HomeMy WebLinkAbout41- Administrator CITY OF SAN BERNCRDINO - REQUEST ILM-,',R COUNCIL ACTION
From: Fred Wilson Subject: Expansion of CATV users tax to
include a video users tax.
Dept: Administration
Date: 8-25-93
Synopsis of Previous Council action:
7-6-93 Public hearing set for 9/7/93 for public input regarding expansion
of CATV users tax to include video users tax.
Recommended motion:
Close the hearing. Waive further reading of the ordinance and layover for final
adoption.
Signature
Contact person: Fred Wilson Phone: 5122
Supporting data attached: Ward:
FUNDING REQUIREMENTS: Amount:
Source: (Acct No.)
(Acct Description)
Finance:
Council Notes:
75-0262 Agenda Item No. �/z
CITY OF SAN BERN/ODINO - REQUEST F' I COUNCIL ACTION
STAFF REPORT
It is recommended that the Mayor and Council adopt the attached amendment to the City's
Utility Tax ordinance which will result in the imposition of the 8.5% utility users tax to users
of the wireless television service in the City.
This service is a relatively new alternative to traditional cable television service in the City. A
technical addendum has been attached which discusses how this service functions. Simply
stated, a line-of-sight microwave signal is transmitted directly from Riverside to small
microwave dishes placed on the roofs of homes or businesses. The frequencies are then
converted from microwaves to channel selections on standard television sets. The monthly cost
for this service is $26.95 and approximately 20 channels are provided. Cross Country Wireless
Cable Co. is the name of the firm which is providing this service.
The proposed ordinance amends Chapter 3.44 of the Municipal Code and includes this service
under the definition of video provider as one who provides one or more channels of video
programming via multipoint distribution services (wireless cable) or any other technologies.
It is estimated that imposing the utility users tax on users of this service will generate an
additional $85,000 per fiscal year in revenue. The average utility users tax cost for one year
of wireless cable service will be $27.50 per household and it is estimated that approximately
5,000 residents of San Bernardino subscribe to the Cross Country Wireless Cable service.
In terms of equity, a utility user's tax which is imposed upon all people who utilize video
services rather than just residents who subscribe to conventional cable television service is more
equitable for all resident cable users. The reason being, both wireless and closed circuit cable
television provide essentially the same services and are distinguished only by their different
technologies. Potentially, according to an analysis by our legal advisor, the customers who are
residents of San Bernardino may have an Equal Protection claim against the City since the
customers of one cable company are subject to a tax while customers of another cable company
are not.
Cross Country Wireless Cable Co. has raised a number of legal issues associated with this
proposed action: These legal concerns about imposing a utility users tax on wireless cable have
been addressed and are summarized below:
1. Cross Country Wireless has argued that first amendment communication rights would be
violated with an implementation of a utility users tax, but case law states that a person's First
Amendment rights are not violated by an encumbrance of a utility users tax on wireless cable.
2. Cross Country Wireless Cable Company has raised the concern that because they are not
located within the City of San Bernardino they cannot legally be subject to a utility users tax
imposed upon them by the City. This reasoning follows from the fact that under the Due Process
Clause it is required that there be "some definite link, some minimum connection, between a
75-0264
state (or local agency) and the person, property or transaction it seeks to tax." But according
to recent court rulings, this "definite link" does not necessarily have to be the physical presence
of the taxed business within the taxing agency's boundaries. The fact that Cross Country
Wireless Cable solicits business in the City and send their personnel to San Bernardino homes
to install and maintain their services does constitute a "definite link" between the City and the
business being subject to the tax. Cross Country Cable's activities require the use of public
streets constructed and maintained by the City as well as the benefits of the services provided
by the City's police and fire departments. Consequently, for the purpose of establishing a
"minimum connection," Cross Country Wireless Cable need not establish their business within
San Bernardino City boundaries in order to be susceptible to a utility users tax.
Furthermore, the utility users tax is not even imposed on the business itself, but it is imposed
on the customers who live within the cities boundaries. Presumably, the "definite link" may not
even be a factor since the tax is imposed on the customers and not on the wireless company
itself.
3. Cross Country Wireless Cable Co. has argued that under the Supremacy Clause a federal
preemption is allowed for federally regulated broadcasters which excludes them from being
taxed. Cross Country Wireless Cable has asserted that they should be allowed a federal
preemption, but case law maintains the opposite:
a. Cross Country Wireless is not a broadcaster, but simply a carrier just like a closed
circuit cable system and therefore, should not be excluded from taxation.
b. The utility user's tax will not pertain to the Cross Country Wireless Cable Company
itself, but to the user's of the cable system who reside in the City.
c. Utilities such as electric, gas, and interstate telephone are also federally regulated,
yet no one has successfully argued that utility users taxes on such services are invalid because
of the Supremacy Clause.
This revenue generating proposal was approved by the Mayor and Common Council for FY
93/94 as one of the budget balancing measures.
The City of Fontana recently adopted a similar ordinance.
a
1 ORDINANCE NO.
2 AN ORDINANCE OF THE CITY OF SAN BERNARDINO AMENDING SECTION
3.44.040 OF THE SAN BERNARDINO MUNICIPAL CODE EXPANDING THE CATV
3 USERS TAX TO A VIDEO USERS TAX.
4 THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO DO
ORDAIN AS FOLLOWS:
5
SECTION 1. Section 3 .44 . 040 of the San Bernardino Municipal
6
Code is hereby amended to read as follows:
7 3.44.040 Video Users Tax
8 A. A tax is imposed upon every person in the City using
9
video services from a video provider. "Video provider"
10
means any person, company, or service which provides one
11
or more channels of video programming to an address in
12 the City, including to a business, home, condominium, or
13 apartment, where some fee is paid, whether directly or as
14 included in dues or rental charges, for that service,
15 whether or not public rights-of-way are utilized in the
16
delivery of the video programming. A "video provider"
17 shall include, but not be limited to, providers of cable
18 television, master antenna television, satellite master
19 antenna television, direct broadcast satellite,
20
multipoint distribution services, and other providers of
21 video programming, whatever their technology.
22
23
B. The tax imposed in this section shall be collected
24 from the service user by the person providing the video
25 services. The amount of tax collected in one month shall
26 be remitted to the Director of Finance on or before the
27 twentieth day of the following month.
28
1 AN ORDINANCE OF THE CITY OF SAN BERNARDINO AMENDING SECTION
3.44.040 OF THE SAN BERNARDINO MUNICIPAL CODE EXPANDING THE CATV
2 USERS TAX TO A VIDEO USERS TAX.
3 I HEREBY CERTIFY that the foregoing ordinance was duly adopted
4 by the Mayor and Common Council of the City of San Bernardino at a
5 meeting thereof, held on the day of
6 1993 , by the following vote, to wit:
7 Council Members AYES NAYS ABSTAIN ABSENT
8 NEGRETE
9 CURLIN
10 HERNANDEZ
11 OBERHELMAN
12 OFFICE VACANT
13 POPE-LUDLAM
14 MILLER
15
16
City Clerk
17
18 The foregoing ordinance is hereby approved this day
of 1993 .
19
20
21 Tom Minor
City of San Bernardino
22
Approved as to form
23 and legal content:
24 JAMES F. PENMAN,
City Attorney
25 By.
26
27
28
p
C I T Y OF S A N B E R N A R D I N O
INTEROFFICE MEMORANDUM
TO: Shauna Clark, City Administrator
ATTN: Fred Wilson
FROM: Dennis A. Barlow, Sr. Asst. City Attorney
DATE: June 25, 1993
RE: Video Users Tax
The agenda item expanding the CATV Users Tax to all video
users is being returned because by expanding the tax the provisions
of Government Code §54954. 6 are made applicable. This recently
enacted section requires that for such new or increased taxes a
public meeting must be held on the tax where public testimony may
be given. Then, before adoption, a noticed public hearing must be
held with at least 45 days published notice.
The public meeting and public hearing should be reflected in
this material .
_.'//DENNISA. ' RLOW
Attachment
DAB/bg [Video.Mem]
SAN EM RAND M
CITY OF SA O � O U
To COMMUNITY CABLE TELEVISION COMMISSION From DONALD MILLER, JR.
Subject AN INTRODUCTION TO "WIRELESS CABLE" Date JANUARY 28, 1992
Mu I
Approved Date
The subject of "Wireless Cable" has been mentioned in the news and at
recent Cable Commission meetings. Here is a summary report on the subject:
What Is Wireless Cable?
Wireless Cable is a new telecommunications service which provides multiple
video channels using a combination of traditional and relatively new over-
the-air technology. While it resembles cable television service in the
nature of the programming it provides and its multichannel character, it
uses microwave radio channels instead of extensive cable wiring to deliver
a combination of television programming services into homes.
Flow Does It Work?
Please refer to the attached diagram of a typical wireless cable operation.
The technical name for "Wireless Cable" is Multichannel Multipoint Distri-
bution Service (MMDS) . Various channels of programming material (local
off-air, distant off-air, satellite-fed and locally originated) are com-
bined and sent to a special transmitter and antenna usually mounted at a
strategic location with a favorable coverage area. The frequencies used
for wireless cable are allocated to the Multichannel Multipoint Distribut-
ion Service (MMDS) and Multipoint Distribution Service (MDS). In addition,
channels are available in the Operational-Fixed Microwave Service (OFS) and
the Instructional Television Fixed Service (ITFS) , which can be leased from
license holders (i.e. : educational and religious organizations) for MMDS-
type use on a "part-time" basis.
A line-of-sight microwave signal is transmitted throughout the reception
area, which usually has a practical radius of about 25 miles. Mountains,
buildings and even trees can block the signal from reaching small open-wire
rooftop antennas. There, frequncies are down-converted from microwave for
channel selection and reception on standard television sets.
Programming
As mentioned previously, the program mix is determined by the wireless
cable operator, and may come from a variety of sources. As received, the
wirelesss subscriber may choose from 20 or more channels, some of which
are premium (movie channel/sports channel) services. Pay-per-view is also
offered. The local operator is Cross Country Wireless in Riverside.
Regulating Authority
The Federal Communications Commission and state Public Utility Commission
are the sole regulators at this time. No local control, franchising or
taxation is in effect under the current rules governing Wireless Cable.
?R 0 2 1993
CITY OF SAN BERNARDINO
INTEROFFICE MEMORANDUM
CITY ADMINISTRATOR'S OFFICE
DATE: March 31, 1993
TO: Dennis Barlow, Sr. Asst. City Attorney
FROM: Fred Wilson, Assistant City Administrator
SUBJECT: Cross Country Wireless Cable - Utility Users Tax
COPIES: W. R. "Bob" Holcomb, Mayor
Barbara Pachon, Director of Finance
Attached is a copy of a letter from Cross Country Wireless Cable which outlines numerous
reasons why they believe they should not be subject to the utility users tax.
I talked to Don Maynor about this issue and he prepared the attached proposed ordinance
amendment which would address their main reason for objecting to pay the tax.
Please review this information. If you concur with Don's recommendations, I would appreciate
yo r in preparing this amendment for Council action.
FRED A. WILSON
Assistant City Administrator
FAW/cas
Cross Country Wireless Cable
6177 River Crest Dr., Riverside, CA 92507 (7 14) 653-4499 Fax (7 14) 656-9254
May 19 , 1992
Mr. Anthony Parrish
Finance Department
City of San Bernardino
300 North D Street
San Bernardino, CA 92418
Dear Mr. Parrish:
We have received your letter of April 6 , requesting
Cross Country Wireless Cable to collect from its subscribers
an eight percent "service users tax" pursuant to section
3 . 44 .040 of the Municipal Code . For the following reasons,
Cross Country believes that its subscribers are not subject
to this tax.
- The Municipal Code imposes a tax on "services from
i a closed circuit system (CATV services ) of a television
cable company" . Cross Country is not a "closed circuit
system" . It distributes its service via MMDS (multipoint
distribution service) radio frequencies licensed and
authorized by the Federal Communications Commission. Such
services do not use closed transmission paths" as specified
in 47 U. S .C. Section 522 ( 6 ) and 47 C.F.R. Section 76 .5 (a) .
See Definition of A Cable System, 5 FCC Rcd. 7638 ( 1990 ) .
Thus , the terms of the Municipal Code do not encompass the
service offered by Cross Country.
Moreover , "The service users tax is not fairly related
to the benefits that local government provides to Cross
Country . Unlike wired cable and the public utilities that
are subject to the "service users tax" , Cross Country
Wireless Cable service does not make use of public rights-
of-way . Moreover , its service, which like broadcasting
is inherently interstate in nature , is a creation of Federal
law regulation. Accordingly its subscribers should not
be required to pay the same tax as users of these other
Mr. Anthony Parrish
May 19 , 1992
Page 2
services . Imposition of this charge on Cross Country would
impermissibly burden interstate commerce and improperly
interfere with Cross Country' s rights under the First and
Fourteenth Amendments to the U.S. Constitution.
Sincer y,
Don Burns
V. P . Operations/Marketing
DB/JP
cc: Peter Frank
Martin Wald, Esq. ( Covington & Burling)
I
0
LAW OFFICE
DoNArz) Ii. MAYNon
A•ROVESSIONAL LAW CORPORATION
3220 ALPINE ROAD, SUITE A
PORTOLA VALLEY, CALIFORNIA 94OL8
(4116) 864-04916
FACSIMILE
(415)854-8774
March 29, 1993
Mr. Fred Wilson
CITY OF SAN BERNARDINO
300 N. D Street
San Bernardino, CA 92418
Rea Gas Bypass/Utility Users Tax Audit
Dear Fred:
As promised, I am also enclosing a proposed amendment to
Section 3 .44 . 040 of your municipal code regarding a CATV users tax.
I have expanded the definition to pick-up all kinds of new
technology, including "wireless" cable. My expanded definition is
derived from recent state legislation entitled the "video customer
service act" . Although "video provider" sounds like someone who
provides rental movies, it is actually a broad term describing
persons who provide "pay television" . I have enclosed a copy of
the statutory definition for your information.
Sincerely,
(�)O ...
DONALD H. MAYNOR
DHM:dra
CC: Mr. Dennis Barlow, City Attorney' s Office
Mr. Jim Thompson (MRC)
a:\sanberna\0329fw
6
ORDINANCE NO.
AN ORDINANCE ON THE CITY OF SAN BERNARDINO AMENDING CHAPTER
3 .44 OF THE SAN BERNARDINO MUNICIPAL CODE
THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO DO
ORDAIN AS FOLLOWS:
SECTION 1. Section 3 .44. 040 of the San Bernardino Municipal
Code is hereby amended to road as follows:
3,44. 040 Video Users TaX
A. A tax is imposed upon every person in the City using
video services from a video provider. "Video provider"
means any person, company, or service which provides one
or more channels of video programming to an address in
the City, including to a business, home, condominium, or
apartment, where some fee is paid, whether directly or as
included in dues or rental charges, for that service,
whether or not public rights-of-way are utilized in the
delivery of the video programming. A "video provider"
shall include, but not be limited to, providers of cable
television, master antenna television, satellite master
antenna television, direct broadcast satellite,
multipoint distribution services, and other providers of
video programming, whatever their technology.
B. The tax imposed in this section shall be collected
from the service user by the person providing the video
services. The amount of tax collected in one month shall
be remitted to the Director of Finance on or before the
twentieth day of the following month.
W CODS GoVIRNMZNT COVIN
"two M seat•or pay any { voce. AOpUMate for flUMISW sesietaaea dsonesit that apOW41ast aft•sot ben eotivWted K
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61141 has not been ooavietd of a f41oay.
Wh eft MmSm Code (Added by State-19", c. 1188, ¢ I.)
{ 63m. CompanlM advedWing services rslating to sales of public property{ tsotlee of rtlstloa•
alb ship to governmeat; G IWM to notity
141
IM SAMet d for Which no (a) Any private person or private company which advOrtiau that it provid41e lntoetsstbr► or
urvieu regarding the sale or Purehase of public property of any kind she pro!"tondy htdloats In
arm Ave vWj no terries has the advertisement and any other presentation that the person or company is not a 917161em•nt
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other e otis•6 U advsrtlsstnent and any presentation that the person or company is not A gov41rnmmt agency
IN"of am gptcut • e shall constitute an unfair tesWisioa Code, but istnot�m�g and for Lh41 purpose of Section 1T4A0
enasit atatow of t11e U of the Business and Pro
Y A"M6 eB%AA raw by (Added by Stata.1990, C. 888(A.8.8118), ¢ Z.)
fe41e mor41 Wiected
but le set still residing M the Historical and statutory �lotee
the 0441sey cowing the fe41•. 101 l W11110 10n
d 1 1909, For Anotber w UM,ua 4 b;8�6 and amended 1116 b
o nt. $ 1991,c. 1091(A.9.14187),t be,
,a nnta6w or other
S 10 IBM r serve to ARTICLE 1.6. VIDEO CUSTOMER SERVICE ACT
but o not a it . any F, e
Beetton
68088. Short title.
ion of m rovement Act of 68088.1, Definitions.
d
w e 11110 s 68088.2, Duties of video providers; 'upute resolution procedures; penahiea for breach.
of tr41et6 nd fthway a Article 4.5 was added by StaU.1902, C. 1108(A.B.U88), / I.
c n of e
Junction with or as a condlt#on 1
¢ 68oes. Short title
This article shall be known and may be cited as the Video Customer Service c
.1991, c. 1328 (8.13.787), ¢ 8.) (Added by Stata.19P2, c. 1198 (A.B.2388), ¢ 1.)
¢ 68088.1. Definition@
company,or service
Journal of Aug 31, 19N,contairw I (a) Video provider means any person, ce which provides one or more chartnsla
from M"Un Bergeson to Darryl of video programming to a residence, including a home, condominium, or apartment where some tee
isiative ioteat of 8.8.1821 (State. i is paid, whether directly or as included in dues or rental charges, for that service, whether or not
public rights-of-way are Utilized oviders ot delivery
cable telex s on,master an nna televuwn,motel its master providers of
rtier today kw Unaa pueed and include,but not be limited to,p
jr my Banat* Bill 18'21, Among antenna television, direct broadctasht 4atteilitQ, gy pA v dso providers shall not dineother e a landlord
enacts a new Section 68082 to the video programming,graming, p to a single-family home or other residential dwelling
equinng local agencies to rstund providing only broadcast video programming
)llect,ed for which no such services consisting of four units or less.
nted failure to comply with the consumer
(b} "Material breach" means any aubstantial and rope
an raised that this section could be service standards set forth In Section 58088.2.
refund of reasonable standby or
'or sewer servwa,it the payor of (Added by Stats.1992, c. 1198(A.B.2388), ¢ 1.
by or availability charge is not yet Library References
oar.
Section 88062 of the Government Words and Phrases (Parm.Ed•)
apply to tees coikcted for which for breach
vices were rendarod, and an not ¢ 63088.1. Duties of video providers; dispute resolution procedures; penalties
reasonable standby or availability Operative Sept. 1, ISM
Additions ex chanpaa Indioatsd by undarMn�s dMbYort41 by and ' • •
by aster"$ • • • 28