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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