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Page 1 of 3 <br />REPORT <br />To the Honorable Mayor and City Council <br />From the City Manager <br /> <br />August 24, 2015 <br />SUBJECT <br />Agreement with the California State Board of Equalization for the collection of AB 1717 <br />Prepaid Wireless Utility Tax <br /> <br />RECOMMENDATION <br />Adopt a resolution approving and authorizing the City Manager to enter into an <br />agreement with the California State Board of Equalization (BOE) for the collection of AB <br />1717 Prepaid Wireless Utility Tax; adopt a resolution authorizing certain City staff and <br />the City’s UUT/CUT Consultant, MuniServices Inc, to examine BOE’s records as <br />needed; and authorizing the City Manager and City Attorney to approve all other related <br />documents and actions necessary in connection with this revenue. <br /> <br />BACKGROUND <br />Traditionally, a city’s Utility Users’ Tax or Communication Users’ Tax is collected by <br />wireless service providers who include the charge on their customers’ monthly invoices. <br />In Redwood City, wireless services fall under the purview of the Communication Users’ <br />Tax (CUT), Redwood City Code Chapter 32, Article XII, and “Communication Users’ <br />Tax.” In contrast to the traditional arrangement, customers who purchase pre-paid <br />wireless services usually avoid paying any CUT due to collection complications. With <br />prepaid wireless, there is no contract, no monthly invoices, and the prepaid wireless <br />services are usually sold by retailers, not service providers themselves. It is estimated <br />that approximately 70% of all prepaid wireless services are sold by retailers. Since <br />these transactions bypass our local CUT collection process, the City experiences a <br />significant loss of revenue. Additionally, traditional phone plan users are treated <br />disparately, and the burden of the CUT is not equally shared among all telephone users. <br /> <br />Over the last four years the City has experienced an almost 23% drop in wireless CUT <br />revenue, as more wireless customers convert from postpaid to prepaid services. The <br />Council actively supported legislation AB 300, the Prepaid Telephony Services <br />Surcharge and Collections Act which was vetoed by Governor Brown in October 2013 <br />because of the high cost of implementation. In response, local government <br />representatives worked on similar but refined legislation, AB 1717 Prepaid Wireless <br />Utility Tax, which was approved earlier this year. <br /> <br />The FY 2015-16 adopted budget included revenue estimates for this funding source in <br />the utility users’ tax fund with an assumption of collection beginning in January 1, 2016. <br />These funds were earmarked in the budget for affordable housing purposes. The <br />legislation authorizing the prepaid wireless CUT will expire on January 1, 2020. <br />6.3.B. - Page 1