Pass: 17,486 / 76.56% Yes votes ...... 5,353 / 23.44% No votes

See Also: Index of all Measures

Impartial Analysis from City Attorney

This measure proposes the adoption of an ordinance which would amend and update the existing telecommunication utility user tax section of the City's utility user tax ordinance. The proposed ordinance would reduce the tax rate from the current 6% to 5.8%, update outdated definitions and make technical revisions to assure that new telecommunication technology will be taxed the same, regardless of the technology used to provide the service. The proposed ordinance has no effect on the existing utility user tax applied to other utilities such as electrical, gas and water services.

Background. The existing utility user tax was written in 1970. The current tax rate for telecommunication services is 6%. The revenues from this tax -- approximately $6 million per year, are used exclusively for general governmental purposes within the City such as police, fire safety, parks, as well as administrative services.

As written, the existing language in the ordinance is outdated due to significant advances in technology since its adoption, and the tax is not imposed on the many communication services and devices that have since come into existence, such as voice-over-internet protocol, paging, private communication services (e.g., T-1 lines) and IP-TV. Additionally, recent federal court decisions have cast doubt on whether the ordinance, as currently written, can be imposed on long distance, cellular and bundled telephone services.

Fiscal impact. Should litigation be filed against the City or an adverse decision be reached that is controlling in California, the estimated $6 million dollars in general fund revenues collected from the current ordinance could be reduced substantially, having a potentially dramatic impact on the general governmental services such as police, fire safety, parks as well as administrative services. Passage of this measure would prevent the loss of those revenues and protect the City from adverse outcome in any such litigation, as well as avoid the expense of possible litigation against the City itself.

A "yes" vote is in favor of adopting the updated telecommunications portion of the utility user's tax ordinance and reducing the tax rate to 5.8%.

A "no" vote is against adopting the updated telecommunications portion of the utility users tax ordinance which would result in a continuation of the existing 6% tax without updating the municipal code to reflect changes in technology and law.

A majority of "yes" votes is required for the ordinance to be enacted.

Respectfully submitted,

/s/ Susana Alcala Wood
City Attorney
City of Modesto

The above statement is an impartial analysis of the proposed ordinance amendment. If you desire a copy of the proposed ordinance amendment, please call the City Clerk's office at (209) 577-5396 and a copy will be mailed at no cost to you.

Modesto Bee

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