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Utility User Tax 4 July 28, 2008 <br />Financial Impact-Revenue Neutral <br />As noted earlier, the proposed ordinance expands the current definition of telecommunications to <br />include all forms of communication technology. As a result, the tax "base" is expanded and if <br />the tax rate were left unchanged, then revenues would be increased. Council, in earlier <br />discussions has indicated that it wishes to have any new ordinance "revenue neutral". To <br />achieve this goal, staff is recommending that the new UUT rate on Communications Services be <br />set at 5.7%, which is a reduction from the current rate of 6%. <br />Currently, the Telephone Users' Tax raises approximately $3.3 million annually and the Video <br />Users' Tax raises $650,000 annually, totaling approximately $4.0 million. Staff estimates that if <br />the rate were to remain unchanged, then approximately 5% or $200,000 in new revenues would <br />be raised by the new ordinance. To remain revenue neutral, staff is recommending that the rate <br />be reduced by 5% or from 6% to 5.7%, which is three tenths of one percent. While these are <br />staff s best estimates at the time, if they hold true, then there will be no financial impact to the <br />City. <br />Implementation <br />In order to place the amendment to the City's UUT on the November 4, 2008 ballot, Council <br />must, by resolution approved by at least two thirds of the Council, call for submission of the <br />question to registered voters, approve the form of the ballot question and establish procedures for <br />ballot arguments, and direct the City Clerk to submit the measure to the City Attorney for <br />impartial analysis. Pursuant to Government Code Section 53724(b) the resolution, including the <br />approval of the submission of the proposed ordinance, must be approved by atwo-thirds vote of <br />the all members of the City Council. <br />Staff recommends that Council appoint the established Revenue Ad Hoc Committee to author an <br />argument in favor of the amendment. In addition, Council should approve the form of the <br />amendment to the UUT. <br />Previous City Council Action(s) <br />Amendment to UUT in 2004, Ordinance No. 04-014, 7/6/2004 <br />City Council Committee Review and Action <br />N/A <br />Applicable General Plan Policy <br />N/A <br />Permits and/or Variances Granted <br />N/A <br />Environmental Review <br />N/A <br />