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HomeMy WebLinkAbout08- City Administrator Ci"!rY�OF SAN BERNARDINO REQUEST FOR COUNCIL ACTION From: Fred Wilson Subject: Resolution adopting Utility User Assistant City Administrator Tax Administrative Rules I Dept: Date: June 21 , 1996 Synopsis of Previous Council action: Recommended motion: Adopt resolution. Signature Contact person: Fred Wilson Phone: 5122 Supporting data attached: yes Ward: FUNDING REQUIREMENTS: Amount: Source: (Acct. No.) (Acct. Description) Finance: Council Notes: acs �?6- 93 7/1�199� _� Anonrin Itam Nn •9 STAFF REPORT The City's Utility User's Tax Ordinance (UUT) places a utility users tax on the use of certain utility services within the City. Under the City's UUT Ordinance, the utility service provider is required to impose and collect the UUT tax from its customers and remit the tax to the City. The cooperation of the collecting utility is, therefore, critical to the implementation of the UUT ordinance. In most respects, the various utility industries have been outstanding in their valuable role as the city tax collectors. Unfortunately, in the past year or two, the City and its auditors have encountered increasing resistance from a number of utilities in the City's efforts to assure compliance with its UUT ordinance. The following is an illustrative list of problem areas with some utilities: -Utility fear of exposure to legal challenges to UUT ordinances under the Guardino decision. -Utility fear of liability for errors in the geo-coding of customers not located within the boundaries of the taxing jurisdiction. -Utility fear of liability for incorrect application of the UUT tax to its various services. -Utility fear of incurring significant costs in responding to excessive auditing requests. -Utility opposition to the City's use of third party auditors that are compensated on a performance basis. -Utility concern over the difficulty of having to comply with over 100 UUT ordinances with different rules and administrative protocols. These concerns are further exacerbated by the dramatic changes taking place in many of the utility industries where deregulation and new market entrants are exposing the traditional monopoly providers to tremendous financial and competitive risks. Nearly all utility providers are aggressively looking for ways to reduce costs and to reduce customer bills. Consequently, local UUT taxes are viewed by utilities with great disfavor. . r ✓ Over the past several months, representatives of a number of public agencies have met with each other and then with tax department representatives from various telecommunications providers. The purpose of these meetings was to identify the legitimate concerns of the utility providers and then attempt to reasonably address those concerns by adopting uniform administrative rules for implementing the various UUT ordinances. Attachment A, Administrative Rules, is the result of that considerable effort. Attachment B, Description of Administrative Rules, is a in-depth explanation of each of the Administrative Rules listed in Attachment A. The attached Resolution Adopting the UUT Administrative Rules for the City of San Bernardino is recommended for approval . 2 P.08 COPY ATTACHUM Utility Users Tax Administrative Rules I. To assist utility service providers that perform the valuable public service of collecting the City's Utility, Users Tax (UUT) ,, City will assume the following responsibilities: A. Prior to the implementation of a new UUT tax, City will assure the accuracy of its boundary information (including the reflection of the latest annexations and municipal reorganizations) needed for utility billing and tax collection purposes, by reviewing and correcting the utility service provider' s computerized billing data no less than once a year. The utility service provider shall not be responsible or liable for the collection or payment of any pasj UUT taxes that were not collected due to the inaccuracy of information provided by the City or due to the City' s failure to make appropriate corrections to the utility service provider' s billing data . B. Provide utility service providers with accurate and timely ordinance information, including ordinance amendments, at a central location (e.g. , Web Page on Internet) . City will provide written notice of ordinance changes to persons designated by the utility service provider. In the absence of special circumstances, the utility service provider shall begin implementation of the UUT tax change within sixty (60) days from the date on which the utility service provider receives the written notification from the City. If the 60th day is not the first day of a month, then the utility service provider 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. C. Assume sole responsibility for defending any legal challenge regarding the validity of the UUT ordinance, any part thereof, or any collection thereunder, and shall defend and hold harmless any tax collecting agent named in such action for properly performing its legal obligations set out in the UUT ordinance . 1 — � - P.09 D. Reimburse utility service providers for the reasonable costs associated with an extraordinary audit request (e . g. , modifications to existing to billing software in order to respond to audit request) . E. Take reasonable steps to assure that all utility service providers, including new market entrants, are correctly applying and collecting the UUT tax. F. To the extent feasible, permit utility service providers 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 agreed to and reflected in these administrative rules by the Tax Administrator. For example : "The amount of tax collected in one month shall be remitted by U. S . Mail, to the Tax Administrator, and must be received by the Tax Administrator on or before the 20th day of the following month; or, at the option of the person required to collect or remit the tax, such person shall remit an estimated amount of tax measured by the tax billed in the previous month or upon the payment pattern of the customer (s) of the service supplier, which must be received by the Tax Administrator on or before the 20th day of the following month. " G. Following the effective date of these administrative rules, the Tax Administrator shall notify the utility service providers within the City that they may request that the Tax Administrator of 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, then any determination by the Tax Administrator shall apply prospectively. The Tax Administrator shall give the utility service provider at least a 60 (sixty) day written 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 provider shall implement the changes on the first day of the month following the 2 • P.10 month in which the 60th day occurs . To "begin implementation�� means to calculate and place the UUT tax in the customer billing. H. Where new utility technologies are employed or new utility services are being offered, a utility service provider may request that the Tax Administrator render a determination of applicability within ninety (90) days of providing such services or technologies . Upon rendering a determination 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 provider at least a 60 (sixty) day written notice before implementation of such changes shall be required.• If the 60th day is not the first day of a month, then the utility service provider 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 Para raphs G. and H. above, the Tax Administrator 4 - agree to participate in an advisory committee, comprised 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 various utility services and technologies; uniform implementation protocols; and appropriate amendments to WT ordinances to reflect industry, regulatory, and technological changes . 11 . The Tax Administrator has the right and obligation to assure fair and reasonable compliance with the UUT ordinance. Due to the complexity of utility 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 providers have a legitimate interest in assuring that such outside firms maintain the confidentiality of utility customer information and conduct their compliance reviews in a professional and efficient manner. The Tax 3 P.11 Cy Administrator's use of special outside expertise shall therefore be subject to the following rules: A. The outside firm will execute a non-disclosure agreement (approved by the City Attorney) in which the outside firm agrees to maintain the confidentiality of customer information and not to use individual customer information for any purpose other than the UUT compliance review of this City. B. The outside firm will not initiate contact with a utility customer in the course of performing its compliance activities, except with the prior written consent of the utility service provider. C. The outside firm shall fully disclose to the City any potential conflict of interest (e . g . , prior or Proposed representation of private utility customers within the City) . D. The outside firm shall not make any data requests of a utility service provider by subpoena unless the outside firm first receives the review and approval of Tax Administrator prior to the request being made to the utility service provider. E. The outside firm is authorized to perform a compliance review (including sampling audits and computerized reviews) which, in its professional opinion, is reasonably necessary to perform its contractual obligation to the City. If a utility service provider 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 appropriate remedial steps . F. 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 provider. G. The Tax Administrator shall make available to the utility service provider a copy of any draft compliance 4 P.12 report prepared by the outside firm regarding sucrr utility service provider. The utility service provider shall be afforded an opportunity (at least thirty (30) days) to respond to any aspect of the draft report before such report becomes final. III . Dispute Resolution Process A. If a utility disputes an application of these administrative rules, an interpretation of the WT ordinance, or any other action by the Tax Administrator (including its outside firm) , the protesting utility may request to the Tax Administrator that the matter be submitted to nonbinding arbitration within thirty (30) days . If the matter is not resolved within thirty (30) days following the arbitration decision, the protesting utility may request that the matter be set for a de novo hearing before the City Council at the next available City Council meeting. 5 Description of Administrative Rules ATTACHMENT B Section I. A. This provision places the burden on the city to assure that the billing information(customer addresses)of the various utilities is accurate so customers within the City pay the tax and customers outside of the City do not pay the City's tax. The City's current auditor,Municipal Resource Consultant,performs this valuable service at no cost to the utility, and at no increased cost to the City. This provision does not provide retroactive immunity for past errors,which may only be authorized by the City Council on a individual basis depending the extent and cause of the errors. Section I. B. This provision places the burden on the City to provide the utility tax collectors with accurate information regarding its UUT ordinance,including future amendments. Municipal Resource Consultant has agreed to performs this service at no increased cost to the City by placing the City's ordinance in a data base on its Internet Web site. Section I. C. Under this section,the utility collector would not assume any responsibility for legal challenges to the City's UUT ordinance. State law is being proposed that will accomplish the same thing. Section L D. The City will reimburse the utility for the cost of responding to "extraordinary"audit requests,where,for example, software modifications become necessary. Section L E. The City will seek to assure UUT compliance by all utility providers, including new market entrants. Section I. F. The Tax Administrator will attempt in good faith to following ' payment and remittance protocols followed by other California public agencies. Section L G. This provision allows utility service providers to obtain"prospective" tax application by cooperatively meeting with the Tar Administrator and City Attorney and fully disclosing the various services provided by the utility. The Tax Administrator and City Attorney will then determine the appropriate application of the UUT ordinance to such services. Under Section I.I. ,the Tax Administrator and City Attorney will participate with other public agencies to develop uniform application rules,to the extent feasible. Section I. H. The provision establishes a similar incentive as Section I.G. for "prospective"application of the UUT ordinance to new services and technologies. Section L I. This section anticipates the creation of an advisory committee representing public agencies with UUT ordinances. It would make non-binding recommendations that are designed to achieve uniformity in UUT application and UUT administration. The advisory committee would also meet with utility representatives to develop industry-supported recommendations. The Tax Administrator and City Attorney would participate in such an advisory committee. Section II contains a series of provisions designed to address utility concerns regarding the City's use of a third party auditor/consultant such as Municipal Resource Consultants (MRC). Those concerns include confidentiality of customer information, conflict of interest,reasonableness of audit requests,scope of audit, and right to review draft audit report. MRC is willing to abide by these requirements. Section III is provides a mechanism(non-binding arbitration)for addressing disputes between the City and Tax Collector regarding the application of the administrative rules and the UUT ordinance The City( nnnril wmOrl have flip Description of Administrative Rules ATTACHMENT B Section I. A. This provision places the burden on the city to assure that the billing information(customer addresses)of the various utilities is accurate so customers within the City pay the tax and customers outside of the City do not pay the City's tax. The City's current auditor,Municipal Resource Consultant, performs this valuable service at no cost to the utility, and at no increased cost to the City. This provision does not provide retroactive immunity for past errors, which may only be authorized by the City Council on a individual basis depending the extent and cause of the errors. Section I. B. This provision places the burden on the City to provide the utility tax collectors with accurate information regarding its UUT ordinance,including future amendments. Municipal Resource Consultant has agreed to performs this service at no increased cost to the City by placing the City's ordinance in a data base on its Internet Web site. Section I. C. Under this section,the utility collector would not assume any responsibility for legal challenges to the City's UUT ordinance. State law is being proposed that will accomplish the same thing. Section I. D. The City will reimburse the utility for the cost of responding to "extraordinary"audit requests,where,for example, software modifications become necessary. Section L E. The City will seek to assure UUT compliance by all utility providers, including new market entrants. Section I. F. The Tax Administrator will attempt in good faith to following payment and remittance protocols followed by other California public agencies. Section I. G. This provision allows utility service providers to obtain"prospective" tax application by cooperatively meeting with the Tar Administrator It~ and fully disclosing the various services provided by the utility. The Tax Administrator will then determine the appropriate application of the UUT ordinance to such services. Under Section I.I. , the Tax Administrator GMWJMMUW will participate with other public agencies to develop uniform application rules,to the extent feasible. Section I. H. The provision establishes a similar incentive as Section I.G. for "prospective"application of the UUT ordinance to new services and technologies. Section I. I. This section anticipates the creation of an advisory committee representing public agencies with UUT ordinances. It would make non-binding recommendations that are designed to achieve uniformity in UUT application and UUT administration. The advisory committee would also meet with utility representatives to develop industry-supported recommendations. The Tax Administrator would participate in such an advisory committee. Section II contains a series of provisions designed to address utility concerns regarding the City's use of a third party auditor/consultant such as Municipal Resource Consultants (NIRC). Those concerns include confidentiality of customer information, conflict of interest, reasonableness of audit requests, scope of audit, and right to review draft audit report. MRC is willing to abide by these requirements. Section III is provides a mechanism(non-binding arbitration) for addressing disputes between the City and Tax Collector regarding the application of the administrative rules and the UUT ordinance. The Citv Council would have the