SR-6E (8)
~ (~e501Lt11cf) Me Q7C2ll)E
-' FD RB DC/g \finance\treas\share\sruutarr SEP 2 3 1997
Council Meeting September 23, 1997 Santa MOnica, Cal1forma
TO Mayor and City Council
FROM City Staff
SUBJECT Approval of Resolution Amending Utility User's Tax Admrnlstratlve Rules
Introduction
This report recommends that the City Council approve the attached resolution amending
the City'S Utll1ty User's Tax Admrnlstratlve Rules Many of the recommended reVISions are
minor wording changes that will clarify the Intent and ard In the application of the
Administrative Rules Two substantive changes more clearly Identify the responsibilities
of each party (City and utility Service Supplier) when determining the appropriate
application of the City's Utility User Tax ordinance In regard to new and emerging
technologies
Background
The City's Utility Users Tax (UUT) Ordinance (Chapter 672 of the Santa Monica MUnicipal
Code) establishes a tax on the use of various utIlity services Within the City The UUT IS
an Important element of the revenue stream which finances municipal services such as
police, fire, library, and publiC works Utility Service Suppliers are required to collect the
tax from their customers and remit the proceeds to the City It IS Important that they
understand the proper application of the ordrnance, particularly In light of new and
1 9 2~7 ~"
emergmg technologies which mayor may not be subject to the UUT
In September 1996, the City Council adopted a set of administrative rules (ResolutIon No
9086 CCS)mtended to facIlitate the efficient and effectIve collection of UUT revenues The
rules are also Intended to assure that the tax IS correctly applied by all current and future
utIlIty Service Suppliers to all appropriate types of services which they currently proVide or
Will In the future provIde Further diScussions among the City's UUT auditor, other public
agencies. and the utility Service SupplIers have resulted In the revIsions set forth In the
attached resolution
DISCUSSion of Changes
Attachment A to the recommended resolution proVides the text of the Administrative Rules
with the proposed reVISions noted Many reVISions are wording changes that proVide
further c1anficatlon as to the responSibilitIes of both the City and the ServIce Suppliers
concerning Implementation of the tax
The two substantive changes deal with the liability of the Service Suppliers for payment of
past U UT taxes that may not have been collected These are discussed below
Section I A. of the ongmal rules stated that the ServIce Supplier was not
responSible for payment of past UUT taxes that were not collected due to the
Inaccuracy of boundary Information supplied by the City or due to the City'S failure
')
-
to make appropnate corrections to the utility Service Supplier's billing data The
proposed amendment limits this non-liability "to the extent that the City reviews such
data at the request of the utility ServIce Supplier"
Section I.G. IS being revised to add language stating that upon request of a Service
Supplier, should the City review the applicability of the UUT to certain services that
were not previously taxed and determine that these services should have been
taxed. the UUT would apply prospectively provided the Service Supplier previously
acted In good faith However, If It IS determined that the Service Supplier did not act
In good faith In failing to apply the UUT, the City could apply the UUT retroactIvely
Budget/Flnanclallmpact
There IS no budget or financial Impact associated With approval of the attached revIsions
to the City's UUT Administrative Rules
Recommendation
City staff recommends that the City CounCil approve the attached resolution which adopts
the amended UUT Administrative Rules
Prepared by Mike DenniS. Director of Fmance-Clty Controller
Ralph Bursey, City Treasurer-Revenue Manager
DaVid Carr. ASSistant City Treasurer
Attachment Proposed Resolution
...
.)
-------
;
FD RB DC /g \fmance\treas\share\uutrures
Council Meeting September 23. 1997 Santa Monica. California
RESOLUTION NUMBER 9202 eccs)
(City Council Series)
~
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MONICA
AMENDING THE CITY"S UTILITY USER TAX ADMINISTRATIVE RULES
WHEREAS. the City of Santa MOnica's Utility Tax (UUT) Ordmance (Chapter
6 72 of the Municipal Code) places a utility users tax on the use of certain utility
services withIn the City,
WHEREAS, the utility ServIce Supplier (as that term 15 defined In Section
672 010(e) of the Municipal Code) IS reqUired to Impose and collect the UUT tax from
Its customers. and remit the tax to the City,
WHEREAS, the cooperatIon of the utility Service Supplier IS of great Importance
to the appropnate Implementatton of the City'S UUT ordinance,
WHEREAS, the CIty Council adopted Resolution No 9086 (CCS) on September
10. 1996 which established and approved the City's UUT AdmInistratIve Rules,
WHEREAS, the City now proposes to amend the UUT Administrative Rules to
further faCIlitate Implementation of the City's UUT ordinance,
, ~
NOW. THEREFORE, the City Council of the CITY OF SANTA MONICA does
hereby resolve
.
SECTION 1 The UUT AdminIstrative Rules are hereby amended as detailed In
Attachment "A" to this resolution. and shall be followed and Implemented by the Tax
Administrator of the City'S Utility Tax Ordinance
SECTION 2 A copy of the amended UUT Administrative Rules shall be
dlstnbuted, WIthin thirty days hereof, to all utility Service Suppliers that conduct
business wlthm the City
SECTION 3 The City Clerk shall certify to the adoptIon of thiS Resolution, and
thenceforth and thereafter the same shall be m full force and effect
APPROVED AS TO FORM
, 1/
dl 4- I ~
. lJLLLiLtl: -A J ...&111..1 fJYt. eA..
MARSHA JONES MOUTRIE
City Attorney ..
~ .
Attachment A
Utility Tax Administrative Rules
l To assist utility ServIce Suppliers that perform the valuable public service of collectmg
the Cfty'S'UtllJty Users Tax (UUT), CIty wIll assume the followmg responsIbIlities
A Subsequent to adoption of these administrative rules, City will assure the
accuracy of Its boundary Information needed for utility billing and tax collection
purposes, by offering to revlewtt=tg and correcttflg the utrllty ServIce Supplier's
computerized bIlling data no less than once a year The City will also make
available. UDon reauest bv a utilitv Service SUDDlier. its current boundarY
- - - - - -
information. The utility Servrce Supplier shall not be responsible or liable for the
collection or payment of any UUT taxes that were due prior to the adoption of these
Administrative Rules that were not collected due to the Inaccuracy of information
provided by the City or due to the City's failure to make approprrate corrections to
the utIlity Service Supplier's billing data to the extent that the City reviewed such
data at the reauest of the utilitv Service SUDDlier
- - , -
B The City Will proVide utility Service Suppliers With accurate and timely ordinance
information, Including ordmance amendments. at a central10catron (currently the
MuniciDal Re$ource Web site: httD:\www.mrc-usa.com e 9 . \I.'eb rage on
Internet) City Will prOVide written notrce of ordinance changes to persons
deSignated by the utility Service Supplier In the absence of speCial Circumstances,
as determmed by the Tax Administrator In hiS or her sole discretIon, the utility
ServIce Supplier shall begin Implementation of the UUT tax change wlthm sIxty (60)
days from the date on which the utility Service SupplIer receives the written
notifIcation from the City If the 60th day IS not the first day of a month, then the
utility ServIce Supplier shall Implement the changes no later than the first billing
cycle on the first day of the month follOWing the month In which the 60th day
occurs To "begin ImplementatIon" means to calculate and place the UUT tax In the
customer billing
C As !,rovided in Public Utilities Code Section 799. =Fthe City Will assume sole
responsibility for defendIng any legal challenge regarding the validity of the City's
UUT Ordinance, any part thereof, or any collection thereunder, and shall defend
and hold harmless any tax collecting agent (utility Service Supplier) named In such
action for properly performmg Its legal obligations set out In the UUT Ordinance
o The City, In Its sole discretion, Will reimburse utility ServIce Suppliers for the
reasonable costs assocIated With an extraordinary audit request (includin~. but not
limited to e-g-, modifications to eXisting billing software in order to respond to an
audit request)
, ,
E The City will take reasonable steps to assure that all utIlity Service Suppliers,
rncludlng new market entrants. are correctly applyrng and collectrng the UUT tax
F To the extent feasible. the City Will permit utility Service Supphers to follow the
same payment and remittance protocol for UUT collections that IS generally
employed by other California public agenCies, provided that such protocol IS
consistent With the City's UUT Ordinance
UUT taxes may be remitted by electronic funds transfer (EFT) in lieu of U.S.
Mail. provided that such protocol is a~reed to by thfi' Tax Adminstrator. For
example:
The utilitv Will initiate an Automated Clearinahouse tACH} credit
- -.
transfer on the due date that will be received by the City's bank on the
followina business day. The ACH will be in a format that identifies the
- -
type of ~ayment bein(l made. A monthlv written report of amounts
remitted, includina amounts billed. write-offs. unpaid liabilitv.
adJustmenl$ and net tax oayable will be provided by U.S. Mail.
G Followmg the effectIve date of these Administrative Rules, the Tax Administrator
shall give notice to the utility Service Suppliers Within the City that they may request
that the Tax Admmlstrator, In consultation With the CIty Attorney, render a
determination of the application of the UUT tax to their various eXisting services
If such request IS made Within ninety (90) days of the notIce by the Tax
Administrator to the utility Service Supplier of these Administrative Rules, then any
determination by the Tax Administrator shall apply prospectively The Tax
Administrator shall give the utility Service Supplier at least SIXty (60) days wntten
notice follOWing the determination of tax application before Implementation of such
changes shall be required If the 60th day IS not the first day of a month, then the
utIlity Service Supplier shall Implement the changes on the first day of the month
followmg the month 10 which the 60th day occurs To "begm Implementation"
means to calculate and place the UUT tax In the customer billing The Tax
Administrator and City Attornev shall not be reauired to render a
- - -
determination with oros~ective effect under this subsection where a utility
Service Suoolier fails to aODlv the UUT at all. or fails to aDolv the tax to a
- - - - - - - -
service that the utility Sfi'rvice Sup~lier. in (load faith. believes to be taxable.
A utility Service Su~~lier's failure to aooly the UUT tax to a servIce shall not
be deemed in good faith . for purooses of this subsection. if the service is
predominantly vi$wed by the utility Service SUD~lier's industry as beina
subject to the UUT tax or, in the case of telecommunication services. has
been directly determined by the IRS within the oast six months or more. to be
subiect to the federal excise tax.
~ ,
H Where new utility technologies are employed or new utility services are being
offered, a utility Service Supplier may request that the Tax AdminIstrator. m
consultatIon With the City Attorney, render a determination of the application of the
UUT tax to such new technology or service Within nmety (90) days of proViding such
services or technologies Upon rendenng a determmatlon of applicability. the Tax
Administrator shall seek prospective application of the UUT tax Ordinance to such
technologies or services The Tax Administrator shall give the utility Service
Supplier at least sixty (60) days wntten notice before Implementation of such
changes shall be required If the 60th day IS not the first day of the month, then the
utility Service Supplrer shall Implement the changes on the first day of the month
follOWing the month In which the 60th day occurs To "begin Implementation"
means to calculate and place the UUT tax In the customer billing
I Regarding Paragraphs G and H above, the Tax Administrator, In his or her sole
discretion and upon consultation With the City Attorney, may participate In an
adVISOry committee. compnsed of representatives of publiC agencies With UUT
ordinances, to develop and recommend to such public agencies (after meeting and
conferring With utility representatIves) Uniform applications of the UUT tax to
vanous utIlity services and technologies, Uniform Implementation protocols, and
appropnate amendments to UUT ordinances to reflect Industry, regulatory, and
technological changes
J The Tax Administrator shall not reduce or waive any obligation to collect any tax
or any obligation to pay any penalty pursuant to Santa Monica MuniCipal Code
Sections 6 72 070(d) and 672 090(e), unless the affected utility Service Supplier
requests a determination as IS provided for In Paragraphs G and H above Pending
completion of the requested determination. the utility ServIce Supplier shall contmue
to collect all applicable taxes
K. The Tax Administrator shall take reasonable stees to notify all Service
- -
SUDoliers Drovidina Similar services of any determination made under
- - -
Daragraph G. or H.
II The Tax Administrator has the nght and obligatIOn to assure fair and reasonable
compliance With the UUT Ordinance Due to the compleXity of utJ/tty services,
technologIes. and tax administration. the Tax Administrator may reqUire speCIal outsIde
expertIse to assist In performing compliance reView of the UUT ordinance Utility Service
Suppliers have a legItimate mterest In assunng that such outside firms mamtaln the
confidentIality of utility customer information and conduct thelf complIance revIews In a
profeSSIonal and effiCient manner The Tax Administrators use of speCial outside expertise
sha/J therefore be subject to the followmg rules
~
\
~
A. The outside firm will provide. at the beainnina of each and everv audit
- --
engagement. a letter or resolution from the City to the Service Supplier that
identifies the outside firm as an authorized agent of the City.
AS The outside firm will execute a non-disclosure agreement (m a form acceptable
to .the City Attorney) m which the outside firm shall agree to mamtaln the
confidentiality of customer information and not to use mdlvldual customer
mformatlon for any purpose other than the UUT compliance review of thIs City
BC The outside firm will not Initiate contact with a utility customer In the course of
performing Its compliance activities. except with the prror wrrtten consent of the
utility Service Supplier
GO The outside firm shall fully disclose to the City any potential conflict of Interest
(e g . prior or proposed representation of prrvate utility customers Within the City)
9E The outside firm shall not make any data requests of a utility Service Supplier
by a City issued subpoena unless the outside firm first receives the review and
approval of the Tax Administrator prror to the request being made to the utility
Service Supplier
EE The outside firm shall be authorrzed to perform any compliance revIew
(Including sampling audits and computerrzed reviews) WhiCh, In Its profeSSional
opinion, IS reasonably necessary to perform ItS contractual obligation to the City
If a utility Service Supplier refuses to cooperate In connection With such compliance
reView, the outside firm shall Immediately adVise the Tax Administrator so that the
Tax AdminIstrator may take approprrate remedial steps
FG The outsIde firm Will use Its best efforts to accurately Identify all errors, whether
such corrections are In favor of the customer, the City, another public agency, or the
utility Service Supplier
6H The Tax Administrator shall make available to the utility Service Supplier a
copy of any compliance report prepared by the outside firm regardmg such utility
Service Supplier The utility Service Supplier shall be afforded an opportunity (at
least thirty (30) days) to respond to any aspect of the report before such report
becomes final The final re~ort will identify and address aU substantIve wrItten
comments on the draft reoort submitted bv the utilitv Service SUDDlier.
- - - - -
,
~
III DIspute ResolutIon Process
A If a utility Service Supplier disputes an appllcatron of these Administrative Rules,
an Interpretation of the UUT Ordmance. or any other action by the Tax Administrator
(Includmg Its outside firm). the protestmg utility Service Supplier may request a
heanng pursuant to Paragraph B below and In addition to any other request for
relief may request to the Tax Administrator that the matter be submitted to voluntary
non-bmdlng mediation within thirty (30) days of the Tax Admmlstrator's actions If
the Tax Admmlstrator In hiS or her sole discretion agrees to submit the matter to
voluntary non-binding mediation. and If the matter IS not resolved Within thirty (30)
days follOWing the conclUSion of any mediation, the protestmg utility Service
Supplier may request that the matter be set for a hearrng before the City Council at
the next available CIty Council meeting
B If a heanng before the City Council IS requested, the City Councilor at the
City Council's direction. a hearing officer, shall hear the matter pursuant to Santa
MOnica MuniCipal Code Section 6 16 010 et seq If a hearing exam mer hears the
matter, the deCISion of the hearing examiner shall be reviewed by the City Council
at the next avaIlable City Council meetmg follOWing the hearing examiner's deCISion
and shall be accepted, rejected or modified follOWing arguments from all parties
concerned The City Council's deCISion shall be final and subject to JudiCial review
pursuant to CCP Section 1094 5
9 \finance\treas\share\uutattac b
, ",
Adopted and approved thIS 23rd of September 1997
. 4-/-:~
Roben Holbrook. Mayor Pro Tern
I. Mana M Stewart. CIty Clerk of the Cuy of Santa Moruca. do hereby certIfy that the
foregomg ResolutIon 9202 (CCS) was duly adopted at a meetmg of the City CouncIl held on
the 23rd of September. 1997 by the followmg vote
Ayes Councllmernbers Ebner. Femstem, Genser. Greenberg. Holbrook. Rosenstem
Noes CouncIlmembers None
Abstam: CouncIlmembers None
Absent CouncIlmembers O'Connor
ATTEST:
"-
~~:=--w ~~.u~
.I........... ...
Mana M Stewan. CIty Clerk