PURPOSE     

Staff and the City Attorney�s office recommend the adoption of the proposed ordinance amending Sections 14-1101 and 14-1102 of the Burbank Municipal Code for the sole purpose of removing obsolete references in the Telephone Users Tax ordinance to now-repealed Internal Revenue Code rulings regarding definitions and exemptions.  These proposed amendments are intended only to clarify the original intent and historical construction and practice of the City regarding the type of telephone service subject to the Utility User�s Tax.  The proposed ordinance does not impose any new tax, increase any tax, or revise existing tax administration or calculation methodology. This Ordinance does not, nor is it intended to impose, extend or increase the Telephone Users Tax.    

BACKGROUND

Since 1969, the City of Burbank has imposed a Utility User�s Tax (�UUT�) including a Telephone User�s tax on every person using intrastate and subsequently interstate and international telephone communications services.  Beginning in 1979, the federal government also imposed a federal excise tax (FET) on long distance telephone service if the charges for the service were based on either time or distance. For ease of administration and uniformity, in 2000, the City, along with many other cities in California adopted amendments to its Telephone User�s Tax ordinance to incorporate and refer to definitions used by the federal government in the IRS Code and regulations pertaining to the collection of the FET for long distance telephone communications services.  Consistent with the provisions of the City�s UUT, the telephone service providers are required to collect and remit to the City the UUT mandated by the Burbank Municipal Code.  

On May 25, 2006, the Internal Revenue Service (IRS) announced that the federal excise tax may only be imposed on long distance service if the charges for the service are based on both time and distance. This revised administrative interpretation is to go into effect on July 31, 2006. While Burbank�s municipal code provisions referenced these federal statutes and regulations for purposes of definition and ease and consistency of administration, the City of Burbank has, at all times, since its adoption in 1969 and as subsequently amended, intended that the imposition, administration and calculation methodology of its Utility Users Tax remain within the sole and exclusive jurisdiction of the City of Burbank and the Burbank Municipal Code.   

The proposed amendments to this ordinance remove the references to the now-repealed federal laws and regulations.  They also incorporate a number of exemptions from the UUT which were contained in the federal laws and regulations and which have been provided in practice throughout

the pendency of the UUT (for example, American Red Cross, calls originating within a combat zone from a member of the Armed Forces of the U.S., non-profit hospitals, etc.).  These changes do nothing but maintain the status quo.  They are necessary for and intended only to clarify the original intent and historical construction and practice of the City regarding the type of telephone communications services subject to the Utility User�s Tax. 

ANALYSIS

The proposed changes to the UUT ordinance are solely for the purpose of removing obsolete references to now-repealed Internal Revenue Code rulings regarding definitions and exemptions.  This Ordinance does not impose any new tax, increase any tax, or revise existing tax administration or calculation methodology. This Ordinance does not, nor is it intended to impose, extend or increase the Telephone Users Tax.

The proposed ordinance is recommended as an urgency measure to be introduced and adopted at the same meeting so that it becomes effective before July 31, 2006, in accordance with Section 8 of the Burbank Charter.  As indicated above, this ordinance does not impose a new tax, increase any tax or revise existing tax administration or calculation methodologies.  By enacting the ordinance before July 31, 2006, the effective date of the IRS� amended FET interpretation, there will be no interruption in collection or confusion among the telephone service providers who are responsible for collection of the tax, regarding the continuing requirements of the Burbank Telephone Users Tax. 

The Council is authorized to enact an urgency measure when necessary for the immediate preservation of public peace, health or safety. The facts constituting such urgency are as follows: The revenues from the telephone users tax are anticipated to be approximately $6.1 million for Fiscal Year 2006-2007.  If the City is unable to collect the UUT, because it is continuing to rely on definitions in the Burbank Municipal Code that reference now-repealed IRS provisions, it is projected that the total telephone users tax revenues could decrease by approximately $5.6 million for Fiscal Year 2006-07. The revenues from the telephone users tax are critical to the public peace, health and safety in that these revenues pay the costs associated with essential services, including public safety.

FISCAL IMPACT

This Ordinance does not impose any new tax, increase any tax, or revise existing tax administration or calculation methodology, This Ordinance does not, nor is it intended to impose, extend or increase the Telephone Users Tax.  The revenues from the telephone users tax are anticipated to be approximately $6.1 million dollars for Fiscal Year 2006-2007. If the City is unable to collect the UUT, because it is continuing to rely on definitions in the Burbank Municipal Code that reference now-repealed IRS provisions, it is projected that the total telephone users tax revenues could decrease by approximately $5.6 million for Fiscal Year 2006-07. The revenues from the telephone users tax are critical to the public peace, health and safety in that these revenues pay the costs associated with essential services, including public safety.

RECOMMENDATION

It is recommended that the Council introduce and adopt the proposed ordinance entitled: AN URGENCY ORDINANCE AMENDING SECTIONS 14-1101 AND 14-1102 OF THE BURBANK MUNICIPAL CODE, TELEPHONE USER�S TAX, or in the alternative, if the Council does not wish to adopt it as an urgency measure, that the Council introduce AN ORDINANCE OF THE COUNCIL OF THE CITY OF BURBANK AMENDING SECTIONS 14-1101 AND 14-1102 OF THE BURBANK MUNICIPAL CODE, TELEPHONE USER�S TAX.

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