telephone services currently are not subject to the tax, while others are. This inequity
cannot be corrected without placing revisions to the Tax on the ballot for approval by the
voters; and
WHEREAS, recently, new legal challenges and claims have been filed against
other cities that did not place their amended utility user taxes on the ballot. Attorneys in
those cases have claimed damages and substantial attorney's fees; and
WHEREAS, on August 13, 2014, City resident Sharon Yarber filed a claim against
the City in the amount of$5 million regarding UUT that the City has collected since 2006;
WHEREAS, Section 3.24.030 of the City's Municipal Code states: a claim for
refund of a tax that has been improperly collected or paid to the City must be presented
to the City within one year of the date of the accrual of the claim.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF RANCHO PALOS
VERDES DOES HEREBY FIND, RESOLVE AND ORDER AS FOLLOWS:
SECTION 1. The City Council hereby orders City Staff to notify providers of
telecommunications services within the City to cease collecting the City's Utility User Tax
from the City's taxpayers until such time as revisions to the City's Utility User Tax are
approved by a majority of the City's voters.
SECTION 2. The City Council hereby orders City Staff to establish a separate
Commitment encumbrance of the City's General Fund, which shall be referred to as the
"Utility User Tax Telecommunication Claim Account or"UUT Claim Account." City Staff is
directed to determine an estimate of the total Utility User Tax collected by
telecommunication providers from taxpayers in the City and remitted to the City during
the twelve (12) month period beginning August 13, 2013. Once the total is determined,
Staff shall transfer such amount, as well as all Utility User Tax received from
telecommunication providers after August 19, 2014, into the "UUT Claim Account."
SECTION 3. The City Council hereby orders that funds that are held in the UUT
Claim account shall only be available for payment of claims or refunds relating to Utility
User Tax payments that were paid previously to the City; said funds shall not be available
for use for any other purpose until taxpayer claims for refunds are paid and until another
resolution is approved by the City Council authorizing the transfer of any remaining funds
back to General Fund reserves.
PASSED, APPROVED and ADOPTED this 19th day of August 20" .
, I
isk-,„
1110 Mayor
Attest:
ity Clerk
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES )ss
CITY OF RANCHO PALOS VERDES )
I, Carla Morreale, City Clerk of the City of Rancho Palos Verdes, hereby certify that the
above Resolution No. 2014-50 was duly and regularly passed and adopted by the said
City Council at a regular meeting held on August 19, 2014.
City Clerk
Resolution No. 2014-50
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