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CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
Date: January 13, 2002
o.~..., "
Subject: Resolution of the Mayor and
Common Council authorizing the Mayor
to execute a Settlement Agreement and
General Release with In Touch
. ,communications, Inc., concerning
.LYtility User's Tax
From: Fred Wilson, City Administrator
Dept: City Administrator's Office
Synopsis of Previous Council Action:
Recommended motion:
Adopt resolution
Contact person: Lori Sassoon
Phone: 384-5122
Supporting data attached: Staff report, reso" agreement Ward: All
FUNDING REQUIREMENTS:
Amount: None; total revenue of $55,602.76
Source: (Acct. No.)
(Acct. Description)
Finance:
Council Notes:
'l2e::o -B 'ZCo 3-,53
Agenda Item No. g'
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STAFF REPORT
Subiect:
Resolution authorizing the Mayor to execute a Settlement Agreement and General
Release with In Touch Communications, Inc., concerning Utility User's Tax.
Backl!round:
In the fall of 2002, the City's utility tax auditor, MMC, issued a compliance letter to In
Touch Communications, Inc., a financially beleaguered telecommunications company.
Following receipt of that letter, In Touch admitted that it had failed to collect UUT during
from December 1998 through December 2001.
As an alternative to the company filing bankruptcy, the company proposed that creditor
cities agree to a reasonable payment schedule of its outstanding UUT obligation, but
without penalties and interest. The company claimed that it would be impossible to obtain
necessary financing and continue in business if all cities insisted on full and immediate
payment of the UUT.
With some assistance from MMC, the cities of Los Angeles and Long Beach negotiated a
settlement agreement with In Touch. After meeting with the company, both cities felt that
receipt of some immediate payments (with the prospect of additional future payments)
was preferable to receiving little or nothing through the bankruptcy process.
In Touch then agreed that it would offer the same terms and conditions of settlement to
any other creditor city, including San Bernardino, if the offer were accepted within sixty
(60) days of November 20, 2002. On December 19, 2002, the attorney representing In
Touch agreed to extend this offer through February 1,2003.
Given the likelihood of bankruptcy by the company if settlement agreements are not
reached with creditor cities, staff is recommending approval of this agreement.
Financial Impact:
The total outstanding UUT debt to the City of San Bernardino is $55,602.76. By
entering into this settlement agreement, the City will be waiving the 15% penalty due
pursuant to the City's UUT ordinance, which totals $8,340.41. The UUT debt will be
paid in installments over the next four (4) years.
Recommendation:
It is recommended that the Mayor and Council adopt the resolution.
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RESOLUTION NO.
RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY
OF SAN BERNARDINO AUTHORIZING THE MAYOR TO EXECUTE A
SETTLEMENT AGREEMENT AND GENERAL RELEASE WITH IN TOUCH
COMMUNICATIONS, INC., CONCERNING UTILITY USER'S TAX.
BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE
CITY OF SAN BERNARDINO AS FOLLOWS:
SECTION 1. The Mayor of the City of San Bernardino is hereby authorized and
directed to execute on behalf of said City the Settlement Agreement and General Release with
In Touch Communications, Inc., a copy of which is attached hereto, marked Exhibit "A" and
incorporated herein by reference as though fully set forth at length.
SECTION 2. The authorization to execute the above referenced agreement is
rescinded if the parties to the agreement fail to execute it within sixty (60) days of the passage
of this resolution.
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RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY
OF SAN BERNARDINO AUTHORIZING THE MAYOR TO EXECUTE A
SETTLEMENT AGREEMENT AND GENERAL RELEASE WITH IN TOUCH
COMMUNICATIONS, INC., CONCERNING UTILITY USER'S TAX.
I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor
and Common Council of the City of San Bernardino at a
meeting thereof, held on the
7 _dayof
, 2003, by the following vote, to wit:
Council Members:
AYES
NAYS
ABSTAIN ABSENT
ESTRADA
LIEN LONGVILLE
MCGINNIS
DERRY
SUAREZ
ANDERSON
MCCAMMACK
City Clerk
The foregoing resolution is hereby approved this
day of
,2003
Judith Valles, Mayor
City of San Bernardino
Approved as to
Form and legal content:
JAMES F. PENMAN,
CilLey ~
By: 71.
o
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SETTLEMENT AGREEMENT AND GENERAL RELEASE
THIS WRITING REPRESENTS THE SETTLEMENT AGREEMENT AND GENERAL
RELEASE ("Agreement") between THE CITY OF SAN BERNARDINO ("CITY") and IN
TOUCH COMMUNICATIONS, INC., a California corporation, referred to herein as "Service
Provider."
WHEREAS, Service Provider has been in the business of providing telephone services to
customers in CITY since 1998 to the present;
WHEREAS, CITY imposes a telephone users tax upon every person in CITY using
telephone communication services which the Service Provider has a duty to collect and remit in a
timely marmer to CITY;
WHEREAS, the Service Provider is obligated to collect and remit to CITY from such
persons a telephone users tax for tax periods from December 1998, through December 2001,
inclusive;
WHEREAS, the Service Provider failed to collect or remit to the Cities any telephone
users tax for tax periods from December 1998, through December 200 I, inclusive;
WHEREAS, the Service Provider contends that it has valid defenses that would excuse or
limit its liability for such failure to collect or remit telephone users tax for such periods;
WHEREAS, the Service Provider and CITY desire to settle fully and finally all
differences between them arising from Service Providers failure to remit to CITY telephone users
tax for tax periods from December 1998 through December 200 I;
NOW THEREFORE, in consideration of the promises and mutual promises contained
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herein, it is agreed as follows:
1. The current Utility Users Tax Ordinance and any amendments thereto is herein
incorporated by reference in their entirety.
2. Service Provider shall pay to CITY the total tax amount of $55,602. 76, as follows:
Service Provider shall pay to CITY percent (10%) of the total tax specified herein on or
before March 16,2003; Service Provider shall pay to CITY fifteen percent (15%) of the
total tax specified herein on or before December 16, 2003; Service Provider shall pay to
CITY twenty percent (20%) of the total tax specified herein on or before December 16,
2004; Service Provider shall pay to CITY twenty-five percent (25%) of the total tax
specified herein on or before December 16, 2005; and Service Provider shall pay to CITY
thirty percent (30%) of the total tax specified herein on or before December 16, 2006, at
which time the total tax should have been paid in full.
3. All payments referenced in paragraphs 2, are due on the sixteenth day of the month. In
the event a payment is not received within ten days of its due date, at the option of the
CITY, any balance remaining unpaid shall become immediately due and payable, and suit
for the recovery of such unpaid installment and the remaining balance due may be
instituted without any additional written or verbal notice or demand of any kind.
4. The total payment of$55,602.76 referenced in paragraph 2 above represents the total
principal amount of telephone users taxes exclusive of penalties or interest that Service
Provider contends it owed to CITY for tax periods from December 1998 through
December 2001, inclusive.
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5. Following execution of this Agreement, CITY shall have the right, upon reasonable
notice to Service Provider, to conduct during normal business hours at its own expense a
reasonable audit of the books and records of Service Provider to verify the amount of
taxable receipts relating to telephone user charges that apply to CITY and upon which the
tax is due and owing, to verify the Service Provider's method of calculation of the tax
due, and to verify the Service Provider's financial condition and cash status as
represented to CITY in prior negotiations. If, pursuant to such audit, CITY reasonably
determines that additional taxes, not including interest and penalties, are owed to CITY in
excess of the principal amount stated above for the tax periods from December 1998
through December 200 I, inclusive, or that the Service Provider has materially and
unreasonably misrepresented its financial condition and cash status, CITY retains the
right to file suit to recover the additional amounts it claims are owed, including penalty
and interest accruing to such amounts as provided in the applicable City Municipal Code
sections. In the event CITY files such suit, neither this Agreement, nor anything
contained herein, shall be construed as an admission by Service Provider of any fact or
liability relating to such lawsuit, and Service Provider shall have the right to interpose any
defenses it may have to such lawsuit, without limitation, except a statute of limitations
defense, which shall be tolled for the tax periods from December 1998 through December
2001, inclusive.
6. This Agreement resolves only the dispute regarding telephone users taxes allegedly owed
by Service Provider to CITY for tax periods from December 1998 through December
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2001, inclusive; this Agreement does not resolve the liability of Service Provider for any
other taxes, debts, or obligations that may be owed to CITY, nor does this Agreement
resolve the liability of Service Provider for telephone users taxes that may be owed CITY
for telephone user tax periods other than those occurring from December 1998 through
December 2001, inclusive.
7. The Service Provider represents to CITY that since January 2002, inclusive, the Service
Provider has timely and fully paid and will continue to timely and fully pay all telephone
users taxes due CITY for all subsequent tax periods.
8. No party to this Agreement admits wrongdoing, and nothing in this Agreement shall be
deemed to be an admission ofliability.
9. Should the Service Provider file for federal bankruptcy protection prior to the time that
the total obligations of this Agreement to CITY are paid in full, whether such bankruptcy
is voluntary or involuntary, any remaining balance due and owing CITY shall be
considered and classified as an unsecured priority excise tax obligation under
II U.S.C.A. s507(a)(8)(C) by the Service Provider without further proof of claim by
CITY.
10. The payment of any money to CITY shall not operate as a waiver of any provision of this
Agreement or of any right under the Agreement.
11. Except by judgment following a trial, if the Service Provider settles, stipulates, or agrees
with any other city or county taxing authority, or their agents or representatives, to pay a
portion of the penalties and interest on the telephone user tax due any other taxing
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jurisdiction for any of the tax periods from December 1998 through December 2001,
inclusive, then the Service Provider shall immediately disclose this information to CITY
and pay the same proportion of the penalties and interest on the telephone user taxes due
to CITY for the same inclusive months. The intent of this paragraph is to assure CITY
that the Service Provider will not voluntarily pay any taxing jurisdiction more than the
principal tax owing, unless the Service Provider also pays CITY herein a similar
proportionate amount of late penalties and interest. This paragraph II shall not apply in
the case of any settlement, stipulation, or agreement with any city or county taxing
authority following the institution of a lawsuit in a court of competent jurisdiction to
collect telephone user taxes allegedly owed by Service Provider for any of the periods
from December 1998 through December 2001, inclusive, when the principal amount of
the tax allegedly owed for such period is $5,000.00 or less. In the event that a city or
county taxing authority to whom the principal amount of telephone user taxes allegedly
owed by Service Provider exceeds $5,000.00 brings a lawsuit in a court of competent
jurisdiction to collect such taxes, Service Provider may enter into a settlement,
stipulation, or agreement with such city or county taxing authority that includes payment
of penalties or interest without incurring proportionate liability to CITY for penalties and
interest under this paragraph II if:
(i) Service Provider notifies CITY, in advance, of the proposed settlement, stipulation, or
agreement; and
(ii) the two municipalities to whom the largest principal amounts of telephone user taxes
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allegedly owed by Service Provider for such periods, which the parties agree shall be
conclusively presumed to be the City of Los Angeles and the City of Long Beach, both
consent in writing, to such settlement, stipulation, or agreement.
12. In the event proceedings are instituted to interpret or enforce this Agreement or to protect
or establish any rights or remedies hereunder, the prevailing party shall be entitled to its
costs and expenses, including reasonable attorney's fees and court costs.
13. This Agreement shall be governed and construed in accordance with the laws of
California. In the event that any provision of this Agreement is held by a court of
competent jurisdiction or other regulatory body having jurisdiction herein, to be
unenforceable or invalid, such holding shall not render unenforceable any other provision
of this Agreement, each provision being expressly severable and independently
enforceable to the fullest extent permitted by law.
14. This Agreement is intended by the parties to benefit themselves only and is not in any
way intended or designed to or entered into for the purpose of creating any benefit or right
for any person or entity of any kind that is not a party to this Agreement.
15. Except as required by the California Public Records Act or other applicable municipal,
state or federal law, the identity of the Service Provider, the terms of this Agreement, and
the total amount of the telephone users tax paid to the Cities shall remain confidential
between the parties.
16. This Agreement shall become effective as to CITY at such time as it is fully executed by
both the Service Provider and the City official with authority to bind CITY. This
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Agreement may be signed in counterparts by the parties for all purposes.
WE, THE UNDERSIGNED, HEREBY CERTIFY THAT WE HAVE READ THIS
ENTIRE AGREEMENT AND HAVE HAD THE TERMS USED THEREIN AND THE
CONSEQUENCES THEREOF EXPLAINED BY OUR RESPECTIVE ATTORNEYS.
WE FULLY UNDERSTAND THE TERMS AND CONSEQUENCES OF THIS
SETTLEMENT AGREEMENT AND GENERAL RELEASE.
IN TOUCH COMMUNICATIONS, INC.
THE CITY OF SAN BERNARDINO
Date:
Date:
By:
, President
By:
Mayor Judith Valles
, Chief Financial Officer
APPROVED AS TO FORM AND
LEGAL CONTENT:
Dated:~ ?~
James~ty Attorney
And by:
APPROVED AS TO FORM:
Dated:
By:
JOHN 1. CLARK, Esq.
GOODIN, MACBRIDE, SQUERI,
RITCHIE & DAY, LLP
Attorneys for
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CITY OF SAN BERNARDINO
Interoffice Memorandum
CITY CLERK'S OFFICE
Records and Information Management (RIM) Program
DATE:
January 28, 2003
TO:
Lori Sassoon, Assistant to the City Administrator
FROM:
Michelle Taylor, Senior Secretary
RE:
Transmitting Documents for Signature - Resolution 2003-33
At the Mayor and Common Council meeting of January 21,2003, the City of San Bernardino
adopted Resolution 2003-33 - Resolution authorizing the Mayor to execute a settlement
agreement and General Release with In Touch Communications, Inc.. concerning Utility User's
Tax.
Attached is one (I) original agreement. Please obtain signatures in the appropriate location and
return the original agreement to the City Clerk's Office as soon as possible, to my attention.
Please be advised that the resolution and agreement will be null and void if not executed
within 60 days, or by March 24, 2003.
If you have any questions, please do not hesitate to contact me at ext. 3206. Thank you.
Michelle Taylor
Senior Secretary
I hereby acknowledge receipt of the above mentioned documents.
Signed: eC~"~L\~
Date: \ /.?{) { C'..~~ Please sign and return
CITY OF SAN BERNARDINO
Interoffice Memorandum
CITY CLERK'S OFFICE
Records and Information Management (RIM) Program
DATE:
February II, 2003
TO:
Lori Sassoon, Assistant to the City Administrator
FROM:
Michelle Taylor, Senior Secretary
RE:
Resolution 2003-33 - In Touch Communications, Inc.
CC:
Attached is a fully executed copy of settlement agreement and general release with In Touch
Communications, Inc., concerning Utility User's Tax. The original agreement is on file in the
City Clerk's Office.
If you have any questions, please call me at ex!. 3206.
.
** FOR OFFICE USE ONLY - NOT A PUBLIC DOCUMENT **
RESOLUTION AGENDA ITEM TRACKING FORM
Meeting Date (Date Adopted): I - '2-l-6~ Item #
Vote: Ayes ,-f) Nays .&
Change to motion to amend original documents:
':;{
Resolution # 2t:03 - .33
Abstain if Absent &-
Reso. # On Attachments: ./ Contract term:
Note on Resolution of Attachment stored separately: ~
Direct City Clerk to (circle I): PUBLISH, POST, RECORD W/COUNTY
NO
Date Sent to M;>y6r: \ - Z 5- c- .:)
Date of Mayor's Signature: l~-Z {~o.s
Date ofClerk/CDC Signature: \--~ l-cJ3,
NuIlNoidAfter:(,a WI::' h-;J4-Q3
,
By: .-
Reso. Log Updated: L//
Seal Impressed: ~
Date Memo/Letter Sent for Signature:
60 Day Reminder Letter Sent on 30th day:
90 Day Reminder Letter Sent on 45th day:
See Attached:/ Date Returned: ? - I b.o:~
See Attached:
See Attached:
dY-Cd
Request for Council Action & Staff Report Attached:
Updated Prior Resolutions (Other Than Below):
Updated CITY Personnel Folders (6413, 6429, 6433, 10584, 10585, 12634):
Updated CDC Personnel Folders (5557):
Updated Traffic Folders (3985, 8234, 655, 92-389):
Copies Distributed to:
City Attorney /
Parks & Rec.
Code Compliance Dev. Services
Police Public Services Water
Notes:
Yes 1 No By 1
Yes No~ By
Yes No~ By
Yes No / By
Yes No/ By
EDA
Finance
MIS
Others:
Mlmrn,
BEFORE FILING, REVIEW FORM TO ENSURE ANY NOTATIONS MADE HERE ARE TRANSFERRED TO THE
YEARLY RESOLUTION CHRONOLOGICAL LOG FOR FUTURE REFERENCE (Contract Term, etc.l
Ready to File: ill.L
Date: ;)-( O-Oj'
Revised 01112/01