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Home My WebLink About10/7/2015 - STAFF REPORTS - 2.Z.�OF ? P LM S'09 �y V N Cq<�FORN�Pn CITY COUNCIL STAFF REPORT DATE: OCTOBER 7, 2015 CONSENT CALENDAR SUBJECT: PROPOSED RESOLUTION TEMPORARILY SETTING THE RATE ON THE 911 EMERGENCY ACCESS LINE TAX ON PREPAID WIRELESS SERVICE AND CONVERTING THE RATE TO A PERCENTAGE PURSUANT TO AB 1717 TO ENSURE COLLECTION OF THE CITY'S 911 EMERGENCY ACCESS LINE TAX ON PREPAID WIRELESS SERVICE. FROM: David H. Ready, City Manager BY: Finance Department SUMMARY Effective January 1, 2016, the Local Prepaid Mobile Telephony Services Collection Act prescribes a collection process for 911 local access line taxes on prepaid wireless services. The current City tax is in the form of a dollar -based rate of $1.12 per month. Since retailers are only equipped to charge taxes on a percentage basis, the dollar - based rate needs to be converted to a percentage rate for taxing purposes. The State Board of Equalization requires the City Council approve a percentage rate conversion. City staff is recommending the City Council temporarily reduce the prepaid wireless rate to 86 cents per month which converts to per -sale percentage of 1.7%. RECOMMENDATION: 1. Adopt Resolution No. , "A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, TEMPORARILY REDUCING THE 911 ACCESS LINE TAX ON PREPAID WIRELESS SERVICES FROM $1.21 TO $0.86 FROM JANUARY 1, 2016, TO JANUARY 1, 2020." 2. Authorize the City Manager and City Attorney to execute all necessary documents. STAFF ANALYSIS: On September 2, 2015, the City Council approved contracts with the California State Board of Equalization, to collect local taxes on prepaid wireless telephone users, pursuant to recently enacted legislation, the Prepaid Mobile Telephony Services Surcharge Collection Act (AB 1717). The voters of the City of Palm Springs have enacted two taxes on prepaid wireless, the Telephone Utility Tax (TUT) and a 911 ITEM NO. __ 17� City Council Staff Report October 7, 2015 — Page 2 Adopt a Resolution Setting the Rate on Prepaid Wireless & Converting it to a Percentage Emergency Access Line Tax. The proposed action only pertains to the 911 Emergency Access Line Tax for prepaid wireless. City Staff and MuniServices, the City's tax consultant are satisfied that all the requirements pertaining to the new legislation are met for the TUT; however, one additional item is required to enable the City to participate with the collection of the 911 Emergency Access Line Tax. The City of Palm Springs enacted a local tax ordinance, with voter approval, imposing a charge on telephone lines that access local 911 services. This charge is applicable to all wireless or cellphone lines, whether paid on a postpaid (contract) or prepaid basis. In accordance with the Local Prepaid Mobile Telephony Services Collection Act (AB 1717) a collection process to collect the local access line charge on prepaid wireless will be effective January 1, 2016. The current monthly charge for a single access line is $1.21. Since retailers are only equipped to charge taxes on a percentage basis, and the California State BOE is requiring the City to submit a percentage -based tax, the dollar -based rate needs to be converted to a percentage -based rate for taxing purposes on prepaid wireless services. The legislation provides a statutory formula the City must use to convert the fixed fee to a percentage. On the advice of the City consultant, MuniServices, LLC, the City needs to temporarily set the local access line charge for prepaid wireless at 86 cents per line per month, and using the statutory formula, will convert to a percentage of 1.7%. The 1.7% rate was calculated from the current monthly tax of $1.21 per device divided by the City's typical prepaid wireless data plan at $70 per month. The conversion of this percentage rate is very unlikely to render a fixed charge that is higher than the voter approved charge of $1.21. For example, based upon the statewide guidelines that a typical prepaid plan costs $50 per month, the resulting dollar -based rate would be 86 cents. (Calculated by the typical statewide plan at $50 times 1.7%.) The City Council may, at any time, restore the $1.21 rate without voter approval. For the period of January 1, 2016 to January 1, 2020 (when AB 1717 is scheduled to sunset), the reduced rate, converted to a percentage, will ensure taxes can be collected by retailers, and the overall tax to the user will not exceed the voter approved tax rate of $1.21 per line per month. FISCAL IMPACT: The most important fiscal impact will be the increase in compliance of the 911 emergency access line tax amongst all aspects of the telephone services industry. 02 City Council Staff Report October 7, 2015 — Page 3 Adopt a Resolution Setting the Rate on Prepaid Wireless & Converting it to a Percentage Whether land -line based services, wireless services through contract, or prepaid wireless services, all providers, retailers, and customers will be collecting and remitting the appropriate taxes. The magnitude of the impact of the implementation of AB 1717 on the City's revenues is unknown, but the first year's increase for the last six months of the fiscal year in the City's 911 Emergency Access Line Tax, is anticipated to exceed $15,000, net of fees by the State Board of Equalization. This is an important funding source for the public safety 911 and dispatch system in the City of Palm Springs. Geoffrey Gehl, Finance Director ames Thompson, Chief of Staff / City Clerk David H. Ready, er Attachments: Resolution Temporarily Set the Rate on the 911 Emergency Access Line Tax on Prepaid Wireless Services and Convert the Rate to a Percentage 03 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS, CALIFORNIA, TEMPORARILY REDUCING THE 911 ACCESS LINE TAX ON PREPAID WIRELESS SERVICES FROM $1.21 TO $0.86 FROM JANUARY 1, 2016 TO JANUARY 1, 2020. THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES HEREBY FIND AS FOLLOWS: A. At the November 9, 2009 Regular Municipal Election, the voters passed Measure "G" imposing an Access Line Tax. B. Pursuant to Palm Springs Municipal Code §3.39.050, the voters approved annual adjustments in accordance with the increase of the Consumer Price Index, and the current tax per access line is $1.21 per month. C. AB-1717 requires the use of a percentage -based rate to accommodate the sale of prepaid wireless services for the period of January 1, 2016 and January 1, 2020, when the program is scheduled to sunset. D. Since the statutory formula assumes a $50 average prepaid plan, staff recommends temporarily reducing the current rate of $1.21 to $0.86 to avoid a tax increase for more expensive prepaid plans. Based on a reduced rate of $0.86 per access line per month, the calculated tax percentage rate on prepaid wireless sales is 1.7%. THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DOES HEREBY RESOLVE AS FOLLOWS: SECTION 1. The amount of the Access Line Tax pursuant to Palm Springs Municipal Code §§ 3.39.050 and 3.39.060 shall be temporarily reduced until January 1, 2020, as follows: Access Line on prepaid wireless services only shall be $0.86 per access line or 1.7% per Revenue and Tax Code Sec. 42102.5(a)(2). SECTION 2. The Director of Finance is hereby directed and authorized to provide written notice of this resolution to the Board of Equalization pursuant to Revenue and Tax Code § 42000 et seq. SECTION 3. The provisions of this resolution are effective January 1, 2016. 0 /1 Resolution No Page 2 PASSED, APPROVED AND ADOPTED BY THE PALM SPRINGS CITY COUNCIL THIS 7m DAY OF OCTOBER, 2015. DAVID H. READY, CITY MANAGER ATTEST: JAMES THOMPSON, CITY CLERK CERTIFICATION STATE OF CALIFORNIA ) COUNTY OF RIVERSIDE ) ss. CITY OF PALM SPRINGS) I, JAMES THOMPSON, City Clerk of the City of Palm Springs, hereby certify that Resolution No. is a full, true and correct copy, and was duly adopted at a regular meeting of the City Council of the City of Palm Springs on the 7th day of October, 2015, by the following vote: AYES: NOES: ABSENT: ABSTAIN: JAMES THOMPSON, CITY CLERK City of Palm Springs, California 05