(11)AR 080310 Resolutions Placing Ballot Measure

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Staff Report to the Mayor and City Council Consider Adoption of Resolutions Placing Utility Users' Tax Measure on Ballot August 3, 2010 Page 2 • All rates suspended when audited general fund recurring revenue exceeds $39.5M • All rates terminated when audited general fund recurring revenue exceeds $39.5M for 5 consecutive years • 10 Year extension • Updated terminology to address modern technology and issues BACKGROUND This item was continued from your June 8, 2010 Special Meeting and June 15, 2010 Regular Meeting. On March 2, 2004, the citizens of the City of Colton voted to implement a utility users' tax ("UUT") on water, electric, telephone, gas, video, trash and sewer service within the City. The tax is currently set at 4% for residential customers and 6% for all non-residential (commercial, industrial, other) customers. The tax became effective on April 6, 2004 and is scheduled to terminate on June30, 201 L Further, the UUT ordinance (specifically with respect to telecommunications and video) requires updates to address 21 st Century technology. The UUT is a general tax which pays for public services such as police protection, fire and paramedic services, street operations and maintenance, library services, senior citizen services and parks/recreation services. The City currently receives approximately $5 Million per year from the UUT, which is about 16% of the City's General Fund revenue. Although the City has already taken measures to reduce costs, collection of UUT revenues after June 30, 2011 will be critical to providing current levels of municipal services into FY 2011-2012 and thereafter. If the UUT terminates, the City will be required to implement deeper cuts to City programs and services in FY 2011-2012. Also, because technology is moving at such a rapid pace, the current UUT ordinance contains definitions, exemptions and references that have already become outdated for the 21st Cent specifically with respect to telecommunications and video. In some cases, this outdated language has resulted in lawsuits in other jurisdictions challenging the application of the UUT to certain telephone/telecommunication services (ie: the Federal Excise Tax exemption). A ruling adverse to the City on the Federal Excise Tax issue could result in a loss of revenue. Further, many telephone and video companies are applying the UUT inconsistently, due to outdated definitions and terms, exposing the City to future refund claims and legal challenges. ISSUES/ANALYSIS SENIOR & LOW-INCOME EXEMPTIONS REMAIN THE SAME The proposed Measure would not change the existing senior citizen or low-income exemptions. ORANGE\ WPRIEST\68322.8