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9A3 UTILITY USERS TAX TASK FORCE UPDATE An ad hoc attorneys group working as a task force formed by the League and the California State Association of Counties (CSAC) has com- pleted a two -year effort to provide guidance to cities that impose their Utility User Tax on cellular phone calls. Background: The goal of the group – known as the Utility Users Tax Technical Task Force (UUT TTF) – was to develop a mechanism to recommend "best practices" for the uniform application and collection of the utility users tax, which would assist wireless carriers in complying with the various local tax requirements of the many cities and counties in California. The federal "Wireless Telecommunica- tions Sourcing Act of 2000" was the impetus for creation of the Task Force. Approximately 100 of the 150 cities and coun- ties that have adopted a utility users tax ordinance impose their utility users taxes on cellular phone calls. The authorized amount of the tax, however, is not being, and has not been, uniformly and correctly collected by all service providers. The statewide result is a continuing underpayment of tax to city coffers of several millions of dollars each year. Over the past ten years, several different methods have been used by the wireless carriers to calculate the tax. Today, two of the major carriers, AT &T Wireless and Verizon Wireless, collect about 40 percent of the full amount of the tax authorized by the ordinances because of their alleged inability to track the origination or termina- tion of mobile calls, which they assert is required to establish a nexus for the imposition of the tax. The other three major wireless carriers (Nextel, Sprint, and Cingular) collect 100 percent of the authorized amount. AT &T Wireless and Verizon Wireless, however, contended that cities might not use the federal law without first obtaining voter approval under Propo- sition 218. After considering various "compromise" proposals, the Task Force recommended that cities consider seeking a judicial resolution on this issue by means of a "friendly" declaratory relief action. The Task Force then sought the input and com- ments of the League's Legal Advocacy Committee, which suggested that an ad hoc group of inter- ested city attorneys be organized to analyze the legal issues and options for cities (and counties) affected by the utility user tax /cell phone problem. The city attorney members of this ad hoc group include Michael Colantuono, First Vice President and City Attorney, Barstow & La Habra Heights, Betsy Strauss, City Attorney, Rohnert Park, and representatives of the six agencies with the most tax receipts at risk: San Francisco, Los Angeles, San Jose, Oakland, Long Beach, and Los Angeles County. Task Force Memo Presents Options The group has produced a memo that analyzes the relevant legal issues and the options available to cities. (A copy of the memo is available on the League website, under Issues and Advocacy/ Revenue and Taxation.) The group determined that it could recommend a "one- size - fits -all" approach for the more than 100 affected taxing agencies. The group concluded that the choice among the options — implementa- tion without litigation, "friendly" test suits, or other litigation — must be made by each taxing agency in light of its own ordinance, administrative and legis- lative record, and unique circumstances. The group also noted that legislation could help, but that such legislation would not be an effective immediate or primary strategy to resolve these issues. Finally, the group suggested the League play its more usual role of coordinating efforts by and communications among agencies affected by this issue. The group further recommended the League put the word out to solicit information from any agency that intends to enforce its ordinance and to defend a suit filed by AT &T Wireless or Verizon Wireless, or to bring an enforcement action against the carriers if they should refuse to enforce an ordinance, so the League may track the resulting litigation and coordinate amicus assistance. A series of workshops were held to brief finance directors on this issue in mid - January. Further efforts to distribute this information are in process. Visit the League's Official Web Site-- www.cacitjes,org PRIORITY FOCUS /PAGE 3