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Home My WebLink AboutUtility Tax Late Payment Penalty - Reduction of Utility Tax (!1jF00'y:47C'1V5*riVf- A". to Council/Agency Meeting Held: 2111.Iq (0'z°' D Lid. Y erred/Continued to: zPpproved ❑ Condiotional y A rev ❑ Denied/ S City Cler 's i nature Council Meeting Date: March 16, 1998 Department ID Number: AS 98-004 CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIL ACTION 60 SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS SUBMITTED BY: RAY SILVER, City Administrator0441 PREPARED BY: ROBERT J. FRANZ, Deputy City Administrate SUBJECT: REDUCE THE UTILITY TAX LATE PAYMENT PENAL Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s) Statement of Issue: The second reading of a proposed new ordinance reducing the late fee for utility company payments to the City was delayed so that staff could meet with a City Council Committee (Garofalo and Sullivan) regarding the proposed changes. The ordinance has been revised to reflect the committee's recommendations to the full City Council. Funding Source: Not applicable. Recommended Action: Motion to introduce Ordinance #,3390 reducing the late payment penalty for utility tax collections from 15% to 10% and establishing a procedure for appeal of penalties to the City Council. Alternative Action(s): 1. Deny the recommended action, or 2. Request further study. Analysis: In 1996, the City Council determined that the collection procedures of the City's Utility Users Tax required modification to ensure that service suppliers efficiently and effectively remitted the tax due the City, while providing an opportunity and forum for challenging the penalty assessment consistent with the due process clauses of the Federal and State Constitutions. Towards both of these aims, changes to the City's ordinance have been provided. 3390 claim a credit for such refunded taxes against the amount of tax which is due upon the next monthly returns. (e) A service supplier may refund any sums due to the service user in accordance with this Section or by the service supplier's customary practice. (f) No credit or refund shall be allowed or paid by the City under the provisions of this Section unless the claimant has submitted a written claim to the Tax Administrator within one year of the overpayment or erroneous or illegal collection of said tax. Such claim must clearly establish claimant's right to the refund by written records showing entitlement thereto. The submission of a written claim, which is acted upon by the Tax Administrator, shall be a prerequisite to a suit thereon. The Tax Administrator shall act upon the refund claim within the time period set forth in Government Code Section 912.4. If the Tax Administrator fails or refuses to act on a refund claim within the time prescribed by Government Code Section 912.4, the claim shall be deemed to have been rejected by the Tax Administrator on the last day of the period within which the Tax Administrator was required to act upon the claim as provided in Government Code Section 912.4. It is the intent of the Tax Administrator that the one year written claim requirement of this subsection be given retroactive effect; provided, however,that any claims which arose prior to the commencement of the one year claims period of this subsection, and which are not otherwise barred by a then applicable statute of limitations or claims procedure, must be filed with the Tax Administrator as provided in this subsection within ninety (90) days following the effective date of this ordinance. The above refund procedure has been adopted by the City pursuant to Government Code Section 935. Section 11. Section 3.36.265 is hereby added to the Huntington Beach Municipal Code to read as follows: "3.36.265. Additional Powers and Duties of Tax Administrator. (a) The Tax Administrator shall have the power and duty, and is hereby directed to enforce each and all of the provisions of this Chapter. (b) The Tax Administrator shall have the power to adopt rules and regulations not inconsistent with provisions of this Chapter for the purpose of carrying out and enforcing the payment, collection and remittance of the taxes herein imposed. A copy of such rules and regulations shall be on file in the Tax Administrator's Office. 7 SF/s:SF-980rd:Utiltax Rev.2/19/98-#7 3390 (c) The Tax Administrator may make administrative agreements to vary the strict requirements of this Chapter so that collection of any tax imposed herein may be made in conformance with the billing procedures of particular service supplier so long as said agreements result in collection of the tax in conformance with the general purpose and scope of this Chapter. A copy of each such agreement shall be on file in the Tax Administrator's Office. (d) The Tax Administrator shall determine the eligibility of any person who asserts a right to exemption from or a refund of, the tax imposed by this Chapter." Section 12. This ordinance shall become effective 30 days after it is adopted. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 6 t h day of A P r i 1 , 1998. Mayor ATTEST: APPROVED AS TO FORM: 1�� City Clerk ity "ttorney REVIEWED AND APPROVED: ED: City Ad inistrator epu ity A nis ator/ Administrative S rvices 8 SF/s:SF-980rd:Util tax Rev.2/19/98-47 L Ord. No. 3390 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I, CONNIE BROCKWAY,the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing ordinance was read to said City Council at a regular meeting thereof held on the 16th dM of March, 1998, and was again read to said City Council at a regular meeting thereof held on the 6th day of April, 1998, and was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council. AYES: Harman, Green, Dettloff, Bauer, Sullivan, Garofalo NOES: None ABSENT: Julien ABSTAIN: None I,Connie Brockway CITY CLERK of the City of Huntington Beach and ex-officio Clerk of the City Council,do hereby certify that a synopsis of this ordinance has been published in the Independent on , 19 In accordance with the City Charter of said City City Clerk and ex-officio Clerk Connie Brockway City Clerk of the City Council of the City Deputy City Clerk of Huntington Beach, California G/ordinanc/ordbkpg 4/7/98 3-io- J ORDINANCE NO. 3392 AN ORDINANCE OF THE CITY OF HUNTINGTON BEACH AMENDING CHAPTER 2.32 OF THE HUNTINGTON BEACH MUNICIPAL CODE PERTAINING TO POWERS AND DUTIES OF DEPARTMENT OF COMMUNITY DEVELOPMENT The City Council of the City of Huntington Beach does ordain as follows: SECTION 1. That Section 2.32.030 of Chapter 2.32 of the Huntington Beach Municipal Code is hereby amended to read as follows: 2.32.020 Director--Power and duties (a) The Director of Community Development shall be responsible for the administration and enforcement of the following: (1) Huntington Beach Building Code (Chapter 17.04) (2) Huntington Beach Housing Code (Chapter 17.08) (3) Moving of Buildings (Chapter 17.20) (4) Driveways and Parking Areas (Chapter 17.20) (5) Sun Decks and Windscreens (Chapter 17.24) (6) Trailer Parks (Chapter 17.36) (7) Huntington Beach Code For Abatement of Dangerous Buildings (Chapter 17.12) (8) Huntington Beach Electrical Code (Chapter 17.46) (9) Huntington Beach Mechanical Code (Chapter 17.40) (10) Huntington Beach Plumbing Code (Chapter 17.44) (11) Huntington Beach Oil Code (Title 15) (12) Standing Water--Fences (Chapter 8.32) (13) Rubbish Abatement (Chapter 8.36) (14) Inoperable Vehicles (Chapter 8.48) (15) Planning law(Huntington Beach Ordinance Code) (16) Zoning regulations (Huntington Beach Ordinance Code) (17) State and local environmental regulations (18) Enforcement of California Labor Code section 6404.5 (smoking in closed places of employment) SECTION 2. This ordinance shall take effect 30 days after its adoption. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting held thereof on the 6 t h day of April 1998. ATTEST: yor APPROVED A TO FORM: i y Cle c _ REVIEWED AND APPROVED ,3`j_y City Attorney �. �w, ��.,✓t INITIATED AND APPRIVD�� City A inistrator Director of Community Development 7/k/ordir=ce/mc2-32/3/2/98 • z ATTACHMENT # 1 ATTACHMENT 1 Proposed Changes - Utility Tax Ordinance Meeting with Major Utility Companies Issue #1: The proposed ordinance included several technical errors. Staff Comment: The prior City ordinance and the proposed ordinance contained several errors that relate to the terms tax collector, tax administrator and in some cases service supplier versus service user. In addition, the ordinance said that payments from utility companies are to be made to the tax administrator instead of the Charter requirement that payments be made to the City Treasurer. Revised Proposed Ordinance: The proposed ordinance has been corrected to address all of these technical changes. Issue #2: Due date for monthly payments ("postmarked" versus "received by") Utility Company Comment: The prior City ordinance indicated that payments were due on the 20th of the month based on a postmark. The proposed ordinance changed the postmark requirement to a requirement that the City "receive" the payment by the 20th of the month. Utility companies argued that they cannot control the delivery of mail and that they could not be held responsible for delays that were out of their control. They preferred, and recommended, the postmark by the 20th criteria be retained since they can control the delivery to the post office and the date it is postmarked. Staff Comment: The City Treasurer's Office prefers the change to a "received by the 20th" criteria since the current postmark criteria requires an exception to the normal opening of mail in order to retain the envelope with the postmark. Currently approximately 90 payments are received monthly and require unnecessary staff time to keep the envelope with the postmark date with the payment. In addition, staff pointed out that a "received by" criteria is a common private sector practice for monthly payments to banks and mortgage companies where volume of payments are received. Staff would even accept "received by the 25th" to avoid this inefficient use of staff resources. Revised Proposed Ordinance: The proposed ordinance has been changed to reflect a "postmark by the 20th" as requested by the utility companies. Issue#3: Appeal Process Utility Company Comment: The major utility companies requested that the new appeal process in the ordinance be modified to allow appeals to the City Council if late payment penalties are assessed. They believe that their recent experience with the City staff and City Council indicates that a City Council review is necessary. Staff Comment: The recommended ordinance has an appeal process that allows appeals to be appealed to the City Council. 0027489.02 03/03/98 12:57 PM any, of such users, and such other information as may be necessary for service suppliers to remove exempt service users from their tax billings. 3.36.310 Service supplier--Duty of. No service supplier shall be required to bill any exempt service user for any tax imposed by this chapter after receipt of notice from the Director of Finance that such service user has met the requirements for exempt status established by the provisions of this chapter. 3.36.320 Exemption automatic. The exemption provided for in this chapter shall continue and be renewed automatically from year to year except as hereinafter provided. No exempt service user shall fail to notify the Director of Finance within ten(10) days of a change of address, or of any other fact or circumstance which might disqualify him or otherwise affect his exempt status. All exempt service users shall file with the Director of Finance new verified applications in order to receive exempt service at a new address or location. 3.36.330 Tax billing exemptions--Effective when. All service suppliers shall remove exempt service users from their tax billings for the first regular full billings dated on or before October 15, 1980, and thereafter within sixty (60) days after notice from the Director of Finance to do so. 3.36.340 Violation--Penalty. It is unlawful and a misdemeanor for any person knowingly to receive the exemption provided by this chapter when such person has not met the requirements on which such exemption is based, or when such person can no longer meet the requirements on which such exemption is based, and upon conviction thereof shall be subject to a fine of five hundred dollars ($500) or imprisonment in the county jail for a period not to exceed six(6) months, or by both such fine and imprisonment. Each such person shall be guilty of a separate offense for each and every day or portion thereof during which a violation is committed or continued. 9 G:SF:961egdraft:utiltax 5/20/97-#3 Utility Tax Information Name of Cities Basic Late Charge Penalty Huntington Beach 15% La Habra * 15% Irvine 10% Buena Park 15% Cerritos 15% Los Alamitos * 5% Penalty: increased to 20% after two additional working days Westminster 1 1/2% Santa Ana 25% Long Beach 15% La Palma * 10% Placentia 15% Seal Beach * 15% Stanton * 5% Penalty: increased to 20% after two additional working days * Indicates confirmation by Telephone -REC vEo CITY OF HUNTINGTON. B�*Pfl INTER-DEPARTMENT COMMUNVWMbTh" z E C� ,- HUNTINGTON BEACH JUL 7 8 '97 TO: Michael T. Uberuaga, City Adminis or FROM: Robert J. Franz, Deputy City Administra �- SUBJECT: Utility Tax Ordinance Changes Agenda Item G-IA, July 7, 1997 DATE: July 3, 1997 I recommend the above agenda item be held over to allow additional review time for utility company representatives. The first reading of the new utility tax ordinance was approved by the City Council on June 16, 1997. The RCA and proposed ordinance were sent to the utility companies (Fed Ex - Overnight Delivery) on Thursday, June 12, 1997, which was the earliest date the document could be released to the public. No comments or questions about the ordinance were received by staff until today (July 3, 1997). Stephanie Metzler of the Gas Company called to request one change with which staff concurs (change the due date from "received"to "postmarked"). In addition, GTE representative Lou Banas has contacted . Councilman Dave Garofalo to request a delay in adoption of the ordinance'. Utility companies provided written comments and input on the proposed new ordinance in March of 1996 prior to the City Attorney's Office drafting the proposed new ordinance. There was a delay from the time this input was received to the date the final ordinance was presented to the City Council last month. Therefore, it is appropriate to delay the second reading to insure all utility companies have time to review and comment on the final ordinance. RJF:dj s 26478 LGd u (_7 7/3/97 3:14 PM F kr-QUEST FOR COUNCIL ACTI%jN MEETING DATE: March 16, 1998 DEPARTMENT ID NUMBER: AS 98-004 The amount of the City's penalty (15%) for late payment was also compared to other cities. Six of the twelve cities reviewed had a penalty of 15% for delinquent payment (the City's rate since 1970), one has a 25% penalty, two have a 10% penalty, while one has a 1.5% penalty. The remaining two cities have a 5% penalty that increases to 20% if the payment is two days (or more) late (See Attachment 2). Further, the recommended ordinance allows for payment on the first working day after a weekend or holiday if the due date (20th of the month) falls on such a day, limits the City liability when refunds are due, allows for electronic funds transfers of payments, and allows appeals of penalties to the City Council (there is no appeal process in the current ordinance). The ordinance was reviewed twice with the major utility companies (General Telephone, Edison and the Gas Company) and with the City Council Committee. Attachment 1 is a summary of the issues discussed at the meetings and the changes in the proposed ordinance which relate to these issues. The City Council Committee (Garofalo and Sullivan) reviewed the issues raised by the utility companies and reached the following conclusions regarding their recommendations to the full City Council: 1. Due Date for Monthly Payments: Concur with the utility companies recommendation to allow payments due on the 20th of the month to be considered timely if postmarked by the 20th. 2. Appeal Process: Concur with the utility companies recommendation that an appeal process be established to allow appeal to the City Council. 3. Late payment Penalty: Concur with the staff recommendation to reduce the current 15% late payment penalty to 10%. The attached ordinance incorporates the above City Council Committee recommendations. The appeal process is similar to the process for appeal of Planning Commission decisions, whereby a fee is required to cover the costs of processing the appeal to the City Council. Individual City Council members can appeal decisions of the City Administrator (no fee). Environmental Status: Not applicable. 0030534.01 -2- 03/03/98 12:56 PM kr-QUEST FOR COUNCIL ACTIvN MEETING DATE: March 16, 1998 DEPARTMENT ID NUMBER: AS 98-004 Attachment(s): City Clerk's . - NumberDescription ................... 1. Summary of Issues 2. Utility tax information - survey cities. 3. Proposed Amendment to the City's Utility User Tax Ordinance (including legislative draft). 6)W. A10 a,3470 RCA Author: Robert J. Franz 0030534.01 -3- 03/03/98 12:56 PM / — 3-i6-98 ORDINANCE NO. 3 3 9 0 AN ORDINANCE OF THE CITY OF HUNTINGTON BEACH AMENDING CHAPTER 3.36 OF THE HUNTINGTON BEACH MUNICIPAL CODE PERTAINING TO THE COLLECTION PROCEDURES FOR THE UTILITY USERS TAX WHEREAS, the City Council has determined that the collection procedures of the City's utility users tax requires amendment to ensure that service suppliers efficiently and effectively remit the tax due to the City, while providing an opportunity for service users and service suppliers to challenge the tax assessment consistent with the due process clauses of the Federal and State Constitutions; NOW, THEREFORE, the City Council of the City of Huntington Beach ordains as follows: Section 1. Section 3.36.160 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.160. Reporting and Remitting. (a) Each service supplier shall make a return to the Tax Administrator, on forms provided by him, stating the amount of taxes billed by the service supplier during the preceding month. At the time the return is filed, the full amount of the tax collected shall be remitted to the Treasurer. The Tax Administrator is authorized to require such further information as he deems necessary to properly determine if the tax herein imposed is being levied and collected in accordance with this chapter. Tax returns must be postmarked with prepaid postage and properly addressed, or delivered to the Treasurer on or before the 20th day of each month. Returns and tax remittances are due immediately upon cessation of business for any reason. Should the due date occur on a weekend or legal holiday, the return must be received on the first regular working day following a Saturday/Sunday, or legal holiday. (b) Service suppliers and the Tax Administrator may enter into an agreement to remit taxes by way of electronic funds transfer or similar means. 1 SFis:SF-980rd:Util tax Rev.2/19/98-#7 3390 (c) The Tax Administrator, or the Tax Administrator's designated representative, may request from a person providing transportation services of gas or electricity to service users within the City a list of the names and addresses of its transportation customers within the City pursuant to Section 6354(e) of Chapter 2.5 of Division 3 of the California Public Utilities Commission. (d) If any person subject to record-keeping under this section unreasonably denies the Tax Administrator, or the Tax Administrator's designated representative, access to such records,then the Tax Administrator may impose a penalty of$500 on such person for each day following the initial date that the person refuses to provide such access." Section 2. Section 3.36.180 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.180. Interest and Penalties. (a) Taxes collected from a service user which are not received by the Treasurer on or before the due dates provided in this chapter are delinquent. (b) Any service supplier who fails to remit any tax imposed by this chapter within the time required shall pay a penalty of ten percent(10%) of the amount of the tax. Said penalty shall be paid in addition to the amount of the tax. (c) Any service supplier who fails to remit any delinquent remittance on or before a period of thirty (30) days following the date on which the remittance first became delinquent shall pay a second delinquency penalty of ten percent(10%) of the amount of tax in addition to the amount of the tax and the penalty first imposed. (d) If the Treasurer determines that the non-payment of any remittance due under this chapter is due to fraud, a penalty of twenty-five percent(25%) of the amount of the tax shall be added thereto in addition to the penalties stated in subsection (b) and(c) of this Section. (e) In addition to the penalties imposed, any service supplier who fails to remit any tax imposed by this chapter shall pay interest to the City at the rate of one and one-half percent(1-1/2%)per month or fraction thereof on the amount of the tax, exclusive of penalties, from the date on which the remittance first becomes delinquent until paid. (f) Every penalty imposed and such interest as accrues under the provisions of this Section shall become a part of the tax herein required to be paid." 2 SF/s:SF-980rd:Utiltax Rev.2/19/98-#7 3390 Section 3. Section 3.36.190 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.190 Penalty--Imposed by administrator. The Tax Administrator shall impose the penalties and interest upon persons required to pay and remit taxes under the provisions of this Chapter." Section 4. Section 3.36.210 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.210 Actions to collect. Any tax required to be paid by a service user under the provisions of this chapter shall be deemed a debt owed by the service user to the City. Any such tax collected from a service user which has not been paid to the Treasurer shall be deemed a debt owed to the City by the person required to collect and pay. Any person owing money to the City under the provisions of this chapter shall be liable to an action brought in the name of the City for the recovery of such amount." Section 5. Section 3.36.220 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.220 Failure to pay--Administrative remedy. Whenever the Tax Administrator determines that a service user has deliberately withheld the amount of the tax owed by him from the amounts remitted to a service supplier, or that a service user has failed to pay the amount of the tax for a period of two or more billing periods, or whenever the Tax Administrator deems it in the best interest of the City, he may relieve the service supplier of the obligation to collect taxes due under this chapter from certain named service users for specified billing periods. The Tax Administrator shall notify the service user that he has assumed responsibility to collect the taxes due for the stated periods and demand payment of such taxes. The notice shall be served on the service user by handing it to him personally or by deposit of the notice in the United States mail, postage prepaid thereon, addressed to the service user at the address to which billing was made by the service supplier; or should the service user have changed his address,to his last known address. If a service user fails to remit the tax to the Treasurer within fifteen days from the date of the service of the notice upon him, which shall be the date of mailing if service is not accomplished in person; a penalty of twenty-five(25%)percent of the amount of the tax set forth in the notice shall be imposed but not less than five dollars. The penalty shall become part of the tax herein required to be paid." 3 SF/s:SF-980rd:Utiltax Rev.2/19/98-47 3390 Section 6. Section 3.36.230 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.230 Assessment--Administrative remedy. The Tax Administrator may make an assessment for taxes not paid or remitted by a service supplier or service user. The Tax Administrator shall mail a notice of the assessment which shall refer briefly to the amount of the taxes and penalties imposed. The Tax Administrator shall mail a copy of such notice to the supplier or the service user, allowing fourteen (14) days to appeal the assessment." Section 7. Section 3.36.240 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.240 Appeals. (a) City Administrator Appeal. If the service user or service supplier is aggrieved by any decision of the Tax Administrator, or with the failure to grant a refund or exemption as provided for under this Chapter, he may appeal to the City Administrator, or his or her duly authorized designee, by filing a notice of appeal with the City Clerk within fourteen (14) days of the decision which aggrieved the service user or service supplier. The City Clerk shall thereupon fix a time and place for*a hearing of such appeal. The City Clerk shall give notice to such person of the time and place of hearing as herein provided. (b) City Admnistrator Decision. The decision of the City Administrator, or his or her duly authorized designee, shall be final unless appealed to the City Council. (c) Appeal to the City Council. An appeal from a decision by the City Administrator may be filed no later than ten calendar days after the date of the decision. (1) Form of Notice on Appeal. The notice of appeal shall contain the name and address of the person appealing the action, the decision appealed from and the grounds for the appeal. A defect in the form of the notice does not affect the validity or right to an appeal. (2) Action on Appeal. The City Clerk shall set the matter for hearing before the City Council and shall give notice of the hearing on the appeal. 4 S F/s:SF-980rd:Utiltax Rev.2/19/98-#7 ' 3390 (3) De Novo Hearing. The City Council shall hear the appeal as a new matter. The original applicant has the burden of proof. The City Council may act upon the appeal, either granting it, conditionally granting it or denying it, irrespective of the precise grounds or scope of the appeal. In addition to considering the testimony and evidence presented at the hearing on the appeal,the City Council shaff consider all pertinent information from the file as a result of the previous hearings from which the appeal is taken. (4) Decision on Appeal. The City Council may reverse or affirm in whole or in part, or may modify the decision, or determination that is being appealed. (5) Fee for Appeal. The notice of appeal shall be accompanied by the fee fixed by resolution of the City Council. (6) Appeal by City Council Member A. A City Council member may appeal a decision of the City Administrator. The appeal shall be processed in the same manner as an appeal by any other person but need not be accompanied by the fee prescribed for an appeal. B. The City Council member appealing the decision is not disqualified by that action from participating in the appeal hearing and the deliberations nor from voting as a member of the City Council." Section 8. Section 3.36.245 is hereby added to the Huntington Beach Municipal Code to read as follows: "3.36.245. Audit by City. The City shall have the right to inspect all books, accounts and records of the service supplier which the City deems necessary to properly determine if the tax herein imposed is being levied and collected in accordance with this Chapter." The service supplier shall make available all books, accounts and records at a location within Los Angeles or Orange County and during normal business hours." Section 9. Section 3.36.250 of the Huntington Beach Municipal Code is hereby amended to read as follows: 5 SF/s:SF-980rd:Utiltax Rev.2/19/98-47 3390 "3.36.250 Records. It shall be the duty of every person•required to collect and remit to the City any tax imposed by this chapter to keep and preserve, for a period of three years, all records as may be necessary to determine the amount of such tax as he may have been liable for the collection of and remittance to the Treasurer, which records the Treasurer shall have the right to inspect at all reasonable times." Section 10. Section 3.36.260 of the Huntington Beach Municipal Code is hereby amended to read as follows: "3.36.260. Refunds. (a) Whenever the amount of any tax has been overpaid or paid more than once or has been erroneously or illegally collected or received by the Tax Administrator under this Chapter, it may be refunded as provided in this Section. (b) A person required to collect and remit taxes as imposed by this Chapter may claim a refund or take as credit against taxes collected and remitted the amount overpaid, paid more than once or erroneously or illegally collected or received when it is established in a manner prescribed by the Tax Administrator that the service user from whom the tax has been collected did not owe the tax; provided, however, that neither a refund nor a credit shall be allowed to the service supplier unless the amount of the tax so collected has either been refunded to the service user by, or credited to charges subsequently payable to, the person required to collect and remit such tax to the City. (c) A service user who has not otherwise received a refund or a credit against future taxes from the service supplier pursuant to subsection(b) of this Section may claim a refund directly from the Tax Administrator for any amount overpaid, paid more than once, or erroneously or illegally. collected or received when it is established that the service user from whom the tax has been collected did not owe the tax. The Tax Administrator shall notify the service supplier of his/her determination and the amount of any refund due to the service user which amount, if any, shall be promptly refunded or credited to the service user by the service supplier in accordance with subsection (b) above. (d) Notwithstanding other provisions of this Section, whenever a service supplier, pursuant to an order of the California Public Utilities Commission or a court of competent jurisdiction, makes a refund to service users of charges for past utility services, the taxes paid pursuant to this Chapter on the amount of such refunded charges shall also be refunded to such service users, and the service supplier shall be entitled to 6 SF/s:SF-980rd:Uti Itax Rev.2/19/98-47 is ATTACHMENT 1 Proposed Changes - Utility Tax Ordinance Meeting with Major Utility Companies Revised Proposed Ordinance: The proposed ordinance includes an appeal process for the City Council to hear appeals regarding late payments. Issue #4: Late Payment Penalty Utility Company Comment: The major utility companies felt that the current 15% penalty was excessive and that the proposed 10% was also too high. They prefer a penalty of "lost interest", a 1.5% penalty or some other lower level of penalty. They stated that since the utility companies do not charge for the administration of the City's utility tax ordinance, the utilities are absorbing administrative costs that the City should recognize in the establishment of penalty provisions in this ordinance. The major utility companies also indicated that they are attempting to get the League of California Cities to review their "model ordinance" which includes the 15% penalty provision. Staff Comment: The 15% penalty provision that staff has enforced consistently since 1970 has been an effective tool to ensure timely receipt of monthly utility tax payments. A survey of other cities shows that while some cities have 10% or lower penalties, the prevailing late payment penalty is 15%. A "loss of interest" or penalty of 1.5% would not, in staffs opinion, encourage prompt payment by utility companies. The administrative cost of enforcing the ordinance would become much higher if a nominal late charge penalty were implemented. Estimated additional staffing of one permanent position at an annual cost of $60,000 for collection enforcement would be recommended if the penalty is lowered to this amount. The recommended penalty is also consistent with standard private sector and governmental penalty provisions regarding late payments. The City receives over $13 million in utility tax receipts and specific dates of payments are matched with cash flow needs to maximize the City's return and to meet monthly expense requirements. Revised Proposed Ordinance: The late charge penalty is proposed to be lowered from 15% to 10% in the proposed ordinance. 0027489.02 03/03/98 12:57 PM s ATTACHMENT #2 0 V UTILITY TAX INFORMATION (Orange County Cities with Utility Taxes) »; .;: .. .... :. - , ;...:.::.:...... . . Basic Late Char a Received versus.: ame;:o Cities,N , . ....... .: - » > > »::>» <> APPeaI:; ........Penalty Postmark Basis Huntington Beach: Current 15% Postmark** *** Recommended 10% Postmark City Council LaHabra* 15% Postmark** *** Irvine 10% Postmark** *** Buena Park 15% Postmark** *** Cerritos 15% Postmark** *** Los Alamitos* 5% Penalty: Increased to 20%after Postmark** *** two additional working days. Westminster 1.5% Postmark** *** Santa Ana 25% Postmark** *** La Palma* 10% Postmark** *** Placentia 15% Postmark** *** Seal Beach* 15% Postmark** *** Stanton* 5% Penalty: Increased to 20%after Postmark** *** two additional working days. Long Beach 15% Postmark** *** * Indicates confirmation by telephone. " Three cities in Southern California (Pomona, Santa Barbara and Redondo Beach) require a "received" on or before basis, prior to being subject to a Late Charge. All cities listed above are treated as "postmark" entities by the major utility companies, irrespective of language such as "payable on", or "due by" in City ordinances. **# Only one of the ordinances reviewed (Irvine)contained language specifically citing Appeal Procedures for purposes of contesting delinquent Utility Tax submission. Irvine included a formal Appeal Section in their ordinance. In that instance, appellants aggrieved "by any decision" of the Tax Administrator could appeal same to the City Manager as well as pursue a further appeal to the City Council. 0029685.01 02/27/98 3:18 PM • ATTACHMENT #3 LEGISLATIVE DRAFT Ordinance No. 3371 Chapter 3.36 UTILITIES TAX Sections: 3.36.010 Definitions 3.36.020 Telephone tax--Imposed 3.36.030 Telephone tax--Charges 3.36.040 Telephone tax--Intrastate use 3.36.050 Electricity tax 3.36.060 Use of electrical energy 3.36.070 Gas tax--Imposed 3.36.080 Gas tax--Exclusions 3.36.090 Water tax--Imposed 3.36.100 Water tax--Exclusions 3.36.110 Cable Television Users Tax 3.36.120 Exemptions 3.36.130 Collection of tax 3.36.140 Collection--When made 3.36.150 Collection--Commencement 3.36.160 124i ff g r-etum and„ e- Reporting and Remitting 3.36.170 Delinquent when 3.36.180 Penalty--Effect 3.36.190 Penalty--Imposed by administrator 3.36.200 Penalty--Combining nature 3.36.210 Actions to collect 3.36.220 Failure to pay--Administrative remedy 3.36.230 Assessment--Administrative remedy 3..36.240 Assessment--Hearing 3.36.245 Audit by City 3.36.250 Records 3.36.260 Refunds 3.36.265 Additional Powers and Duties of Tax Collector 3.36.270 City exempt 3.36.280 Senior citizens--Exemption 3.36.290 Application required 3.36.300. Notification to service supplier 3.36.310 Service supplier--Duty of 3.36.320 Exemption automatic 3.36.330 Tax billing exemptions--Effective when 3.36.340 Violation--Penalty 1 G:SF:96legdraft:utiltax Rev.2/19/98-#4 3.36.010 Definitions. Except where the context otherwise requires,the definitions given in this Section govern the construction of this chapter: (a) "City" means the City of Huntington Beach. (b) "Month" means a calendar month. (c) "Person" means any domestic or foreign corporation, firm, association, syndicate,joint stock company, partnership of any kind,joint venture, club, Massachusetts business or common law trust, society, individual or municipal corporation. (d) "Service supplier" means any entity which receives taxes paid and remits same as imposed by this chapter. (e) "Service user" means a-person required to pay a tax imposed by this chapter. (f) "Tax Administrator" means the Finance Director of the City. (g) "Telephone corporation, electrical corporation, gas corporation, and water corporation" shall have the same meanings as defined in Sections 234,218, 222, and 241 respectively, of the Public Utilities Code of the State of California, as said Sections existed on January 1, 1970. "Electrical corporation" and "water corporation" shall be construed to include any organization, municipality or agency engaged in the selling or supplying of electrical power or water to;a service user; however, as specified by Public Utilities Code Section 218, does not include a corporation or person employing cogeneration technology or producing power from other than a conventional power source for the generation of electricity. (1598-10/70,2933-8/88) 3.36.020 Telephone tax--Imposed. There is imposed a tax upon every person in the City, other than a telephone corporation,using international, interstate, and intrastate telephone communication services in the City. The tax imposed by this Section shall be at the rate of five (5%) percent of all charges made for such services. (1598-10/70, 3096-4/91) 3.36.030 Telephone tax--Charges. As used in this Section, the term "charges" shall not include charges for services paid for by inserting coins in coin-operated telephones except that where such coin-operated telephone service is furnished for a guaranteed amount,the amounts paid under such guarantee plus any fixed monthly or other periodic charge shall be included in the base for computing the amount of tax due; nor shall the term "telephone- communication services" include maritime-mobile services as defined in Section 2.1 of Title 47 of the Code of Federal Regulations, or as that section may be amended from time to time. 3.36.040 Telephone tax--Intrastate use. Notwithstanding the provisions of Section 3.36.020, the tax imposed under this chapter shall not be imposed upon any person for using intrastate telephone communication services to the extent that the amounts paid for such 2 G:SF:961 egdraft:uti Itax Rev.2/19/98-#4 services are exempt from or not subject to the tax imposed by Section 4251 of Title 26 of the United States Code, as such Section existed on January 1, 1970, without regard to Section 3.36.020. 3.36.050 Electricity tax. There is imposed a tax upon every person in the City using electrical energy in the City. The tax imposed by this Section shall be at the rate of five (5%)percent of the charges made for such energy and shall be paid by the person paying for such energy. "Charges" as used in this Section shall include charges made for: (a) Metered energy; and _ (b) Minimum charges for service, including customer charges, service charges, demand charges, standby charges and annual and monthly charges. In the case of a service user employing cogeneration technology the tax imposed by this Section shall be based upon the legal rate per kilowatt cogenerated, as charged by the applicable public utility. . 3.36.060 Use of electrical energy. As used in this Section, the term "using electrical energy" shall not be construed to mean the storage of such energy by a person in a battery owned or possessed by him.for use in an automobile or other machinery or device apart from the premises upon which the energy was received; provided, however, that the term shall include the receiving of such energy for the purpose of using it in the charging of batteries. The term shall not include electricity used in water pumping by water corporations; nor shall the term include the mere receiving of such energy by an electrical corporation or governmental agency at a point within the City for resale. 3.36.070 Gas tax--Imposed. There is imposed a tax upon every person in the City using gas in the City which is delivered through mains or pipes. The tax imposed by this Section shall be at the rate of five (5%) percent of the charges made for such gas. 3.36.080 Gas tax--Exclusions. There shall be excluded from the base on which the tax imposed in this Section is computed: (a) Charges made for gas which is to be resold and delivered through mains or pipes; (b) Charges made for gas to be used in the generation of electrical energy by an electrical corporation; (c) Charges made by a gas public utility for gas used and consumed in the conduct of the business of gas public utilities; and (d) Charges for gas used in water pumping by water corporation. (1598-1 ono) 3 G:SF:96legdraft:utiltax Rev.2/19/98-#4 3.36.090 Water tax--Imposed. There is imposed a tax upon every person in the-City using water in the City which is delivered through mains or pipes. The tax imposed by this Section shall be at the rate of five (5%) percent of the charges made for such water and shall be paid by the person paying for such water. 3.36.400 Water tax--Exclusions. There shall be excluded from the base on which the tax imposed in this Section is computed charges made for water which is to be resold and delivered through mains or pipes; and charges made by a municipal water department, public utility or a county or municipal water district for water used and consumed by such department, utility or district in the conduct of the business of such department, utility or district. 3.36.110 Cable Television Users Tax. (a) There is hereby imposed a tax upon every person in the City using cable television service. The tax imposed by this section shall be at the rate of Five Percent(5%) of the charges made for such service and shall be paid by the person paying for such services. (b) The Tax imposed in this section shall be collected from the service user by the person furnishing the cable television service. 3.36.120 Exemptions. Nothing in this chapter shall be construed as imposing a tax upon any person if imposition of such tax upon that person would be in violation of the Constitution of the United States or the Constitution of the State of California. 3.36.130 Collection of tax. The amount of tax imposed by this chapter shall be collected from the service user by the service supplier. 3.36.140 Collection--When made. The tax shall be collected insofar as practicable at the same time as and along with the collection of charges made in accordance with the regular billing practice of the service supplier. 3.36.150 Collection--Commencement. The duty to collect tax from a service user shall commence with the beginning of the first regular billing period applicable to that person which shall begin as of January 1, 1971, or at the beginning of the first regular billing period thereafter which would not include service prior to January 1, 1971. Where a person receives more than one billing, one or more being for different periods than another,the duty to collect shall arise separately for each billing period. 3.36.160 144ag r-ewm a~a ~ „*Reporting and Remitting.. (a) Each service supplier shall make a return to the Tax Administrator, on forms provided by him, stating the amount of taxes billed by the service supplier during the preceding month. At the time the return is filed,Tthe full amount of the tax collected shall be 416144484443 *AP- *,, n O„a 410 *'' remitted to the T. ^d-m-i-ii-st.,ater- Treasurer. The 4 G:SF:961egdraft:utiItax Rev.2/19/98-#4 Tax Administrator is authorized to require such further information as he deems necessary to er-ly properly determine if the tax herein imposed is being levied and collected in accordance with this chapter. must be A.A.4th pr-epakl postage and Tax returns must be postmarked with prepaid postage and properly addressed, or delivered to the,treasurer on or before the 20th day of each month. o .oa 4),the TA* n r 44LA&qvp*i,o 2Qth day f4he . Returns and tax remittances are due immediately upon cessation of business for any reason. Should the due date occur on a weekend or legal holiday, the return must be received on the first regular working day following a Saturday/Sunday, or legal holiday. (b) Service Suppliers and the Tax Administrator may enter into an agreement to remit taxes by way of electronic funds transfer or similar means. (c) The Tax Administrator, or the Tax Administrator's designated representative, may request from a person providing transportation services of gas or electricity to service users within the City a list of the names and addresses of its transportation customers within the City pursuant to Section 6354(e) of Chapter 2.5 of Division 3 of the California Public Utilities Commission. (d) If any person subject to record-keeping under this section unreasonably denies the Tax Administrator, or the Tax Administrator's designated representative, access to such records, then the Tax Administrator may impose a penalty of$500 on such person for each day following the initial date that the person refuses to provide such access. 3.36.170 -Delinquent when. Taxes collected from a service user which are not filed with the Tax Administrator on or before the due dates provided in this chapter are delinquent. 3.36.180 Interest and Penalties. of n ,ta „llo,.�ea Aef . .dofi.. o , dete .,tio", ,.ball .,o+.,e „a he paid by toe a imposed her-Ain .(a)Taxes collected from a service user which are not received by the Treasurer on or before the due dates provided in this chapter are delinquent. 5 G:SF:961egdraft:utiltax Rev.2/19/98-#4 (b)Any service supplier who fails to remit any tax imposed by this chapter within the time required shall pay a penalty of ten percent (10%) of the amount of the tax. Said penalty shall be paid in addition to the amount of the tax. (c)Any service supplier who fails to remit any delinquent remittance on or before a period of thirty (30) days following the date on which the remittance first became delinquent shall pay a second delinquency penalty of ten percent (10%) of the amount of tax in addition to the amount of the tax and the penalty first imposed. (d)If the Treasurer determines'that the non-payment of any remittance due under this chapter is due to fraud, a penalty of twenty-five percent (25%) of the amount of the tax shall be added thereto in addition to the penalties stated in subsections (b) and (c) of this Section. (e)In addition to the penalties imposed, any service supplier who fails to remit any tax imposed by this chapter shall pay interest to the City at the rate of one and one-half percent (1-1/2%) per month or fraction thereof on the amount of the tax, exclusive of penalties, from the date on which the remittance first becomes delinquent until paid. (f) Every penalty imposed and such interest as accrues under the provisions of this Section shall become a part of the tax herein required to be paid. 3.36.190 Penalty--Imposed by administrator. The Tax Administrator shall ha-ve power- impose the additipi;A1 penalties and interest upon persons required to eelleet pay and remit taxes under the provisions of this Chapter f r 4—aud A-F i4egligeaeo ^^l*i^^ af the T-W 3.36.200 Penally--Combiningnture. Every penalty imposed under the provisions of this chapter shall become a part of the tax required to be paid. 3.36.210 Actions to collect. Any tax required to be paid by a service user under the provisions of this chapter shall be deemed a debt owed by the service user to the City. Any such tax collected from a service user which has not been paid to the Treasurer shall be deemed a debt owed to the City by the person required to collect and pay. Any person owing money to the City under the provisions of this chapter shall be liable to an action brought in the name of the City for the recovery of such amount. 3.36.220 Failure to pay--Administrative remedy. Whenever the Tax Administrator determines that a service user has deliberately withheld the amount of the tax owed by him from'the amounts remitted to a service supplier, or that a service user has failed to pay the 6 G:SF:961egdraft:utiltax Rev.2/19/98-#4 amount of the tax for a period of two or more billing periods, or whenever the Tax Administrator deems it in the best interest of the City, he may relieve the service supplier of the obligation to collect taxes due under this chapter from certain named service users for specified billing periods. The Tax Administrator shall notify the service user that he has assumed responsibility to collect the taxes due for the stated periods and demand payment of such taxes. The notice shall be served on the service user by handing it to him personally or by deposit of the notice in the United States mail, postage prepaid thereon, addressed to the service user at the address to which billing was made by the service supplier; or should the service user have changed his address, to his last known address. If a service user fails to remit the tax to the T;4 ^ Treasurer within fifteen days from the date of the service of the notice upon him, which shall be the date of mailing if service is not accomplished in person; a penalty of twenty-five (25%)percent of the amount of the tax set forth in the notice shall be imposed but not less than five dollars. The penalty shall become part of the tax herein required to be paid. 3.36.230 Assessment--Administrative remedy. The Tax Administrator may make an assessment for taxes not paid or remitted by a service supplier or service user per-so r-e +^ fn4. The Tax Administrator,shall mail a A notice of the assessment which shall refer briefly to the amount of the taxes and penalties imposed;fie The Tax Administrator shall mail a copy of such notice to the e1ling the s@ ra 18o ^ supplier or the service user, allowing At teff fourteen (14) daysto appeal the assessment. POSt StiGh;_4_A_t_iCCA_ fAff.—At- f-4-A"A_ days prior-te the date A-fah-e- hea�-iflg 914 the 44-d i.^ l,o,,,1 .,++l,o L,a�,;,, . „ ,;.aorl hiS @bj@.ti@_B ;'S F;lo a ; .„ting with+L.o T_Ax 3.36.240 Asspessirnpapt Appeals. At the ti-P e fix-oa OVA-4-4-side,-inn the assessfnefft' (a)City Administrator Appeal. If the service user or service supplier is aggrieved by any decision of the Tax Administrator, or with the failure to grant a refund or exemption as provided for under this Chapter, he may appeal to the City Administrator, or his or her duly authorized designee, by filing a notice of appeal with the City Clerk within fourteen (14) days of the decision which aggrieved the service user or service supplier. The City Clerk shall thereupon fix a time and place for a hearing of such appeal. The City Clerk shall give notice to such person of the time and place of hearing as herein provided. G:SF:961egdraft:utiltax Rev.2/19/98-#4 (b) City Administrator Decision. The decision of the City Administrator, or his or her duly authorized designee, shall be final unless appealed to the City Council. (c) Appeal to the City Council. An appeal from a decision by the City Administrator may be filed no later than ten calendar days after the date of the decision. . (1)Form of Notice on Appeal. The notice of appeal shall contain the name and address of the person appealing the action, the decision appealed from and the grounds for the appeal. A defect in the form of the notice does not affect the validity or right to an appeal. (2)Action on Appeal. the City Clerk shall set the matter for hearing before the City Council and shall give notice of the hearing on the appeal. (3)De Novo Hearing. The City Council shall hear the appeal as a new matter. The original applicant has the burden of proof. The City Council may act upon the appeal, either granting it, conditionally granting it or denying it, irrespective of the precise grounds or scope of the appeal. In addition to considering the testimony and evidence presented at the hearing on the appeal, the City Council shall consider all pertinent information from the file as a result of the-previous hearings from which the appeal is taken. (4)Decision on Appeal. The City Council may reverse or affirm.in whole or in part, or may modify the decision, or determination that is being appealed. (5)Fee for Appeal. The notice of appeal shall be accompanied by the fee fixed by resolution of the City Council. (6)Appeal by City Council Member A. A City Council member may appeal a decision.of the City Administrator. The appeal shall be processed in the same 8 G:SF:961egdraft:uti1tax Rev.2/19/98-#4 manner as an appeal by any other person but need not be accompanied by the fee prescribed for an appeal. B. The City Council member appealing the decision is not disqualified by that action from participating in the appeal hearing and the deliberations nor from voting.as a member of the City Council. 3.36.245 Audit by City. The City shall have the right to inspect all books, accounts and records of the service supplier which the City deems necessary to properly determine if the tax herein imposed is being levied and collected in accordance with this Chapter. The service supplier shall make available all books, accounts and records at a location within Los Angeles or Orange'County and during normal business hours. 3.36.250 Records. It shall be the duty of every person required to collect and remit to the City any tax imposed by this chapter to keep and preserve, for a period of three years, all records as may be necessary to determine the amount of such tax as he may have been liable for the collection of and remittance to the T Treasurer, which records the Tax Administrator shall have the right to inspect at all reasonable times. 3.36.260 Refunds. (a)Whenever the amount of any tax has been overpaid or paid more than once or has been erroneously or illegally collected or received by the Tax Administrator under this Chapter, it may be refunded as provided in this Section. (ab) A person required to collect and remit taxes as imposed imider- by this Chapter, may claim a refund or take as credit against taxes collected and remitted the amount overpaid,paid more than once or erroneously or illegally collected or received when it is'established in a manner prescribed by the Tax Administrator,that the service user from whom the tax has been collected did not owe the tax; provided, however, that neither a refund nor a credit shall be allowed to the service supplier unless the amount of the tax so collected has either been refunded to the service user by, or credited to charges subsequently.payable to,by too sofviepusAv*A the person required to collect and remit such tax to the City. (4c) N ,v;A,na s1,,11 be paid,„der- the r *1,;s co *; ,,, , „tos"; the .1 ,;,..,.,,,* A service user who has not otherwise received a refund or a credit against future taxes from the service supplier pursuant to subsection (b)'of this Section may claim.a refund directly from the 9. G:SF:96legdraft:utiltax Rev.2/19/98-#4 Tax Administrator for any amount overpaid, paid more than once, or erroneously or illegally collected or1received when it is established that the service user from whom the tax has been collected did not owe the tax. The Tax Administrator shall notify the service supplier of his/her determination and the amount of any refund due to the service user which amount, if any, shall be promptly refunded or credited to the service user by the service supplier in accordance with subsection (b) above. (d) Notwithstanding other provisions of this Section, whenever a service supplier, pursuant to an order of the California Public Utilities Commission or a court of competent jurisdiction, makes a refund to service users of charges,for past utility services, the taxes paid pursuant to this Chapter on the amount of such refunded charges shall also be refunded to such service users, and the service supplier shall be entitled to claim a credit for such refunded taxes against the amount of tax which is due upon the next monthly returns. (e) A service supplier may refund any sums due to the service user in accordance with this Section or by the service supplier's customary practice. (f) No credit or refund shall be allowed or paid by the City under the provisions of this Section unless the claimant has submitted a written claim to the Tax Administrator within one year of the overpayment or erroneous or illegal collection of said tax. Such claim must clearly establish claimant's right to the refund by written records showing entitlement thereto. The submission of a written claim, which.is acted upon by the Tax Administrator, shall be a.prerequisite to a suit thereon. The Tax Administrator shall act upon the refund claim within the time period set forth in Government Code Section 912.4. If the Tax Administrator fails or refuses to act on a refund claim within the time prescribed by Government Code Section 912.4, the claim shall be deemed to have been rejected by the Tax Administrator on the last day of the period within which the Tax Administrator was required to act upon the claim as provided in Government Code Section 912.4. It is the intent of the Tax Administrator that the one year written claim requirement of this subsection be given retroactive effect; provided, however, that any claims 10 G:SF:961egdraft:utiltax Rev.2/19/98-#4 which arose prior to the commencement of the one year claims period of this subsection, and which are not otherwise barred by a then applicable statute of limitations or claims procedure, must be-filed with the Tax Administrator as provided in this subsection within ninety (90) days following the effective date of this ordinance. The above refund procedure has been adopted by the City pursuant to Government Code Section 935. 3.36.265 Additional Powers and Duties of Tax Administrator. (a)The Tax Administrator shall have the power and duty, and is hereby directed to enforce each and all of the provisions of this Chapter. (b)The Tax Administrator shall have the power to adopt rules and regulations not inconsistent with provisions of this Chapter for the purpose of carrying out and enforcing the payment, collection and remittance of the taxes herein imposed. A copy of such rules and regulations shall be on file in the Tax Administrator's office. (c)The Tax Administrator may make administrative agreements to vary the strict requirements of this Chapter so that collection of any tax imposed herein may be made in conformance with the billing procedures of particular service supplier so long as said agreements result in collection of the tax in conformance with the general purpose and scope of this Chapter. A copy of each such agreement shall be on file in the Tax Administrator's office. (d)The Tax Administrator shall determine the eligibility of any person who asserts a right to exemption from or a refund of, the tax imposed by this Chapter. 3.36.270 City exempt. The taxes imposed by this chapter shall not apply to the City. 3.36.280 Senior citizens--Exemption. The tax imposed by this chapter shall not apply to any individual service user sixty-two years of age or older who uses telephone, electric, water or gas services, in or upon any premises occupied by such individual,provided the combined adjusted gross income as used for federal income tax reporting purposes of all members of the household in which such service user resides does not exceed the "HUD Income Guidelines -Very Low Income Category" currently on file at the City's Office of the 11 G:SF:961egdraft:uti1tax Rev.2/19/98-#4 Housing Rehabilitation Administrator, for the calendar year prior to the fiscal year(July 1 through June 30) for which the exemption provided by this chapter is applied. 3.36.290 Application required. Any service user, meeting the requirements for exempt status, may file a verified application with the Director of Finance on a form furnished by him. The Director of Finance, or his designee, shall review all applications and certify those service users as exempt who meet the requirements for the exemption provided by this chapter. 3.36.300 Notification to service supplier. The Director of Finance, or his designee shall compile a list of all exempt service users, together with the addresses, account numbers, if any, of such users, and such other information as may be necessary for service suppliers to remove exempt service users from their tax billings. 3.36.310 Service supplier--Duty No service supplier shall be required to bill any exempt service user for any tax imposed by this chapter after receipt of notice from the Director of Finance that such service user has met the requirements for exempt status established by the provisions of this chapter. 3.36.320 Exemption automatic. The exemption provided for in this chapter shall continue and be renewed automatically from year to year except as hereinafter provided. No exempt service user shall fail to notify the Director of Finance within ten(10) days of a change of address, or of any other fact or circumstance which might disqualify him or otherwise affect his exempt status. All exempt service users shall file with the Director of Finance new verified applications in order to receive exempt service at a new address or location. 3.36.330 Tax billinge xemptions--Effective when. All service suppliers shall remove exempt service users from their tax billings for the first regular full billings dated on or before October 15, 1980, and thereafter within sixty (60) days after notice from the Director of Finance to do so. 3.36.340 Violation--Penalty.,It is unlawful and a misdemeanor for any person knowingly to receive the exemption provided by this chapter when such person has not met the requirements on which such exemption is based, or when such person can no longer meet the requirements on which such exemption is based, and upon conviction thereof shall be subject to a fine of five hundred dollars ($500) or imprisonment in the county jail for a period not to exceed six(6) months, or by both such fine and imprisonment. Each such person shall be guilty of a separate offense for each and every day or portion thereof during which a violation is committed or continued. 12 G:SF:961egdraft:utiltax Rev.2/19/98-#4 i b� OFFICE OF THE CITY CLERK � CITY OF HUNTINGTON BEACH INTER-DEPARTMENT COMMUNICATION HUNTINGTON BEACH TO: Central Library Banning Street Library Main Street Library Graham Street Library Oak View Library FROM: Connie Brockway, City Clerk SUBJECT: Ordinance Posting DATE: Attached isZZZZ,�y�6ce&/ for Public Posting. nk you, putt' City Clerk 5210 Please sign and return. Received by Date g:\Ordinance/ordpost ORDINANCE NO. 3 3 5 0 AN ORDINANCE OF THE CITY OF HUNTINGTON BEACH AMENDING CHAPTER 3.36 OF THE HUNTINGTON BEACH MUNICIPAL CODE PERTAINING TO THE COLLECTION PROCEDURES FOR THE UTILITY USERS TAX WHEREAS, the City Council has determined that the collection procedures of the City's utility users tax requires amendment to ensure that service suppliers efficiently and effectively remit the tax due to the City, while providing an opportunity for service users and service suppliers to challenge the tax assessment consistent with the due process clauses of the Federal and State Constitutions; NOW, THEREFORE, the City Council of the City of Huntington Beach ordains as follows: Section 1. Section 3.36.160 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.160. Reporting and Remitting. (a) Each service supplier shall make a return to the Tax Administrator, on forms provided by him, stating the amount of taxes billed by the service supplier during the preceding month. At the time the return is filed, the full amount of the tax collected shall be remitted to the Treasurer. The Tax Administrator is authorized to require such further information as he deems necessary to properly determine if the tax herein imposed is being levied and collected in accordance with this chapter. Tax returns must be postmarked with prepaid postage and properly addressed, or delivered to the Treasurer on or before the 20th day of each month. Returns and tax remittances are due immediately upon cessation of business for any reason. Should the due date occur on a weekend or legal holiday, the return must be received on the first regular working day following a Saturday/Sunday, or legal holiday. (b) Service suppliers and the Tax Administrator may enter into an agreement to remit taxes by way of electronic funds transfer or similar means. SFA SF-980rd:Utiltax Rev.2/19/98-47 3390 (c) The Tax Administrator, or the Tax Administrator's designated representative, may request from a person providing transportation services of gas or electricity to service users within the City a list of the names and addresses of its transportation customers within the City pursuant to Section 6354(e) of Chapter 2.5 of Division 3 of the California Public Utilities Commission. (d) If any person subject to record-keeping under this section unreasonably denies the Tax Administrator, or the Tax Administrator's designated representative, access to such records, then the Tax Administrator may impose a penalty of$500 on such person for each day following the-initial date that the person refuses to provide such access." Section 2. Section 3.36.180 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.180. Interest and Penalties. (a) Taxes collected from a service user which are not received by the Treasurer on or before the due dates provided in this chapter are delinquent. (b) Any service supplier who fails to remit any tax imposed by this chapter within the time required shall pay a penalty of ten percent(10%) of the amount of the tax. Said penalty shall be paid in addition to the amount of the tax. (c) Any service supplier who fails to remit any delinquent remittance on or before a period of thirty (30) days following the date on which the remittance first became delinquent shall pay a second delinquency penalty of ten percent(10%) of the amount of tax in addition to the amount of the tax and the penalty first imposed. (d) If the Treasurer determines that the non-payment of any remittance due under this chapter is due to fraud, a penalty of twenty-five percent(25%) of the amount of the tax shall be added thereto in addition to the penalties stated in subsection (b) and(c) of this Section. (e) In addition to the penalties imposed, any service supplier who fails to remit any tax imposed by this chapter shall pay interest to the City at the rate of one and one-half percent(1-1/2%)per month or fraction thereof on the amount of the tax;exclusive of penalties, from the date on which the remittance first becomes delinquent until paid. (f) Every penalty imposed and such interest as accrues under the provisions of this Section shall become a part of the tax herein required to be paid." 2 SF/s:SF-980rd:Utiltax Rev.2/19/98-#7 3390 Section 3. Section 3.36.190 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.190 Penalty--Imposed by administrator. The Tax Administrator shall impose the penalties and interest upon persons required to pay and remit taxes under the provisions of this Chapter." Section 4. Section 3.36.210 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.210 Actions to collect. Any tax required to be paid by a service user under the provisions of this chapter shall be deemed a debt owed by the service user to the City. Any such tax collected from a service user which has not been paid to the Treasurer shall be deemed a debt owed to the City by the person required to collect and pay. Any person owing money to the City under the provisions of this chapter shall be liable to an action brought in the name of the City for the recovery of such amount." Section 5. Section 3.36.220 of the Huntington-Beach Municipal Code is amended to read as follows: "3.36.220 Failure to pay--Administrative remedy. Whenever the Tax Administrator determines that a service user has deliberately withheld the amount of the tax owed by him from the amounts remitted to a service supplier, or that a service user has failed to pay the amount of the tax for a period of two or more billing periods, or whenever the Tax Administrator deems it in the best interest of the City,he may relieve the service supplier of the obligation to collect taxes due under this chapter from certain named service users for specified billing periods. The Tax Administrator shall notify the service user that he has assumed responsibility to collect the taxes due for the stated periods and demand payment of such taxes. The notice shall be served on the service user by handing it to him personally or by deposit of the notice in the United States mail, postage prepaid thereon, addressed to the service user at the address to which billing was made by the service supplier; or should the service user have changed his address, to his last known address. If a service user fails to remit the tax to the Treasurer within fifteen days from the date of the service of the notice upon him, which shall be the date of mailing if service is not accomplished in person; a penalty of twenty-five (25%)percent of the amount of the tax set forth in the notice shall be imposed but not less than five dollars. The penalty shall become part of the tax herein required to be paid." 3 SF/s:SF-980rd:Utiltax Rev.2/19/98-#7 3390 Section 6. Section 3.36.230 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.230 Assessment--Administrative remedy. The Tax Administrator may make an assessment for taxes not paid or remitted by a service supplier or service user. The Tax Administrator shall mail a notice of the assessment which shall refer briefly to the amount of the taxes and penalties imposed. The Tax Administrator shall mail a copy of such notice to the supplier or the service user, allowing fourteen(14) days to appeal the assessment." Section 7. Section 3.36.240 of the Huntington Beach Municipal Code is amended to read as follows: "3.36.240 Appeals. (a) City Administrator Appeal. If the service user or service supplier is aggrieved by any decision of the Tax Administrator, or with the failure to grant a refund or exemption as provided for under this Chapter, he may appeal to the City Administrator, or his or her duly authorized designee, by filing a notice of appeal with the City Clerk within fourteen(14) days of the decision which aggrieved the service user or service supplier. The City Clerk shall thereupon fix a time and place for a hearing of such appeal. The City Clerk shall give notice to such person of the time and place of hearing as herein provided. (b) City Admnistrator Decision. The decision of the City Administrator, or his or her duly authorized designee, shall be final unless appealed to the City Council. (c) Appeal to the City Council. An appeal from a decision by the City Administrator may be filed no later than ten calendar days after the date of the decision. (1) Form of Notice on Appeal. The notice of appeal shall contain the name and address of the person appealing the action,the decision appealed from and the grounds for the appeal. A defect in the form of the notice does not affect the validity or right to an appeal. (2) Action on Appeal. The City Clerk shall set the matter for hearing before the City Council and shall give notice of the hearing on the appeal. 4 SF/s:SF-980rd:Utiltax Rev.2/19/98-#7 3390 (3) De Novo Hearing. The City Council shall hear the appeal as a new matter. The original applicant has the burden of proof. The City Council may act upon the appeal, either granting it, conditionally granting it or denying it, irrespective of the precise grounds or scope of the appeal. In addition to considering the testimony and evidence presented at the hearing on the appeal, the City Council shall consider all pertinent information from the file as a result of the previous hearings from which the appeal is taken. (4) Decision on Appeal. The City Council may reverse or affirm in whole or in part, or may modify the decision, or determination that is being appealed. (5) Fee for Appeal. The notice of appeal shall be accompanied by the fee fixed by resolution of the City Council. (6) Appeal by City Council Member A. A City Council member may appeal a decision of the City Administrator. The appeal shall be processed in the same manner as an appeal by any other person but need not be accompanied by the fee prescribed for an appeal. B. The City Council member appealing the decision is not disqualified by that action from participating in the appeal hearing and the deliberations nor from voting as a member of the City Council." Section 8. Section 3.36.245 is hereby added to the Huntington Beach Municipal Code to read as follows: "3.36.245. Audit by City. The City shall have the right to inspect all books, accounts and records of the service supplier which the City deems necessary to properly determine if the tax herein imposed is being levied and collected in accordance with this Chapter." The service supplier shall make available all books, accounts and records at a location within Los Angeles or Orange County and during normal business hours." Section 9. Section 3.36.250 of the Huntington Beach Municipal Code is hereby amended to read as follows: 5 SF/s:SF-980rd:Utiltax Rev.2/19/98-#7 3390 r "3.36.250 Records. It shall be the duty of every person required to collect and remit to the City any tax imposed by this chapter to keep and preserve, for a period of three years, all records as may be necessary to determine the amount of such tax as he may have been liable for the collection of and remittance to the Treasurer, which records the Treasurer shall have the right to inspect at all reasonable times." Section 10. Section 3.36.260 of the Huntington Beach Municipal Code is hereby amended to read as follows: "3.36.260. Refunds. (a) Whenever the amount of any tax has been overpaid or paid more than once or has been erroneously or illegally collected or received by the Tax Administrator under this Chapter, it may be refunded as provided in this Section. (b) A person required to collect and remit taxes as imposed by this Chapter may claim a refund or take as credit against taxes collected and remitted the amount overpaid, paid more than once or erroneously or illegally collected or received when it is established in a manner prescribed by the Tax Administrator that the service user from whom the tax has been collected did not owe the tax; provided, however, that neither a refund nor a credit shall be allowed to the service supplier unless the amount of the tax so collected has either been refunded to the service user by, or credited to charges subsequently payable to, the person required to collect and remit such tax to the City. (c) A service user who has not otherwise received a refund or a credit against future taxes from the service supplier pursuant to subsection(b) of this Section may claim a refund directly from the Tax Administrator for any amount overpaid, paid more than once, or erroneously or illegally collected or received when it is established that the service user from whom the tax has been collected did not owe the tax. The Tax Administrator shall notify the service supplier of his/her determination and the amount of any refund due to the service user which amount, if any, shall be promptly refunded or credited to the service user by the service supplier in accordance with subsection(b) above. (d) Notwithstanding other provisions of this Section, whenever a service supplier, pursuant to an order of the California Public Utilities Commission or a court of competent jurisdiction, makes a refund to service users of charges for past utility services, the taxes paid pursuant to this Chapter on the amount of such refunded charges shall also be refunded to such service users, and the service supplier shall be entitled to 6 SF/s:SF-980rd:Util tax Rev.2/19/98-47 3390 claim a credit for such refunded taxes against the amount of tax which is due upon the next monthly returns. (e) A service supplier may refund any sums due to the service user in accordance with this Section or by the service supplier's customary practice. (f) No credit or refund shall be allowed or paid by the City under the provisions of this Section unless the claimant has submitted a written claim to the Tax Administrator within one year of the overpayment or erroneous or illegal collection of said tax. Such claim must clearly establish claimant's right to the refund by written records showing entitlement thereto. The submission of a written claim, which is acted upon by the Tax Administrator, shall be a prerequisite to a suit thereon. The Tax Administrator shall act upon the refund claim within the time period set forth in Government Code Section 912.4. If the Tax Administrator fails or refuses to act on a refund claim within the time prescribed by Government Code Section 912.4,the claim shall be deemed to have been rejected by the Tax Administrator on the last day of the period within which the Tax Administrator was required to act upon the claim as provided in Government Code Section 912.4. It is the intent of the Tax Administrator that the one year written claim requirement of this subsection be given retroactive effect; provided, however, that any claims which arose prior to the commencement of the one year claims period of this subsection, and which are not otherwise barred by a then applicable statute of limitations or claims procedure, must be filed with the Tax Administrator as provided in this subsection within ninety (90) days following the effective date of this ordinance. The above refund procedure has been adopted by the City pursuant to Government Code Section 935. Section 11. Section 3.36.265 is hereby added to the Huntington Beach Municipal Code to read as follows: "3.36.265. Additional Powers and Duties of Tax Administrator. (a) The Tax Administrator shall have the power and duty, and is hereby directed to enforce each and all of the provisions of this Chapter. (b) The Tax Administrator shall have the power to adopt rules and regulations not inconsistent with provisions of this Chapter for the purpose of carrying out and enforcing the payment, collection and remittance of the taxes herein imposed. A copy of such rules and regulations shall be on file in the Tax Administrator's Office. 7 SF/s:SF-980rd:Utiltax Rev.2/19/98-#7 3390 (c) The Tax Administrator may make administrative agreements to vary the strict requirements of this Chapter so that collection of any tax imposed herein may be made in conformance with the billing procedures of particular service supplier so long as said agreements result in collection of the tax in conformance with the general purpose and scope of this Chapter. A copy of each such agreement shall be on file in the Tax Administrator's Office. (d) The Tax Administrator shall determine the eligibility of any person who asserts a right to exemption from or a refund of, the tax imposed by this Chapter." Section 12. This ordinance shall become effective 30 days after it is adopted. PASSED AND ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 6 t h day of April , 1998. 11)14-17 — Mayor ATTEST: APPROVED AS TO FORM: City Clerk ity "ttorney REVIEWED AND APPROVED: ED: City Ad l,nistrator &epu�ityyd nis ator/ Administrative S rvices 8 SF/s:SF-980rd:Utiltax Rev.2/19/98-47 r Ord. No. 3390 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss: CITY OF HUNTINGTON BEACH ) I,CONNIE BROCKWAY, the duly elected, qualified City Clerk of the City of Huntington Beach, and ex-officio Clerk of the City Council of said City, do hereby certify that the whole number of members of the City Council of the City of Huntington Beach is seven; that the foregoing ordinance was read to said City Council at a regular meeting thereof held on the 16th day of March, 1998, and was again read to said City Council at a regular meeting thereof held on the 6th day of April, 1998, and was passed and adopted by the affirmative vote of at least a majority of all the members of said City Council., AYES: Harman, Green, Dettloff, Bauer, Sullivan, Garofalo NOES: None ABSENT: Julien ABSTAIN: None 1,Connie Brockway CITY CLERK of the City of Huntington Beach and ex-officio Clerk of the City Council,do hereby certify that a synopsis of this ordinance has been published in the Independent on 000, 19 In accordance with the City Charter of said City City Clerk and ex-officio Clerk Connie Brockway City Clerk of the City Council of the City Deputy City Clerk of Huntington Beach, California G/ordinanc/ordbkpg 4/7/98 RCA ROUTING SHEET INITIATING DEPARTMENT: Administrative Services SUBJECT: Reduce the Utility Tax Late Payment Penalty COUNCIL MEETING DATE: March 16, 1998 ;: :: A ATTA HMENTS STATUS Ordinance (w/exhibits & legislative draft if applicable) Attached Resolution (w/exhibits & legislative draft if applicable) Not Applicable Tract Map, Location Map and/or other Exhibits Not Applicable Contract/Agreement (w/exhibits if applicable) (Signed in full by the City Attorney) Not Applicable Subleases, Third Party Agreements, etc. (Approved as to form by City Attorney) Not Applicable Certificates of Insurance (Approved by the City Attorney) Not Applicable Financial Impact Statement (Unbudget, over $5,000) Not Applicable Bonds (If applicable) Not Applicable Staff Report (If applicable) Attached Commission, Board or Committee Report (If applicable) Attached Findings/Conditions for Approval and/or Denial Not Applicable . . . .. . "EXPLANATION FOR MISSING ATTACHMENTS .:,:::: ::REVIEWED. . :;::RETURNED FORWARDED; Administrative Staff Assistant City Administrator Initial City Administrator Initial FCity Clerk EXPLANATION: FO.R RETURN.OF ITEM. Only)(Below Space For City Clerk's Use RCA Author: Robert J. Franz Council/Agency Meeting Held: /a16'1g-7 Deferred/Continued to: &W."&0" �& `M4�`"`� � City CI rk's Signature ❑ Approved ❑ Conditionally Approved ❑ Denied Y 9 Council Meeting Date: 10/06/97 7-0 Department ID Number: AS 97-042 CITY OF HUNTINGTON BEACH REQUEST FOR COUNCIL ACTION SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL-MEMBERS SUBMITTED BY: MICHAEL T. UBERUAGA, City Administrator �- PREPARED BY: ROBERT J. FRANZ, Deputy City Administrator SUBJECT: UTILITY USERS TAX -- PROPOSED REDUCTION TO LATE PAYMENT PENALTY- 33 r7 I l Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachments) Statement of Issue: In 1996 the City Council requested a review of the City's Utility Users Tax Ordinance. Following an extensive review by the City Attorney's staff and the Administrative Services Department, recommended revisions to the collection procedure were approved (first reading of a new ordinance) on June 16, 1997. The second reading of the ordinance was delayed so that staff could meet with major utility companies regarding the proposed changes. Several minor revisions have been made to the prior recommended ordinance. In addition, the City Treasurer has requested consideration of a change to the current ordinance relating to the postmark of monthly payments. Funding Source: Not applicable. Recommended Action: Motion to introduce Ordinance # 337*1 reducing the late payment penalty for utility tax collections from 15% to 10%. Alternative Action(s): 1. Deny the recommended action, or 2. Request further study, or 3. Approve the recommended Ordinance # 3371 with the alternative proposed by the City Treasurer as described in Attachment 5. Analysis: In 1996, the City Council determined that the collection procedures of the City's Utility Users Tax required modification to ensure that service suppliers efficiently and effectively remitted the tax due the City, while providing an opportunity and forum for challenging the penalty assessment consistent with the due process clauses of the Federal and State Constitutions. Towards both of these aims, changes to the City's ordinance have been provided. (; -6 Kr-QUEST FOR COUNCIL AC7 k..N MEETING DATE: 10/06/97 DEPARTMENT ID NUMBER: AS 97-042 The amount of the City's penalty (15%) for late payment was also reviewed compared to other cities. Seven of the thirteen cities reviewed had a penalty of 15% for delinquent payment (the City's rate since 1970), one has a 25% penalty, two have a 10% penalty, while one has a 1.5% penalty. The remaining two cities have a 5% penalty that increases to 20% if the payment is two days (or more) late (See Attachment 2). Further, the recommended ordinance allows for payment on the first working day after a weekend or holiday if the due date (20th of the month) falls on such a day, limits the City liability when refunds are due, allows for electronic funds transfers of payments, and'allows appeals of penalties to the City Administrator (there is no appeal process in the current ordinance). The ordinance was reviewed with the major utility companies (General Telephone, Edison and the Gas Company) in a meeting on August 8, 1997. Attachment 1 is a summary of the issues discussed at the meeting and the changes in the proposed ordinance which relate to these issues. As described by the City Treasurer (Attachment 4), it would be preferable to eliminate the "postmark" criteria for determining late payments. Currently, monthly payments from utility companies are late if not postmarked by the 20th of the month. The City Treasurer has developed an alternative that would leave the "due date" as the 20th of the month but would require that the monthly payment is delinquent if not "received by" the 24th of the month. Environmental Status: Not applicable. Attachment(s): City Clerk's Page Number No. Description 1. Summary of Issues - Input from Major Utilities. 2. Utility tax information - survey cities. 3. Proposed Amendment to the City's Utility User Tax Ordinance (including legislative draft). 4. Memorandum from the City Treasurer 5. Alternative Draft from City Treasurer RCA Author: Robert J. Franz 0027338.01 -2- 09/25/97 8:37 AM ATTACHMENT # 1 ATTACHMENT 1 Proposed Changes - Utility Tax Ordinance Meeting with Major Utility Companies August 8, 1997 Issue #1: The proposed ordinance included several technical errors. Staff Comment: The prior City ordinance and the proposed ordinance contained several errors that relate to the terms tax collector, tax administrator and in some cases service supplier versus service user. In addition, the ordinance said that payments from utility companies are to be made to the tax administrator instead of the Charter requirement that payments be made to the City Treasurer. Revised Proposed Ordinance: The proposed ordinance has been corrected to address all of these technical changes. Issue #2: Due date for monthly payments ("postmarked" versus "received by") Utility Company Comment: The prior City ordinance indicated that payments were due on the 20th of the month based on a postmark. The proposed ordinance changed the postmark requirement to a requirement that the City "receive" the payment by the 20th of the month. Utility companies argued that they cannot control the delivery of mail and that they could not be held responsible for delays that were out of their control. They preferred, and recommended, the postmark by the 20th criteria be retained since they can control the delivery to the post office and the date it is postmarked. Staff Comment: The City Treasurer's Office prefers the change to a "received by the 20th" criteria since the current postmark criteria requires an exception to the normal opening of mail in order to retain the envelope with the postmark. Currently approximately 90 payments are received monthly and require unnecessary staff time to keep the envelope with the postmark date with the payment. In addition, staff pointed out that a "received by" criteria is a common private sector practice for monthly payments to banks and mortgage companies where volume of payments are received. Staff would even accept "received by the 25th" to avoid this inefficient use of staff resources. Revised Proposed Ordinance: The proposed ordinance has been changed to reflect a "postmark by the 20th" as requested by the utility companies. Issue #3: Appeal Process Utility Company Comment: The major utility companies requested that the new appeal process in the ordinance be modified to allow appeals to the City Council if late payment penalties are assessed. They believe that their recent experience with the City staff and City Council indicates that a City Council review is necessary. 0027489.01 09/04/97 10:05 AM ATTACHMENT 1 Proposed Changes - Utility Tax Ordinance Meeting with Major Utility Companies August 8, 1997 Staff Comment: The recommended ordinance has an appeal process that allows appeals to be decided by the City Administrator. This is consistent with many other City ordinances on appeal of administrative matters such as massage parlor hearings, Personnel Commission decisions, and zoning administrator decisions, where appeals are handled administratively and not heard by the City Council. Since the City has over 90 utility companies making monthly payments of small amounts up to several hundred thousand dollars, the establishment of an appeal process with small appeals of penalties of $10 or less being heard by the City Council could be burdensome and inefficient. Revised Proposed Ordinance: The proposed ordinance includes an appeal process for the City Administrator to hear appeals regarding late payments. Issue #4: Late Payment Penalty Utility Company Comment: The major utility companies felt that the current 15% penalty was excessive and that the proposed 10% was also too high. They prefer a penalty of"lost interest", a 1.5% penalty or some other lower level of penalty. They stated that since the utility companies do not charge for the administration of the City's utility tax ordinance, the utilities are absorbing administrative costs that the City should recognize in the establishment of penalty provisions in this ordinance. The major utility companies also indicated that they are attempting to get the League of California Cities to review their ,'model ordinance" which includes the 15% penalty provision. Staff Comment: The 15% penalty provision that staff has enforced consistently since 1970 has been an effective tool to ensure timely receipt of monthly utility tax payments. A survey of other cities shows that while some cities have 10% or lower penalties, the prevailing late payment penalty is 15%. A "loss of interest" or penalty of 1.5% would not, in staffs opinion, encourage prompt payment by utility companies. The administrative cost of enforcing the ordinance would become much higher if a nominal late charge penalty were implemented. Estimated additional staffing of one permanent position at an annual cost of $60,000 for collection enforcement would be recommended if the penalty is lowered to this amount. The recommended penalty is also consistent with standard private sector and governmental penalty provisions regarding late payments. The City receives over $13 million in utility tax receipts and specific dates of payments are matched with cash flow needs to maximize the City's return and to meet monthly expense requirements. Revised Proposed Ordinance: The late charge penalty is proposed to be lowered from 15% to 10% in the proposed ordinance. 0027489.01 09/04/97 3:06 PM ATTACHMENT #2 Utility Tax Information Name of Cities Basic Late Charge Penalty Huntington Beach 15% La Habra * 15% Irvine 10% Buena Park 15% Cerritos 15% Los Alamitos * 5% Penalty: increased to 20% after two additional working days Westminster 1 1/2% Santa Ana 25% Long Beach 15% La Palma * 10% Placentia 15% Seal Beach * 15% Stanton * 5% Penalty: increased to 20% after two additional working days * Indicates confirmation by Telephone r ATTACHMENT #3 LEGISLATIVE DRAFT Ordinance No. .3 3 2 l Chapter 3.36 UTILITIES TAX Sections: 3.36.010 Definitions 3.36.020 Telephone tax--Imposed 3.36.030 Telephone tax--Charges 3.36.040 Telephone tax--Intrastate use 3.36.050 Electricity tax 3.36.060 Use of electrical energy 3.36.070 Gas tax--Imposed 3.36.080 Gas tax--Exclusions 3.36.090 Water tax--Imposed 3.36.100 Water tax--Exclusions 3.36.110 Cable Television Users Tax 3.36.120 Exemptions 3.36.130 Collection of tax 3.36.140 Collection--When made 3.36.150 Collection--Commencement 3.36.160 Filing r-etuf c"a payment Reporting and Remitting .3.36.170 Delinquent when 3.36.180 Penalty--Effect 3.36.190 Penalty--Imposed by administrator 3.36.200 Penalty--Combining nature 3.36.210 Actions to collect 3.36.220 Failure to pay--Administrative remedy 3.36.230 Assessment--Administrative remedy 3.36.240 Assessment--Hearing 3.36.245 Audit by City 3.36.250 Records 3.36.260 Refunds 3.36.265 Additional Powers and Duties of Tax Collector 3.36.270 City exempt 3.36.280 Senior citizens--Exemption 3.36.290 Application required 3.36.300 Notification to service supplier 3.36.310 Service supplier--Duty of 3.36.320 Exemption automatic 3.36.330 Tax billing exemptions--Effective when 1 G:SF:961egdraft:utiltax 9/3/97-#3 3.36.340 Violation--Penalty 3.36.010 Definitions. Except where the context otherwise requires,the definitions given in this Section govern the construction of this chapter: (a) "City" means the City of Huntington Beach. (b) "Month" means a calendar month. (c) "Person" means any domestic or foreign corporation, firm, association, syndicate,joint stock company, partnership of any kind,joint venture, club, Massachusetts business or common law trust, society, individual or municipal corporation. (d) "Service supplier" means any entity which receives taxes paid and remits same as imposed by this chapter. (e) "Service user" means a person required to pay a tax imposed by this chapter. (f) "Tax Administrator" means the Finance Director of the City. (g) "Telephone corporation, electrical corporation, gas corporation, and water corporation" shall have the same meanings as defined in Sections 234, 218, 222, and 241 respectively, of the Public Utilities Code of the State of California, as said Sections existed on January 1, 1970. "Electrical corporation" and "water corporation" shall be construed to include any organization, municipality or agency engaged in the selling or supplying of electrical power or water to a service user; however, as specified by Public Utilities Code Section 218, does not include a corporation or person employing cogeneration technology or producing power from other than a conventional power source for the generation of electricity. (1598-10/70,2933-8/88) 3.36.020 Telephone tax--Imposed. There is imposed a tax upon every person in the City, other than a telephone corporation, using international, interstate, and intrastate telephone communication services in the City. The tax imposed by this Section shall be at the rate of five (5%) percent of all charges made for such services. (1598-10/70, 3096-4/91) 3.36.030 Telephone tax--Charges. As used in this Section, the term "charges" shall not include charges for services paid for by inserting coins in coin-operated telephones except that where such coin-operated telephone service is furnished for a guaranteed amount, the amounts paid under such guarantee plus any fixed monthly or other periodic charge shall be included in the base for computing the amount of tax due; nor shall the term "telephone- communication services" include maritime-mobile services as defined in Section 2.1 of Title 47 of the Code of Federal Regulations, or as that section may be amended from time to time. 3.36.040 Telephone tax--Intrastate use. Notwithstanding the provisions of Section 3.36.020, the tax imposed under this chapter shall not be imposed upon any person for using 2 G:SF:961egdraft:uti Itax 9/3/97-#3 intrastate telephone communication services to the extent that the amounts paid for such services are exempt from or not subject to the tax imposed by Section 4251 of Title 26 of the United States Code, as such Section existed on January 1, 1970, without regard to Section 3.36.020. 3.36.050 Electricity tax. There is imposed a tax upon every person in the City using electrical energy in the City. The tax imposed by this Section shall be at the rate of five (5%) percent of the charges made for such energy and shall be paid by the person paying for such energy. "Charges" as used in this Section shall include charges made for: (a) Metered energy; and (b) Minimum charges for service, including customer charges, service charges, demand charges, standby charges and annual and monthly charges. In the case of a service user employing cogeneration technology the tax imposed by this Section shall be based upon the legal rate per kilowatt cogenerated, as charged by the applicable public utility. 3.36.060 Use of electrical energy. As used in this Section, the term "using electrical energy" shall not be construed to mean the storage of such energy by a person in a battery owned or possessed by him for use in an automobile or other machinery or device apart from the premises upon which the energy was received; provided, however, that the term shall include the receiving of such energy for the purpose of using it in the charging of batteries. The term shall not include electricity used in water pumping by water corporations; nor shall the term include the mere receiving of such energy by an electrical corporation or governmental agency at a point within the City for resale. 3.36.070 Gas tax--Imposed. There is imposed a tax upon every person in the City using gas in the City which is delivered through mains or pipes. The tax imposed by this Section shall be at the rate of five (5%) percent of the charges made for such gas. 3.36.080 Gas tax--Exclusions. There shall be excluded from the base on which the tax imposed in this Section is computed: (a) Charges made for gas which is to be resold and delivered through mains or pipes; (b) Charges made for gas to be used in the generation of electrical energy by an electrical corporation; (c) Charges made by a gas public utility for gas used and consumed in the conduct of the business of gas public utilities; and (d) Charges for gas used in water pumping by water corporation. (1598-1 ono) 3 G:SF:961egdraft:utiltax 9/3/97-#3 3.36.090 Water tax--Imposed. There is imposed a tax upon every person in the City using water in the City which is delivered through mains or pipes. The tax imposed by this Section shall be at the rate of five (5%)percent of the charges made for such water and shall be paid by the person paying for such water. 3.36.100 Water tax--Exclusions. There shall be excluded from the base on which the tax imposed in this Section is computed charges made for water-which is to be resold and delivered through mains or pipes; and charges made by a municipal water department, public utility or a county or municipal water district for water used and consumed by such department, utility or district in the conduct of the business of such department, utility or district. 3.36.110 Cable Television Users Tax. (a) There is hereby imposed a tax upon every person in the City using cable television service. The tax imposed by this section shall be at the rate of Five Percent(5%) of the charges made for such service and shall be paid by the person paying for such services. (b) The Tax imposed in this section shall be collected from the service user by the person furnishing the cable television service. 3.36.120 Exemptions. Nothing in this chapter shall be construed as imposing a tax upon any person if imposition of such tax upon that person would be in violation of the Constitution of the United States or the Constitution of the State of California. 3.36.130 Collection of tax. The amount of tax imposed by this chapter shall be collected from the service user by the service supplier. 3.36.140 Collection--When made. The tax shall be collected insofar as practicable at the same time as and along with the collection of charges made in accordance with the regular billing practice of the service supplier. 3.36.150 Collection--Commencement. The duty to collect tax from a service user shall commence with the beginning of the first regular billing period applicable to that person which shall begin as of January 1, 1971, or at the beginning of the first regular billing period thereafter which would not include service prior to January 1, 1971. Where a person receives more than one billing, one or more being for different periods than another, the duty to collect shall arise separately for each billing period. 3.36.160 Filing r-elum md pawn Reporting and Remitting.. (a) Each service supplier shall make a.return to the Tax Administrator, on forms provided by him, stating the amount of taxes billed by the service supplier during the preceding month. At the time the return is filed, Tthe full amount of the tax collected shall be dude ' with the r-ewm and filed remitted to the Treasurer. The 4 G:SF:961egdraft:utiltax 9/3/97-#3 Tax Administrator is authorized to require such further information as he deems necessary to to per-y properly determine if the tax herein imposed is being levied and collected in accordance with this chapter. must be pestmar-ked with prepaid postage a eaeh menth, Tax returns must be postmarked with prepaid postage and properly addressed, or delivered to the treasurer on or before the 20th day of each month. r-eeeived by the Tax A am inistr-ater-on .-be fe,.o the 20th a f the fellewing . Returns and tax remittances are due immediately upon cessation of business for any reason. Should the due date occur on a weekend or legal holiday, the return must be received on the first regular working day following a Saturday/Sunday, or legal holiday. (b) Service Suppliers and the Tax Administrator may enter into an agreement to remit taxes by way of electronic funds transfer or similar means. (c) The Tax Administrator, or the Tax Administrator's designated representative, may request from a person providing transportation services of gas or electricity to service users within the City a list of the names and addresses of its transportation customers within the City pursuant to Section 6354(e) of Chapter 2.5 of Division 3 of the California Public Utilities Commission. (d) If any person subject to record-keeping under this section unreasonably denies the Tax Administrator, or the Tax Administrator's designated representative, access to such records, then the Tax Administrator may impose a penalty of$500 on such person for each day following the initial date that the person refuses to provide such access. 3.36.170 Delinquent when. Taxes collected from a service user which are not filed with the Tax Administrator on or before the due dates provided in this chapter are delinquent. 3.36.180 Denalt;, l f€eEtInterest and Penalties. neB.,t*;as; rnr deli ,,..oneypa�,mefl_t. E)f aft),tax ealleeted or-any def4eieney detefmination, shall at4aeh and be-paid by the per-se.n. imposed he (a)Taxes collected from a service user which are not received by the Treasurer on or before the due dates provided in this chapter are delinquent. 5 G:S F:961 e gdraft:ut i I tax 9/3/97-#3 (b)Any service supplier who fails to remit any tax imposed by this chapter within the time required shall pay a penalty of ten percent (10%) of the amount of the tax. Said penalty shall be paid in addition to the amount of the tax. (c)Any service supplier who fails to remit any delinquent remittance on or before a period of thirty (30) days following the date on which the remittance first became delinquent shall pay a second delinquency penalty of ten percent (10%) of the amount of tax in addition to the amount of the tax and the penalty first imposed. (d)If the Treasurer determines that the non-payment of any remittance due under this chapter is due to fraud, a penalty of twenty-five percent (25%) of the amount of the tax shall be added thereto in addition to the penalties stated in subsections (b) and (c) of this Section. (e)In addition to the penalties imposed, any service supplier who fails to remit any tax imposed by this chapter shall pay interest to the City at the rate of one and one-half percent (1-1/2%) per month or fraction thereof on the amount of the tax, exclusive of penalties, from the date on which the remittance first becomes delinquent until paid. (f) Every penalty imposed and such interest as accrues under the provisions of this Section shall become a part of the tax herein required to be paid. 3.36.190 Penalty--Imposed by administrator. The Tax Administrator shall have powef to impose the additional penalties and interest upon persons required to eelleet pay and remit taxes under the provisions of this Chapter for-fiaud of gligeneo in „e fti g of paying t t1,v F—Pitea A4 F44ee., (1 Go%) p .,t of the, ., .,t A,ftl,o t.,,, ^.,llo..te of as Y-eeafnptAed by the qPa-x 3.36 200 Penalty--Combining nature. Every penalty imposed under the provisions of this chapter shall become a part of the tax required to be paid. 3.36.210 Actions to collect. Any tax required to be paid by a service user under the provisions of this chapter shall be deemed a debt owed by the service user to the City. Any such tax collected from a service user which has not been paid to the T^* n,1.. inist,.^te Treasurer shall be deemed a debt owed to the City by the person required to collect and pay. Any person owing money to the City under the provisions of this chapter shall be liable to an action brought in the name of the City for the recovery of such amount. ( 3.36.220 Failure to pay--Administrative remedy. Whenever the Tax Administrator determines that a service user has deliberately withheld the amount of the tax owed by him from the amounts remitted to a service supplier, or that a service user has failed to pay the 6 G:SF:961egdraft:utiltax 9/3/97-#3 amount of the tax for a period of two or more billing periods, or whenever the Tax Administrator deems it in the best interest of the City, he may relieve the service supplier of the obligation to collect taxes due under this chapter from certain named service users for specified billing periods. The Tax Administrator shall notify the service user that he has assumed responsibility to collect the taxes due for the stated periods and demand payment of such taxes. The notice shall be served on the service user by handing it to him personally or by deposit of the notice in the United States mail,postage prepaid thereon, addressed to the service user at the address to which billing was made by the service supplier; or should the service user have changed his address, to his last known address. If a service user fails to remit the tax to the Ta A dmin 'tr-a4a Treasurer within fifteen days from the date of the service of the notice upon him, which shall be the date of mailing if service is not accomplished in person; a penalty of twenty-five (25%)percent of the amount of the tax set forth in the notice shall be imposed but not less than five dollars. The penalty shall become part of the tax herein required to be paid. 3.36.230 Assessment--Administrative remedy. The Tax Administrator may make an assessment for taxes not paid or remitted by a service supplier or service user per-so r-equ r-e to fn t. The Tax Administrator shall mail a A notice of the assessment which shall refer briefly to the amount of the taxes and penalties imposed;eke time a-ad plaee when surah assessmei#shall be submitted to the City Gouneil for- The Tax Administrator shall mail a copy of such notice to the selling the ser-viee and se supplier or the service user, allowing A tern fourteen (14) days-pfier-to appeal the assessment. the date ofthe hearing and shall post sue notice for- .,t least five , „t;,,, ous da. ,s prior-t the date f the h tl, j....,.. .........�..�....... ��.. ......v........a.v vva•�..auv�..� uuJ.. riivi w �iiv uuw vi �aivzicurmg-vir-ciiv ehamber deer-s of the City ooneil. Any ii4Er-e'ste ` ing any objeetionsinay appe-ur and be heard at the hearing py-evided his objeration is filed in Nwiting with th-e. T_ax A,1.„ stu t r.pf:iar-to the time sot fef the hearing. 3.36.240 Appeal. At the t;.,,o fixed far-, side-inn the assessment-, 19 the G45, Couneil shall heaf the same together-with any objeetien filed as aforesaid and thereupon may eeafiFm or-madify the. -Asse-ss-ment by motion. (a)If the service user or service supplier is aggrieved by any decision of the Tax Administrator, or with the failure to grant a refund or exemption as provided for under this Chapter, he may appeal to the City Administrator, or his or her duly authorized designee, by filing a notice of appeal with the City Clerk within fourteen (14) days of the decision which aggrieved the service user or service supplier. The City Clerk shall thereupon fix a time and place for a hearing of such appeal. The City Clerk shall give notice to such person of the time and place of hearing as herein provided. 7 G:SF:961egdraft:utiltax 9/3/97-#3 (b) The decision of the City Administrator, or his or her duly authorized designee, shall be final. 3.36.245 Audit bye The City shall have the right to inspect all books, accounts and records of the service supplier which the City deems necessary to properly determine if the tax herein imposed is being levied and collected in accordance with this Chapter. The service supplier shall make available all books, accounts and records at a location within Los Angeles or Orange County and during normal business hours. 3.36.250 Records. It shall be the duty of every person required to collect and remit to the City any tax imposed by this chapter to keep and preserve, for a period of three years, all records as may be necessary to determine the amount of such tax as he may have been liable for the collection of and remittance to the Tax ^a,,.iaist,.a4e Treasurer, which records the Tax Administrator shall have the right to inspect at all reasonable times. 3.36.260 Refunds. (a)Whenever the amount of any tax has been overpaid or paid more than once or has been erroneously or illegally collected or received by the Tax Administrator under this Chapter, it may be refunded as provided in this Section. (ab) A person required to collect and remit taxes as imposed Unde by this Chapter, may claim a refund or take as credit against taxes collected and remitted the amount overpaid, paid more than once or erroneously or illegally collected or received when 4t is established in a manner prescribed by the Tax Administrator that the service user .from whom the tax has been collected did not owe the tax; provided, however, that neither a refund nor a credit shall be allowed to the service supplier unless the amount of the tax so collected has either been refunded to the service user by, or credited to charges subsequently payable to,b),the sof..:^o useaf*^ the person required to collect and remit such tax to the City. (bc) No refund shall be paid under-the pr-evisieff s of this S eaeCti-e-n-unless the elaima-a service user who has not otherwise received a refund or a credit against future taxes from the service supplier pursuant to subsection (b) of this Section may claim a refund directly from the Tax Administrator for any amount overpaid, paid more than once, or erroneously or illegally collected or received when it is established that the service user from whom the tax has been collected did not owe the tax. The Tax Administrator shall notify the service supplier of his/her determination and the amount of any 8 G:SF:96legdraft:utiltax 9/3/97-#3 refund due to the service user which amount, if any, shall be promptly refunded or credited to the service user by the service supplier in accordance with subsection (b) above. (d) Notwithstanding other provisions of this Section, whenever a service supplier, pursuant to an order of the California Public Utilities Commission or a court of competent jurisdiction, makes a refund to service users of charges for past utility services, the taxes paid pursuant to this Chapter on the amount of such refunded charges shall also be refunded to such service users, and the service supplier shall be entitled to claim a credit for such refunded taxes against the amount of tax which is due upon the next monthly returns. (e) A service supplier may refund any sums due to the service user in accordance with this Section or by the service supplier's customary practice. (f) No credit or refund shall be allowed or paid by the City under the provisions of this Section unless the claimant has submitted a written claim to the Tax Administrator within one year of the overpayment or erroneous or illegal collection of said tax. Such claim must clearly establish claimant's right to the refund by written records showing entitlement thereto. The submission of a written claim, which is acted upon by the Tax Administrator, shall be a prerequisite to a suit thereon. The Tax Administrator shall act upon the refund claim within the time period set forth in Government Code Section 912.4. If the Tax Administrator fails or refuses to act on a refund claim within the time prescribed by Government Code Section 912.4, the claim shall be deemed to have been rejected by the Tax Administrator on the last day of the period within which the Tax Administrator was required to act upon the claim as provided in Government Code Section 912.4. It is the intent of the Tax Administrator that the one year written claim requirement of this subsection be given retroactive effect; provided, however, that any claims which arose prior to the commencement of the one year claims period of this subsection, and which are not otherwise barred by a then applicable statute of limitations or claims procedure, must be filed with the Tax Administrator as provided in this subsection within ninety (90) days following the effective date of this ordinance. The above refund 9 G:SF:96legdraft:utiltax 9/3/97-#3 procedure has been adopted by the City pursuant to Government Code Section 935. 3.36.265 Additional Powers and Duties of Tax Administrator. (a)The Tax Administrator shall have the power and duty, and is hereby directed to enforce each and all of the provisions of this Chapter. (b)The Tax Administrator shall have the power to adopt rules and regulations not inconsistent with provisions of this Chapter for the purpose of carrying out and enforcing the payment, collection and remittance of the taxes herein imposed. A copy of such rules and regulations shall be on file in the Tax Administrator's office. (c)The Tax Administrator may make administrative agreements to vary the strict requirements of this Chapter so that collection of any tax imposed herein may be made in conformance with the billing procedures of particular service supplier so long as said agreements result in collection of the tax in conformance with the general purpose and scope of this Chapter. A copy of each such agreement shall be on file in the Tax Administrator's office. (d)The Tax Administrator shall determine the eligibility of any person who asserts a right to exemption from or a refund of, the tax imposed by this Chapter. 3.36.270 City exempt. The taxes imposed by this chapter shall not apply to the City. 3.36.280 Senior citizens--Exemption. The tax imposed by this chapter shall not apply to any individual service user sixty-two years of age or older who uses telephone, electric, water or gas services, in or upon any premises occupied by such individual, provided the combined adjusted gross income as used for federal income tax reporting purposes of all members of the household in which such service user resides does not exceed the "HUD Income Guidelines - Very Low Income Category" currently on file at the City's Office of the Housing Rehabilitation Administrator, for the calendar year prior to the fiscal year(July 1 through June 30) for which the exemption provided by this chapter is applied. 3.36.290 Application required. Any service user, meeting the requirements for exempt status, may file a verified application with the Director of Finance on a form furnished by him. The Director of Finance, or his designee, shall review all applications and certify those 10 G:SF:961egdraft:utiltax 9/3/97-#3 service users as exempt who meet the requirements for the exemption provided by this chapter. 3.36.300 Notification to service supplier. The Director of Finance, or his designee shall compile a list of all exempt service users, together with the addresses, account numbers, if any, of such users, and such other information as may be necessary for service suppliers to remove exempt service users from their tax billings. 3.36.310 Service supplier--Duty of. No service supplier shall be required to bill any exempt service user for any tax imposed by this chapter after receipt of notice from the Director of Finance that such service user has met the requirements for exempt status established by the provisions of this chapter. 3.36.320 Exemption automatic. The exemption provided for in this chapter shall continue and be renewed automatically from year to year except as hereinafter provided. No exempt service user shall fail to notify the Director of Finance within ten(10) days of a change of address, or of any other fact or circumstance which might disqualify him or otherwise affect his exempt status. All exempt service users shall file with the Director of Finance new verified applications in order to receive exempt service at a new address or location. 3.36.330 Tax billingexemptions—Effective xemptions--Effective when. All service suppliers shall remove exempt service users from their tax billings for the first regular full billings dated on or before October 15, 1980, and thereafter within sixty (60) days after notice from the Director of Finance to do so. 3.36.340 Violation--Penalty. It is unlawful and a misdemeanor for any person knowingly to receive the exemption provided by this chapter when such person has not met the requirements on which such exemption is based, or when such person can no longer meet the requirements on which such exemption is based, and upon conviction thereof shall be subject to a fine of five hundred dollars ($500) or imprisonment in the county jail for a period not to exceed six (6)months, or by both such fine and imprisonment. Each such person shall be guilty of a separate offense for each and every day or portion thereof during which a violation is committed or continued. 11 G:SF:961egdraft:utiltax 9/3/97-#3 ATTACHMENT #4 J4"J& CITY OF HUNTINGTON BEACH T" INTER-DEPARTMENT COMMUNICATION HUNTINGTON BEACH TO: BOB FRANZ, Deputy City Administrator/Admin. Svices. FROM: SHARI L. FREIDENRICH, City Treasurer t SUBJECT: UTILITY TAX PAYMENTS DATE: September 24, 1997 I recommend that the alternative ordinance (attached) be adopted which states that the monthly payment for service suppliers is due on the 20th and delinquent if not"received on or before the 24th of each month." Currently, service suppliers make utility tax payments based on being received with a postmark date on or before the 20th of each month. With the increase in the number of service suppliers to approximately 90, this has created increased manual handling of payments to determine compliance with our ordinance. Envelopes are being retained and attached to payments so that determination of payments can be made by your staff. If postmarks are illegible or missing, this creates additional compliance problems. Finally, cash-flow forecasting is difficult as, currently, we receive the expected $1 million in monthly payments up through the end of each month when the due date for them is the postmarked date of the 20th. I have attached a Policy Statement from the Government Finance Officer's Association (GFOA) regarding the use of postmarks as the payment date. They recommend that continued efficient functioning of public services depends on the prompt receipt of payments due the government. They state that using the postmark date as the due date creates cash management and compliance difficulties for local governments. They understand the concerns of consumers who encounter problems with the postal service that affect the timely receipt and crediting of their payments. However, they believe that corrective remedies should be developed at the local level that do not place administrative burdens on local governments and their citizens and that do not result in the loss of revenue. I have drafted with the City Attorney's office an alternate ordinance incorporating the above. Attachments ....... _.._... .. Policy Statement Postmark as Payment Date Background State and local governments receive payments for income and property taxes, license fees, user fees, fines, utility charges, and various other receipts owed by residents, property owners or those doing business in these jurisdictions. These payments constitute much of the revenue for a government necessary to provide vital public services and fulfill its financial obligations, The continued efficient functioning of public services and the timely payment of a government's obligations depend on the prompt receipt of payments due the government. Most governmental payments have a specific due date and are credited to the proper account as of a date determined by statute or at the discretion of the state or local government. Federal legislative proposals have been advanced that would direct that payment required to be made on or before a prescribed due date shall be considered to have been received by the payee as of the date of the postmark stamped on the envelope instead of the date of actual physical receipt. Such a requirement would impinge on the rights of state and local governments to establish business terms with their customers and taxpayers and could create the following cash management and compliance difficulties for state and local governments: 1. Due dates for many specific payments are currently mandated by state or local law, and are legally deemed paid at the time as determined by the jurisdiction. This proposal would either require legislative bodies to change these dates or would amount to an unfunded fedpral mandate. 2. Increased manual handling of payments would be required in order to demonstrate compliance. For example, envelopes may have to be retained and attached to payments so that determination of the promptness of the payment could be made at a later date. Postmarks and statements may have to be manually reconciled. In addition, postmarks are often illegible or missing, creating additional compliance problems. Where only a partial payment is made after the deadline, the calculation of penalties or interests will be difficult. 3. The increased cost of compliance that would be required by adding staff, reprogramming computers, and purchasing new equipment would be passed on to all state and local taxpayers, not just those who choose to mail their payments on or near the deadline. 4. Interest income of the state or local government could decrease due to the delay in receipts. Even a short delay in payments, when exercised by even a small percentage of payors, will result in missed opportunities for short-term investments because the government will have less cash on hand to invest. These missed opportunities will result in a loss of income to the government and its taxpayers. 5. Cash-flow forecasting could become less accurate as1he timing of payments becomes more uncertain which, in turn, could result in less than optimal short-term investment or borrowing decisions. 6. Because a certain percentage of state or local government payments are made late, thereby incurring penalties and interest, a reduction in the number of late payments would result in a loss of revenue to the government. GFOA Position The Government Finance Officers Association (GFOA) understands the concerns of consumers who encounter problems with the postal service that affect the timely receipt and crediting of their governmental payments. However, GFOA believes that corrective remedies should be developed at the state and local level that do not result in the loss of revenue to and administrative burdens on state and local governments and their citizens. GFOA opposes any federal regulation of payment procedures that constitutes an unfunded mandate on state and local governments. Adopted: May 21, 1996 Back to GFOA Policy Page. ©GFOA 1997. Y A ' A . A ATTACHMENT #5 LEGISLATIVE DRAFT- CITY TREASURER ALTERNATIVE ORDINANCE NO. 337.3 Chapter 3.36 UTILITIES TAX [Effected Sections Only] "3.36.160. Reporting and Remitting. (a) Each service supplier shall make a return to the Tax Administrator, on forms provided by him, stating the amount of taxes billed by the service supplier during the preceding month. At the time the return is filed, the full amount of the tax collected shall be remitted to the Treasurer. The Tax Administrator is authorized to require such further information as he deems necessary to properly determine if the tax herein imposed is being levied and collected in accordance with this chapter. Tax returns must be pestm,,.voa . .;*1, prepaid postage and p er-ly addressed, or.deli >o..oa are due to the Treasurer on or before the 20th day of each month, and are delinquent if not received on or before the 24th day of each month. Returns and tax remittances are due immediately upon cessation of business for any reason. Should the 4ue delinquent date occur on a weekend or legal holiday, the return must be received on the first regular working day following a Saturday/Sunday, or legal holiday. (b) Service suppliers and the Tax Administrator may enter into an agreement to remit taxes by way of electronic funds transfer or similar means. 1 SF\s:SF-97Legdraft:Ut1tax-2 9/24/97-#1 (c) The Tax Administrator, or the Tax Administrator's designated representative, may request from a person providing transportation services of gas or electricity to service users within the City a list of the names and addresses of its transportation customers within the City pursuant to Section 6354(e) of Chapter 2.5 of Division 3 of the California Public Utilities Commission. (d) If any person subject to record-keeping under this section unreasonably denies the Tax Administrator, or the Tax Administrator's designated representative, access to such records, then the Tax Administrator may impose a penalty of$500 on such person for each day following the initial date that the person refuses to provide such access." 3.36.170. Delinquent when. Taxes collected from a service user which are not filed NN4th the TaN received by the Treasurer on or before the slater 24th day of each month are delinquent. 3.36.180, Interest and Penalties. ( - (b)(a) Any service supplier who fails to remit any tax imposed by this chapter AN4t i the ti required on or before the delinquent date shall pay a penalty of ten percent(10%) of the amount of the tax. Said penalty shall be paid in addition to the amount of the tax. 2 SF\s:SF-97Legdraft:Utltax-2 9/24/97-#1 (G)(b) Any service supplier who fails to remit any delinquent remittance on or before a period of thirty (30) days following the date on which the remittance first became delinquent shall pay a second delinquency penalty of ten percent(10%) of the amount of tax in addition to the amount of the tax and the penalty first imposed. (4)(c) If the Treasurer determines that the non-payment of any remittance due under this chapter is due to fraud, a penalty of twenty-five percent(25%) of the amount of the tax shall be added thereto in addition to the penalties stated in subsection (b) and(c)of this Section. (e)(d) In addition to the penalties imposed, any service supplier who fails to remit any tax imposed by this chapter shall pay interest to the City at the rate of one and one-half percent(1-1/2%)per month or fraction thereof on the amount of the tax, exclusive of penalties, from the date on which the remittance first becomes delinquent until paid. ()(e) Every penalty imposed and such interest as accrues under the provisions of this Section shall become a part of the tax herein required to be paid." APPROVED AS O FORM ON,City Attorney GAIL HUB City By- Deputy Y Attorney y�L 3 SRs:SF-97Legdraft:Utltax-2 9/24/97-#1 RCA ROUTING SHEET INITIATING DEPARTMENT: Administrative Services SUBJECT: Utility Users Tax -- Proposed Reduction to Late Payment Penalty COUNCIL MEETING DATE: September 15, 1997 RCA ATTACHMENTS STATUS'` Ordinance (w/exhibits & legislative draft if applicable) Attached Resolution (w/exhibits & legislative draft if applicable) Not Applicable Tract Map, Location Map and/or other Exhibits Not Applicable Contract/Agreement (w/exhibits if applicable) (Signed in full by the City Attorney) Not Applicable Subleases, Third Party Agreements, etc. (Approved as to form by City Attorney) Not Applicable Certificates of Insurance (Approved by the City Attorney) Not Applicable Financial Impact Statement (Unbudget, over $5,000) Not Applicable Bonds (If applicable) Not Applicable Staff Report (If applicable) Attached Commission, Board or Committee Report (If applicable) Not Applicable Findings/Conditions for Approval and/or Denial Not Applicable ..... .................. .. .. E PLAN- :ION =<F R I ING ATTACHMENTS::: REVIEWED RETURNED FOR DED Administrative Staff ( ) ( ) Assistant City Administrator (Initial) City Administrator (Initial) ( ) ) City Clerk ( ) EXPLANATION FOR RETURN OF ITEM: Only)(Below Space For City Clerk's Use RCA Author: Robert J. Franz N Council/Agency Meeting Held: 9h sZ Deferred/Continued to: ( -o ❑ Approved ❑ Conditic[rna l Approved ZDeln'12'�' d Cit Clerk s Si nature __ V ' Council Meeting Date: 09/15/97 Department ID Number: AS 97-037 CITY OF HUNTINGTON BEACH ' REQUEST FOR COUNCIL ACTION Z ,� G -IMF SUBMITTED TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS SUBMITTED BY: MICHAEL T. UBERUAGA, City Administ a o - v "r PREPARED BY: ROBERT J. FRANZ, Deputy City Administrat SUBJECT: UTILITY USERS TAX -- PROPOSED REDUCTION LATE PAYMENT PENALTY Q&D . t'3311 Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environjpental Status,Attachment(s) Statement of Issue: In 1996 the City Council requested a review of the City's Utility Users Tax Ordinance. Following an extensive review by the City Attorney's staff and the Administrative Services Department, recommended revisions to the collection procedure were approved (first reading of a new ordinance) on June 16, 1997. The second reading of the ordinance was delayed so that staff could meet with major utility companies regarding the proposed changes. Several minor revisions have been made to the prior recommended ordinance. Funding Source: Not applicable. Recommended Action: Motion to introduce Ordinance #A3/7 I reducing the late payment penalty for utility tax collections from 15% to 10%. Alternative Action(s): Deny the recommended action, or request further study. Analysis: In 1996, the City Council determined that the collection procedures of the City's Utility Users Tax required modification to ensure that service suppliers efficiently and effectively remitted the tax due the City, while providing an opportunity and forum for challenging the penalty assessment consistent with the due process clauses of the Federal and State Constitutions. Towards both of these aims, changes to the City's ordinance have been provided. The amount of the City's penalty (15%) for late payment was also reviewed compared to other cities. REQUEST FOR COUNCIL ACTION MEETING DATE: 09/15/97 DEPARTMENT ID NUMBER: AS 97-037 Seven of the thirteen cities reviewed had a penalty of 15% for delinquent payment (the City's rate since 1970), one has a 25% penalty, two have a 10% penalty, while one has a 1.5% penalty. The remaining two cities have a 5% penalty that increases to 10% if the payment is two days.(or more) late (See Attachment 2). Further, the recommended ordinance allows for payment on the first working day after a weekend or holiday if the due date (20th of the month) falls on such a day, limits the City liability when refunds are due, allows for electronic funds transfers of payments, and allows appeals of penalties to the City Administrator (there is no appeal process in the current ordinance). The ordinance was reviewed with the major utility companies (General Telephone, Edison and the Gas Company) in a meeting on August 8, 1997. Attachment 1 is a summary of the issues discussed at the meeting and the changes in the proposed ordinance which relate to these issues. Environmental Status: Not applicable. Attachment(s): NumberCity Clerk's Page Description 1. Summary of Issues - Input from Major Utilities. 2. Utility tax information - survey cities. 3. Proposed Amendment to the City's Utility User Tax Ordinance (including legislative draft). RCA Author: Robert J. Franz 0027338.01 -2- 08/28/97 1:28 PM (18) 09/15/97 - Council/Agency Agenda - Page 18 G. Ordinances G-1. Ordinance For Adoption - None G-2. Ordinances for Introduction G-2A. (City Council) Introduction Of Ordinance No. 3370 -Amends Municipal Code Chapter 8.44 Vehicles & Motorcycles Relative To Motorized Scooter(GO-PEDS) and Motorized Skateboards (640.10) - "An Ordinance of the City of Huntington Beach Amending Chapter 8.44 of the Huntington Beach Municipal Code Pertaining to Vehicles and Motorcycles, and Definitions Thereof, and the Operation of Motorized Scooters." Recommended Action: After City Clerk reads by title, approve introduction of Ordinance No. 3370, by roll call vote. ;:: .::: r::>:; :: Deferred::t .::. 97.::.::.:::::6��>a .lee ::>Abe .t:.::.::A!#ete:: I e.;: +or:.:b+ .::: .:::::::::::::.:::::::::. ....:1�::: afe....a. .re.... G-213. (City Council) Introduction Of Ordinance No. 3371 - Utility Users Tax - Proposed Reduction To Late Penalty (640.10) - "An Ordinance of the City of Huntington Beach Amending Chapter 3.36 of the Huntington Beach Municipal Code Pertaining to the Collection Procedures for the Utility Users Tax." Submitted by the Deputy City Administrator-Administrative Services Director (Reduces the late payment penalty for utility tax collections from 15% to 10%) Recommended Action: After City Clerk reads by title, approve introduction of Ordinance No. 3371, by roll call vote. [Deferred to 1016197 -- 6-0 (Julien: Absent)] H. (City_Council/Redevelopment Agency) Council/Agency Agenda Items H-1. Submitted By Council/Agency Member Dave Garofalo H-2. Submitted By Council/Agency Member Pam Julien H-3. Submitted By Council/Agency Member Tom Harman H-4. Submitted By Council/Agency Mayor Pro Tern Shirley Dettloff (18) (9) 09/02/97 - Council/Agency Agenda - Page 9 F-2. (Redevelopment Agency) Solicitation Of Statement Of Qualifications From Owner Participants Block 104/13lock 105 Development Strategy - Main Pier Redevelopment Area - PCH/Fifth St/Walnut Ave./Main Street And PCH/Sixth Street/Walnut Avenue (410.20) Communication from the Economic Development Director informing Council that due to the termination of the Main-Pier II Disposition & Development Agreement, the Redevelopment Agency lacks an approved strategy for staff direction for the future development/redevelopment of Block 104 and Block 105. (Block 104 bounded by Pacific Coast Highway/Fifth/Walnut/Main) (Block 105 bounded by Pacific Coast Highway/Sixth/Walnut). Recommended Action: Authorize the solicitation of Statement of Qualifications from owner participants who wish to develop a portion or all of Blocks 104 and 105 and direct staff to evaluate the responses and return to the Agency Board with recommendations as to development strategy options based on the responses. [Approved 6-0-1 (Green: Absent)] F-3. (City Council) Appointment Of City Council Ad Hoc Committee To Plan Pier Plaza Grand Opening Celebration (120.25) Communication from the Community Services Director recommending the appointment of three Councilmembers to a City Council Ad Hoc Committee to plan the Pier Plaza Grand Opening Celebration. Recommended Action: Appoint three Councilmembers to work with staff and community volunteers to plan and implement the Grand Opening activities for the Pier Plaza next summer. [Appointed Mayor Pro Tem Dettloff, Councilmembers Julien & Garofalo] F-4. (City Council)Administrative Hearing -Appeal Filed By Southern California Edison - Penalty Assessment Late Payment-Utility Tax (340.50) Communication from the Deputy City Administrator-Administrative Services Director. Administrative hearing to consider the appeal of the assessment of a 15% penalty required by the Huntington Beach Municipal Code for the late payment of utility taxes by Southern California Edison. -- Memorandum from the Deputy City Administrator-Administrative Services Director dated August 19, 1997 regarding the Appeal of the Penalty Assessment for Late Submittal of Utility Tax. Recommended Action: 1. Modify the Gity'S 0 penalty to 0 or 2. Madify the penalty to equal the Gity'S 19-63t iRtReirPerst PeaFningr, OR the eight(8) day late payrneRt or 3. Accept Southern California Edison's proposal to allow Edison to make their monthly payment to the city four(4) days early for two consecutive months instead of imposing a financial penalty. [Approved 4-2-1 (Dettloff, Sullivan: NO; Green: Absent)] (9) (13) 07/07/97 - Council/Agency Agenda - Page 13 G. Ordinances G-1. Ordinances For Adoption G-1A. (City Council) Adoption Of Ordinance No 3367 -Amends Code To Reduce The Late Penalty On Utility Users Tax -Adopt Ordinance No. 3367 - "An Ordinance Of The City Of Huntington Beach Amending Chapter 3.36 Of The Huntington Beach Municipal Code Pertaining To The Collection Procedures For The Utility Users Tax." Submitted by the Deputy City Administrator-Administrative Services Director (Reduces Late Payment Penalty from 15% to 10%.) Recommended Motion: After City Clerk reads by title, adopt Ordinance No. 3367, by roll call vote. [Deferred to future meeting so Utility Companies can review-- Approved Deferral by Council Consensus] G-1 B. (City Council) Adoption Of Ordinance No. 3364 -Amends Code To Add New Chapter - Regarding Stormwater& Urban Run Off Management-Adopt Ordinance No. 3364 - "An Ordinance Of The City Council Of The City Of Huntington Beach Amending The Huntington Beach Municipal Code By Adding New Chapter 14.25 Entitled `Storm Water And Urban Runoff Management'." Submitted by the Public Works Director Recommended Motion: After City Clerk reads by title, adopt Ordinance No. 3364, by roll call vote. [Adopted 6-0 -- Julien: Absent] G-2. Ordinance For Introduction G-2A. (City Council) Introduction Of Ordinance No 3368 -Amends Code Pertaining To Vehicles Parked On Street For Over 72 Hours & Removal By Police Department- (Allows Participation In Statewide Vehicle Abatement Program Administered By Orange County Transit Authority -Abandoned Vehicles) -Approve introduction of Ordinance No. 3368 - "An Ordinance Of The City Of Huntington Beach Amending Section 10.08.130 Of Chapter 10.08 Pertaining To Vehicles Parked On The Street For Over 72 Hours And Vehicle Removal By The Police Department." Recommended Motion: After City Clerk reads by title, approve introduction of Ordinance No. 3368, by roll call vote. [Approved Introduction 6-0 -- Julien: Absent] (13) • (15) 06/16/97 - Council/Agency Agenda - Page 15 G-1 D. (City Council) Introduction Of Ordinance No. 3367 -Amends Code To Reduce The Late Penalty On Utility Users Tax (640.10) -Approve introduction of Ordinance No. 3367 - "An Ordinance Of The City Of Huntington Beach Amending Chapter 3.36 Of The Huntington Beach Municipal Code Pertaining To The Collection Procedures For The Utility Users Tax." Submitted by the Deputy City Attorney/Administrative Services Director (Reduces Late Payment Penalty from 15% to 10%). Recommended Motion: After City Clerk reads by title, approve introduction of Ordinance No. 3367, by roll call vote. [Introduction Approved 6-0 (Harman: Absent)] H. (City Council/Redevelopment Agency) Council/Agency Agenda Items (City Council) (Deferred From June 2, 1997) Submitted By Mayor Bauer& Councilmember Garofalo - Recognizing The Efforts Of The Huntington Youth Shelter As Operated By Volunteers Of America - Resolution No. 97-33 Communication from Mayor Bauer and Councilmember Garofalo dated May 16, 1997 recommending adoption of Resolution No. 97-33 recognizing that the Huntington Youth Shelter and Family Resource Center fulfills a great need for the City of Huntington Beach and its youth and families and will continue to receive the unqualified support by the city that has been a tradition since its founding in 1993. Recommended Motion: We respectfully move that the Huntington Beach City Council adopt and collectively sign Resolution 97-33 in support of the efforts of the Huntington Youth Shelter as operated by Volunteers of America. "A Resolution Of The City of Huntington Beach - Huntington Youth Shelter and Family Resource Center, A Program Of Volunteers Of America." [Adopted 6-0 (Harman: Absent)] H-1. Submitted By Council/Agency Member Dave Garofalo (City Council) (Deferred From June 2, 1997) Feasibility Of Allowing Part-Time Employees The Opportunity To Purchase The Medical Benefit Plan Currently Offered by The City To Full-Time Employees (120.90) Communication from Councilmember Garofalo recommending a review be made of the feasibility of the city developing a mechanism that would allow part-time employees the opportunity to purchase and pay for, out of their own pockets, the same medical benefit plan currently offered by the city to full-time employees. [Referred To Staff To Study 6-0] H-2. Submitted By Council/Agency Member Pam Julien (City Council) Permission To Be Excused From Council Meeting (120.40) Communication from Councilmember Julien requesting permission to be excused from the City Council meeting of July 7, 1997. Recommended Motion: Approve said request. [Approved 6-0 (Harman: Absent)] (15) A City ofHuntington Beach rn G -a x CJ1 � n G c:. m emo rn aTt r- '—rJ - r r To: Mayor& City Councilmembers, Michael Uberuaga From: Shari L. Freidenrich, City Treasurer CC: Bob Franz .. A Date: 09/15/97 Re: Postmark as Payment Date I have attached a copy of the Policy Statement issued by the Government Finance Officers Association regarding using the postmark as the payment date. In summary, they believe that corrective remedies should be developed at the state and local level that do not result in the loss of revenue and do not place administrative burdens on state and local governments and their citizens. This concurs with my recommendation that the postmark date not be used as the due date for the payment of the utility taxes to the City of Huntington Beach. Please call me if you have any questions. A 0 Page 1 nn Policy Statement Postmark as Payment Date Background State and local governments receive payments for income and property taxes, license fees, user fees, fines, utility charges, and various other receipts owed by residents, property owners or those doing business in these jurisdictions. These payments constitute much of the revenue for a government necessary to provide vital public services and fulfill its financial obligations, The continued efficient functioning of public services and the timely payment of a government's obligations depend on the prompt receipt of payments due the government. Most governmental payments have a specific due date and are credited to the proper account as of a date determined by statute or at the discretion of the state or local government. Federal legislative proposals have been advanced that would direct that payment required to be made on or before a prescribed due date shall be considered to have been received by the payee as of the date of the postmark stamped on the envelope instead of the date of actual physical receipt. Such a requirement would impinge on the rights of state and local governments to establish business terms with their customers and taxpayers and could create the following cash management and compliance difficulties for state and local governments: 1. Due dates for many specific payments are currently mandated by state or local law, and are legally deemed paid at the time as determined by the jurisdiction. This proposal would either require legislative bodies to change these dates or would amount to an unfunded federal mandate. 2. Increased manual handling of payments would be required in order to demonstrate compliance. For example, envelopes may have to be retained and attached to payments so that determination of the promptness of the payment could be made at a later date. Postmarks and statements may have to be manually reconciled. In addition, postmarks are often illegible or missing, creating additional compliance problems. Where only a partial payment is made after the deadline, the calculation of penalties or interests will be difficult. 3. The increased cost of compliance that would be required by adding staff, reprogramming computers, and purchasing new equipment would be passed on to all state and local taxpayers, not just those who choose to mail their payments on or near the deadline. 4. Interest income of the state or local government could decrease due to the delay in receipts. Even a short delay in payments, when exercised by even a small percentage of payors, will result in missed opportunities for short-term investments because the government will have less cash on hand to invest. These missed opportunities will result in a loss of income to the government and its taxpayers. 5. Cash-flow forecasting could become less accurate as1he timing of payments becomes more uncertain which, in turn, could result in less than optimal short-term investment or borrowing decisions. 6. Because a certain percentage of state or local government payments are made late, thereby incurring penalties and interest, a reduction in the number of late payments would result in a loss of revenue to the government. GFOA Position The Government Finance Officers Association (GFOA) understands the concerns of consumers who encounter problems with the postal service that affect the timely receipt and crediting of their governmental payments. However, GFOA believes that corrective remedies should be developed at the state and local level that do not result in the loss of revenue to and administrative burdens on state and local governments and their citizens. GFOA opposes any federal regulation of payment procedures that constitutes an unfunded mandate on state and local g®vernments. Adopted: May 21, 1996 Back to GFOA Policy Page. OGFOA 1997. A A A 'ITY OF HUNTINGTON BEAV.i MEETING DATE: June 16, 1997 DEPARTMENT ID NUMBER: AS 97-022 Council/Agency Meeting Held: (. a 97 Deferred/Continued to: B/Approved ❑ Conditionally AnDroved ❑ Denied )Pzpav City CI s Signature Council Meeting Date: June 16, 1997 Department ID Number: AS 97-022 717197 �G` ¢ ^1 . Aa oCITY OF OF HUNTINGTON BEACH REQUEST FOR ACTION d n 0 SUBMITTED TO` HONORABLE MAYOR AND CITY COUNCII KAPMBERS SUBMITTED BY: MICHAEL T. UBERUAGA, City AdministratW7��_Paymentenalt�y - PREPARED BY: ROBERT J. FRANZ, Deputy City Administra SUBJECT: Utility Users Tax-Proposed Reduction to La Statement of Issue,Funding Source,Recommended Action,Alternative Action(s),Analysis,Environmental Status,Attachment(s) Statement of Issue: At its June 17, 1996 meeting, the City Council requested a revision to the collection procedures for the Utility Users Tax. Following an extensive review by the City Attorney's Staff and the Administrative Services Department, recommended revisions to the collection Procedure have now been brought back before the City Council as requested. Funding Source: N/A Recommended Action: Motion to introduce Ordinance # 330 reducing the late payment penalty for utility tax collections from 15% to 10%. Alternative Action(s): Deny the recommended action, or.request further study. Analysis: The City Council has determined that the collection procedures of the City's Utility Users Tax required modification to ensure that service suppliers efficiently and effectively remitted the tax due the City, while providing an opportunity and forum for challenging the tax assessment consistent with the due process clauses of the Federal and State Constitutions. Towards both of these aims, appropriate language has been provided. Seven of the thirteen Cities reviewed had a penalty of 15% for delinquent payment (the City's rate since 1970), one has a 25% penalty, two have a 10% penalty, while one has a 1 1/2 % penalty. The remaining two Cities have a 5% penalty that increases to 20% if the 1 payment is two days (or more) late (See Attachment 2). Further, the recommended Ordinance includes new language to clarify "received" as opposed to "postmarked', allows r\' UTAXLATEMOC -2- 06/05/97 4:47 PM AUTHOR: Ima User i . REQUEST FOR ACTION MEETING DATE: June 16, 1997 DEPARTMENT ID NUMBER: AS 97-022 for payment on the first working day after a weekend or a Holiday if the 20th falls on such a day, limits the City liability when refunds may be due, and allows for Electronic Transfers for Payment„purposes. Environmental Status: N/A Attachment(s): City Clerk's 1. Proposed Amendment to the City's Utility User Tax Ordinance 2. Utility Tax Information UTAXLATE.DOC -3- 06/05/97 4:47 PM AUTHOR: Ima User ATTACHMENT # 1 Ordinance o. �3 `1 LEGISLAT DRAFT ha ter 3.36 UTIL TIE T Sections: 3.36.010 Definitions 3.36.020 Telephone tax--Imposed 3.36.030 Telephone tax--Charges 3.36.040 Telephone tax--Intrastate use 3.36.050 Electricity tax 3.36.060 Use of electrical energy 3.36.070 Gas tax--Imposed 3.36.080 Gas tax--Exclusions 3.36.090 Water tax--Imposed 3.36.100 Water tax--Exclusions 3.36.110 Cable Television Users Tax 3.36.120 Exemptions 3.36.130 Collection of tax 3.36.140 Collection--When made 3.36.150 Collection--Commencement 3.36.160 Filing r-etiam and payment Reporting and Remit 'ng 3.36.170 Delinquent when 3.36.180 Penalty--Effect 3.36.190 Penalty--Imposed by administrator 3.36.200 Penalty--Combining nature 3.36.210 Actions to collect 3.36.220 Failure to pay--Administrative remedy 3.36.230 Assessment--Administrative remedy 3.36.240 Assessment--Hearing 3.36.245 Audit by City 3.36.250 Records 3.36.260 Refunds 3.36.265 Additional Powers and Duties f Tax Collector 3.36.270 City exempt 3.36.280 Senior citizens--Exemption 3.36.290 Application required 3.36.300 Notification to service supplier 3.36.310 Service supplier--Duty of 3.36.320 Exemption automatic 3.36.330 Tax billing exemptions--Eff tive when 3.36.340 Violation--Penalty 3.36.010 Definitions. Except where th context otherwise requires,the definitions given in this Section govern the construction o phis chapter: (a) "City" means the City of Huntin ton Beach. (b) "Month" means a calendar m th. 1 G:SF:961egdraft:uti1tax 520/97-#3 (c) "Person" means any domestic or foreign corporation, firm, association, syndicate,joint stock company, partnership of any kind,joint venture, club, Massachusetts business or common law trust, society, individual or municipal corporation. (d) "Service supplier" means any entity which receives taxes paid and remits same as imposed by this chapter. (e) "Service user" means a person required to pay a tax imposed by this chapter. (f) "Tax Administrator" means the Finance Director of the City. (g) "Telephone corporation, electrical corporation, gas corporation, and water corporation" shall have the same meanings as defined in Sections 234, 218, 222, and 241 respectively, of the Public Utilities Code of the State of California, as said Sections existed on January 1, 1970. "Electrical corporation" and "water corporation" shall be construed to include any organization, municipality or agency engaged in the selling or supplying of electrical power or water to a service user; however, as specified by Public Utilities Code Section 218, does not include a corporation or person employing cogeneration technology or producing power from other than a conventional power source for the generation of electricity. (1598-10R0, 2933-8/88) 3.36.020 Telephone tax--Imposed. There is imposed a tax upon every person in the City, other than a telephone corporation, using international, interstate, and intrastate telephone communication services in the City. The tax imposed by this Section shall be at the rate of five (5%) percent of all charges made for such services. (1598-10Ro,3096-4/91) 3.36.030 Telephone tax--Charges. As used in this Section, the term "charges" shall not include charges for services paid for by inserting coins in coin-operated telephones except that where such coin-operated telephone service is furnished for a guaranteed amount, the amounts paid under such guarantee plus any fixed monthly or other periodic charge shall be included in the base for computing the amount of tax due; nor shall the term "telephone- communication services" include maritime-mobile services as defined in Section 2.1 of Title 47 of the Code of Federal Regulations, or as that section may be amended from time to time. 3.36.040 Telephone tax--Intrastate use. Notwithstanding the provisions of Section 3.36.020, the tax imposed under this chapter shall not be imposed upon any person for using intrastate telephone communication services to the extent that the amounts paid for such services are exempt from or not subject to the tax imposed by Section 4251 of Title 26 of the United States Code, as such Section existed on January 1, 1970, without regard to Section 3.36.020. 3.36.050 Electricity tax. There is imposed a tax upon every person in the City using electrical energy in the City. The tax imposed by this Section shall be at the rate of five (5%) percent of the charges made for such energy and shall be paid by the person paying for such energy. "Charges" as used in this Section shall include charges made for: (a) Metered energy; and (b) Minimum charges for service, including customer charges, service charges, demand charges, standby charges and annual and monthly charges. In the case of a service user employing cogeneration technology the tax imposed by this Section shall be based upon the legal rate per kilowatt cogenerated, as charged by the applicable public utility. 2 G:SF:961egdraft:uti1tac 5/20/97-#3 3.36.060 Use of electrical energy. As used in this Section, the term "using electrical energy" shall not be construed to mean the storage of such energy by a person in a battery owned or possessed by him for use in an automobile or other machinery or device apart from the premises upon which the energy was received; provided, however, that the term shall include the receiving of such energy for the purpose of using it in the charging of batteries. The term shall not include electricity used in water pumping by water corporations; nor shall .the term include the mere receiving of such energy by an electrical corporation or governmental agency at a point within the City for resale. 3.36.070 Gas tax--Imposed. There is imposed a tax upon every person in the City using gas in the City which is delivered through mains or pipes. The tax imposed by this Section shall be at the rate of five (5%)percent of the charges made for such gas. 3.36.080 Gas tax--Exclusions. There shall be excluded from the base on which the tax imposed in this Section is computed: (a) Charges made for gas which is to be resold and delivered through mains or pipes; (b) Charges made for gas to be used in the generation of electrical energy by an electrical corporation; (c) Charges made by a gas public utility for gas used and consumed in the conduct of the business of gas public utilities; and (d) Charges for gas used in water pumping by water corporation. (1598-10/70) 3.36.090 Water tax--Imposed. There is imposed a tax upon every person in the City using water in the City which is delivered through mains or pipes. The tax imposed by this Section shall be at the rate of five (5%)percent of the charges made for such water and shall be paid by the person paying for such water. 3.36.100 Water tax--Exclusions. There shall be excluded from the base on which the tax imposed in this Section is computed charges made for water which is to be resold and delivered through mains or pipes; and charges made by a municipal water department, public utility or a county or municipal water district for water used and consumed by such department, utility or district in the conduct of the business of such department, utility or district. 3.36.110 Cable Television Users Tax. (a) There is hereby imposed a tax upon every person in the City using cable television service. The tax imposed by this section shall be at the rate of Five Percent (5%) of the charges made for such service and shall be paid by the person paying for such services. (b) The Tax imposed in this section shall be collected from the service user by the person furnishing the cable television service. 3.36.120 Exemptions. Nothing in this chapter shall be construed as imposing a tax upon any person if imposition of such tax upon that person would be in violation of the Constitution of the United States or the Constitution of the State of California. 3.36,130 Collection of tax. The amount of tax imposed by this chapter shall be collected from the service user by the service supplier. 3 G:SF:961egdraft:utiltax 5/20/97-#3 3.36.140 Collection--When made. The tax shall be collected insofar as practicable at the same time as and along with the collection of charges made in accordance with the regular billing practice of the service supplier. 3.36.150 Collection--Commencement. The duty to collect tax from a service user shall commence with the beginning of the first regular billing period applicable to that person which shall begin as of January 1, 1971, or at the beginning of the first regular billing period 'thereafter which would not include service prior to January 1, 1971. Where a person receives more than one billing, one or more being for different periods than another, the duty to collect shall arise separately for each billing period. 3.36.160 Filing _etuf., andpayment Reporting and Remitting.. (a) Each service supplier shall make a return to the Tax Administrator, on forms provided by him, stating the amount of taxes billed by the service supplier during the preceding month. At the time the return is filed, Tthe full amount of the tax collected shall be ineludedwith the Fetum and filed remitted to the Tax Administrator. The Tax Administrator is authorized to require such further information as he deems necessary to properly determine if the tax herein imposed is being levied and collected in accordance with this chapter. must be pestmarked with prepaid postage and eaeh Tax returns must be received by the Tax Administrator on or before the 20th day of the following month. Returns and tax remittances are due immediately upon cessation of business for any reason. Should the due date occur on a weekend or legal holiday, the return must be received on the first regular working day following a Saturday/Sunday, or legal holiday. (b) Service Users and the Tax Administrator may enter into an agreement to remit taxes by way of electronic funds transfer or similar means. (c) The Tax Administrator, or the Tax Administrator's designated representative, may request from a person providing transportation services of gas or electricity to service users within the City a list of the names and addresses of its transportation customers within the Ci pursuant to Section 6354(e) of Chapter 2.5 of Division 3 of the Cali ornia Public Utilities Commission. (d) If any person subject to record-keeping under this section unreasonably denies the Tax Administrator, or the Tax Administrator's designated representative, access to such records, then the Tax Administrator may impose a penalty of$500 on such person for each day following the initial date that the person refuses to provide such access. 3.36.170 Delinquent when. Taxes collected from a service user which are not filed with the Tax Administrator on or before the due dates provided in this chapter are delinquent. 3.36.180 Penalty R Interest and Penalties. Penalties fef de';.,, ueney;n pca, meflt. requir-edt r-emit at the rate of fifteen of any tax -_AIIPP�P� Af:any defteieney detefmination, shall attaeh and be paid by the pefsen (a Taxes collected from a service user which are not received by the Tax Collector on or before the due dates provided in this chapter are delinquent. 4 G:SF:961egdraft:uti1tax 5/20/97-#3 (b)Any service supplier who fails to remit any tax imposed by this chapter within the time required shall pay a penalty of ten percent (10%) of the amount of the tax. Said penalty shall be paid in addition to the amount of the tax. (c)And service supplier who fails to remit any delinquent remittance on or before a period of thirty (30) days following the date on which the remittance first became delinquent shall pay a second delinquency penalty of ten percent (10%) of the amount of tax in addition to the amount of the tax and the penalty first imposed. (d)If the Tax Collector determines that the non-payment of any remittance due under this chapter is due to fraud, a penalty of twenty- five percent (25%) of the amount of the tax shall be added thereto in addition to the penalties stated in subsections (b) and (c) of this Section. (e)In addition to the penalties imposed, any service supplier who fails to remit any tax imposed by this chapter shall ay interest to the City at the rate of one and one-half percent (1-1/2% per month or fraction thereof on the amount of the tax, excllusive o penalties, from the date on which the remittance first becomes delinquent until paid. (f) Every penalty imposed and such interest as accrues under the provisions of this Section shall become a part of the tax herein required to be paid. 3.36.190 Penaltv--Imposed by administrator. The Tax Administrator shall have Power-to impose the additional penalties and interest upon persons required to Galleet pay and remit taxes under the provisions of this Chapter f^r-fraud ^ glige ee i ei4ing ^+ � paying t the rate f f Ree (1 51%) per-ee t of the afneunt ef the ta-r eelleete er as ' r-eeemputed by the Ta?i n dm str-at^. 3.36.200 Penaltv--Combining nature. Every penalty imposed under the provisions of this chapter shall become a part of the tax required to be paid. (1598-1ono,2211-8177) 3.36.210 Actions to collect. Any tax required to be paid by a service user under the provisions of this chapter shall be deemed a debt owed by the service user to the City. Any such tax collected from a service user which has not been paid to the Tax Administrator shall be deemed a debt owed to the City by the person required to collect and pay. Any person owing money to the City under the provisions of this chapter shall be liable to an action brought in the name of the City for the recovery of such amount. (159s-1ono,2211-sm) 3.36,220 Failure to pav--Administrative remedy. Whenever the Tax Administrator determines that a service user has deliberately withheld the amount of the tax owed by him from the amounts remitted to a service supplier, or that a service user has failed to pay the amount of the tax for a period of two or more billing periods, or whenever the Tax Administrator deems it in the best interest of the City, he may relieve the service supplier of the obligation to collect taxes due under this chapter from certain named service users for specified billing periods. The Tax Administrator shall notify the service user that he has assumed responsibility to collect the taxes due for the stated periods and demand payment of such taxes. The notice shall be served on the service user by handing it to him personally or by deposit of the notice in the United States mail, postage prepaid thereon, addressed to the service user at the address to which billing was made by the service supplier; or should the service user have changed his address, to his last known address. If a service user fails to remit the tax to the Tax Administrator within fifteen days from the date of the service of the notice upon him, which shall be the date of mailing if service is not accomplished in person; a penalty of twenty-five (25%) percent of the amount of the tax set forth in the notice shall 5 G:SF:961eadraft:utiItax 5/20/97-Z be imposed but not less than five dollars. The penalty shall become part of the tax herein required to be paid. (1598-10n0) 3.36.230 Assessment--Administrative remedy. The Tax Administrator may make an assessment for taxes not paid or remitted by a service supplier or service user per-se . The Tax Administrator shall mail a A notice of the assessment which shall refer briefly to the amount of the taxes and penalties imposed and the time d plane when s ,ah assessment shall he submitted to the City GE)UReil fe 'eenfifmatien or-medifieation. The Tax Administrator shall mail a copy of such notice to the ellih,r the serrrice and sen-iee supplier or the service user, allowing at !east b tt� fourteen (14) days-pfief-to appeal the assessment. the date e ftl1,e l,ear;.,b a.,,l the Past such net.ae fee- at least hire_eentiriuous_days prier to the. ate e the hearing /Y r the having any ebjeetions may appeaf and beheaEd at the hearing provided his ooJeetion is filed inwfitingwith the Tax, A dm strate prior-to the t: et for the he A t the time fixed for- side g, then assessment-, 3.36.240 Assessment u �Appeal. ^b , b ethef with any objeetien filed as afer-esaid and thereupon m r,fi;-; , eff ffi—ed-i-Pj' theassessment by met; (a)If the service user or service supplier is aggrieved by any decision of the Tax Administrator, or with the failure to grant a refund or exemption as provided for under this Chapter, he may appeal to the Citx Administrator, or his or her duly authorized designee, by filing a notice of appeal with the City Clerk within fourteen (14) days of the decision which aggrieved the service user or service supplier. The City Clerk shall thereupon fix a time and place for a hearing of such appeal. The City Clerk shall give notice to such person of the time and place of hearing as herein provided. (b) The decision of the City Administrator, or his or her duly authorized designee, shall be final. 3.36.245 Audit by City. The City shall have the right to inspect all books, accounts and records of the service supplier which the City deems necessary to roperly determine if the tax herein imposed is being levied and collected inaccordance with this Chapter. The service supplier shall make available all books, accounts and records at a location within Los Angeles or Orange County and during normal business hours. 3.36.250 Records. It shall be the duty of every person required to collect and remit to the City any tax imposed by this chapter to keep and preserve, for a period of three years, all records as may be necessary to determine the amount of such tax as he may have been liable for the collection of and remittance to the Tax Administrator, which records the Tax Administrator shall have the right to inspect at all reasonable times. (1598-10n0) 3.36.260 Refunds. (a)Whenever the amount of any tax has been overpaid or paid more than once or has been erroneously or illegally collected or received by the Tax Administrator under this Chapter, it may be refunded as provided in this Section. (ab) A person required to collect and remit taxes as imposed utdef by this Chapter, may claim a refund or take as credit against taxes collected and remitted the amount overpaid, paid more than once or erroneously or illegally collected or received when 6 QSF:961eadraftmiltax 5/20/97-#3 it is established in a manner prescribed by the Tax Administrator that the service user from whom the tax has been collected did not owe the tax;.provided, however, that neither a refund nor a credit shall be allowed to the service supplier unless the amount of the tax so collected has either been refunded to the service user by, or credited to charges subsequently payable to,'-1,the son,;^^ ^r to the person required to collect and remit such tax to the City. (be) Tefund shall be paid undef the pr-evisions ef this Seetion unless the elaimant established his Fight thereto by wfiaen r-eeer-ds sh AAP-44 Q, P-+;+!efnefit thereto A service user who has not otherwise received a refund or a credit against future taxes from the service supplier pursuant to subsection (b) of this Section may claim a refund directly from the Tax Administrator for any amount overpaid, paid more than once, or erroneously or illegally collected or received when it is established that the service user from whom the tax has been collected did not owe the tax. The Tax Administrator shall notify the service supplier of his/her determination and the amount of any refund due to the service user which amount, if any, shall be promptly refunded or credited to the service user by the service supplier in accordance with subsection (b) above. (d)Notwithstanding other provisions of this Section, whenever a service supplier, pursuant to an order of the California Public Utilities Commission or a court of competent jurisdiction, makes a refund to service users of charges for past utility services, the taxes paid pursuant to this Chapter on the amount of such refunded charges shall also be refunded to such service users, and the service supplier shall be entitled to claim a credit for such refunded taxes against the amount of tax which is due upon the next monthly returns. (e)A service supplier may refund any sums due to the service user in accordance with this Section or by the service supplier's customary practice. (f) No credit or refund shall be allowed or paid by the City under the provisions of this Section unless the claimant has submitted a written claim to the Tax Administrator within one year of the overpayment or erroneous or illegal collection of said tax. Such claim must clearly establish claimant's right to the refund by written records showing entitlement thereto. The submission of a written claim, which is acted upon by the Tax Administrator, shall be a prerequisite to a suit thereon. The Tax Administrator shall act upon the refund claim within the time period set forth in Government Code Section 912.4. If the Tax Administrator fails or refuses to act on a refund claim within the time prescribed by Government Code Section 912.4, the claim shall be deemed to have been rejected by the Tax Administrator on the last day of the period within which the Tax Administrator was required to act upon the claim as provided in Government Code Section 912.4. It is the intent of the Tax Administrator that the one year written claim requirement of this 7 G:S F:961 egd raft:ut i 1 tar 5/20/97-#3 subsection be given retroactive effect; provided, however, that any claims which arose prior to the commencement of the one year claims period of this subsection, and which are not otherwise barred by a then applicable statute of limitations or claims procedure, must be filed with the Tax Administrator as provided in this subsection within ninety (90) days following the effective date of this ordinance. The above refund procedure has been adopted by the City pursuant to Government Code Section 935. 3.36.265 Additional Powers and Duties of Tax Administrator. (a)The Tax Administrator shall have the power and duty, and is hereby directed to enforce each and all of the provisions of this Chapter. (b)The Tax Administrator shall have the power to adopt rules and regulations not inconsistent with provisions of this Chapter for the purpose of carrying out and enforcing the payment, collection and remittance of the taxes herein imposed. A copy of such rules and regulations shall be on file in the Tax Administrators office. (c) The Tax Administrator may make administrative agreements to vary the strict requirements of this Chapter so that collection of any tax imposed herein may be made in conformance with the billing procedures of particular service supplier so long as said agreements result in collection of the tax in conformance with the general purpose and scope of this Chapter. A copy of each such agreement shall be on file in the Tax Administrator's office. (d)The Tax Administrator shall determine the eligibility of any person who asserts a right to exemption from or a refund of, the tax imposed by this Chapter. 3.36.270 Citv exempt. The taxes imposed by this chapter shall not apply to the City. 3.36.280 Senior citizens--Exemption. The tax imposed by this chapter shall not apply to any individual service user sixty-two years of age or older who uses telephone, electric, water or gas services, in or upon any premises occupied by such individual, provided the combined adjusted gross income as used for federal income tax reporting purposes of all members of the household in which such service user resides does not exceed the "HUD Income Guidelines - Very Low Income Category" currently on file at the City's Office of the Housing Rehabilitation Administrator, for the calendar year prior to the fiscal year(July 1 through June 30) for which the exemption provided by this chapter is applied. 3.36.290 Application required. Any service user, meeting the requirements for exempt status, may file a verified application with the Director of Finance on a form furnished by him. The Director of Finance, or his designee, shall review all applications and certify those service users as exempt who meet the requirements for the exemption provided by this chapter. 3.36.300 Notification to service supplier. The Director of Finance, or his designee shall compile a list of all exempt service users, together with the addresses, account numbers, if 8 G:SF:961egdraft:utiltax 5/20/97-#3 a any, of such users, and such other information as may be necessary for service suppliers to remove exempt service users from their tax billings. 3.36.310 Service supplier--Duty of No service supplier shall be required to bill any exempt service user for any tax imposed by this chapter after receipt of notice from the Director of Finance that such service user has met the requirements for exempt status established by the provisions of this chapter. 3.36.320 Exemption automatic. The exemption provided for in this chapter shall continue and be renewed automatically from year to year except as hereinafter provided. No exempt service user shall fail to notify the Director of Finance within ten (10) days of a change of address, or of any other fact or circumstance which might disqualify him or otherwise affect his exempt status. All exempt service users shall file with the Director of Finance new verified applications in order to receive exempt service at a new address or location. 3.36.330 Tax billing exemptions--Effective when. All service suppliers shall remove exempt service users from their tax billings for the first regular full billings dated on or before October 15, 1980, and thereafter within sixty (60) days after notice from the Director of Finance to do so. 3.36.340 Violation--Penaltv. It is unlawful and a misdemeanor for any person knowingly to receive the exemption provided by this chapter when such person has not met the requirements on which such exemption is based, or when such person can no longer meet the requirements on which such exemption is based, and upon conviction thereof shall be subject to a fine of five hundred dollars ($500) or imprisonment in the county jail for a period not to exceed six (6) months, or by both such fine and imprisonment. Each such person shall be guilty of a separate offense for each and every day or portion thereof during which a violation is committed or continued. 9 G:S F:9 61 e g d raft:u t i 1 tax 5/20197-43 Ordinance No. LEGISLATIVE DRAFT Chapter 3.36 UTILITIES TAX Sections: 3.36.010 Definitions 3.36.020 Telephone tax--Imposed 3.36.030 Telephone tax--Charges 3.36.040 Telephone tax--Intrastate use 3.36.050 Electricity tax 3.36.060 Use of electrical energy 3.36.070 Gas tax--Imposed 3.36.080 Gas tax--Exclusions 3.36.090 Water tax--Imposed 3.36.100 Water tax--Exclusions 3.36.110 Cable Television Users Tax 3.36.120 Exemptions 3.36.130 Collection of tax 3.36.140 Collection--When made 3.36.150 Collection--Commencement 3.36.160 Filing retum and paymefA Reporting and Remitting 3.36.170 Delinquent when 3.36.180 Penalty--Effect 3.36.190 Penalty--Imposed by administrator 3.36.200 Penalty--Combining nature 3.36.210 Actions to collect 3.36.220 Failure to pay--Administrative remedy 3.36.230 Assessment--Administrative remedy 3.36.240 Assessment--Hearing 3.36.245 Audit by City 3.36.250 Records 3.36.260 Refunds 3.36.265 Additional Powers and Duties of Tax Collector 3.36.270 City exempt 3.36.280 Senior citizens--Exemption 3.36.290 Application required 3.36.300 Notification to service supplier 3.36.310 Service supplier--Duty of 3.36.320 Exemption automatic 3.36.330 Tax billing exemptions--Effective when 3.36.340 Violation--Penalty 3.36.010 Definitions. Except where the context otherwise requires, the definitions given in this Section govern the construction of this chapter: (a) "City" means the City of Huntington Beach. (b) "Month" means a calendar month. 1 G:SF:961 a gdraft:uti I tax 5/20/97-#3 (c) "Person" means any domestic or foreign corporation, firm, association, syndicate,joint stock company,partnership of any kind,joint venture, club, Massachusetts business or common law trust, society, individual or municipal corporation. (d) "Service supplier" means any entity which receives taxes paid and remits same as imposed by this chapter. (e) "Service user" means a person required to pay a tax imposed by this chapter. (f) "Tax Administrator" means the Finance Director of the City. (g) "Telephone corporation, electrical corporation, gas corporation, and water corporation" shall have the same meanings as defined in Sections 234, 218, 222, and 241 respectively, of the Public Utilities Code of the State of California, as said Sections existed on January 1, 1970. "Electrical corporation" and "water corporation" shall be construed to include any organization, municipality or agency engaged in the selling or supplying of electrical power or water to a service user; however, as specified by Public Utilities Code Section 218, does not include a corporation or person employing cogeneration technology or producing power from other than a conventional power source for the generation of electricity. (1598-10170, 2933-8/88) 3.36.020 Telephone tax--Imposed. There is imposed a tax upon every person in the City, other than a telephone corporation, using international, interstate, and intrastate telephone communication services in the City. The tax imposed by this Section shall be at the rate of five (5%) percent of all charges made for such services. (1598-10/70,3096-4/91) 3.36.030 Telephone tax--Charges. As used in this Section,the term "charges" shall not include charges for services paid for by inserting coins in coin-operated telephones except that where such coin-operated telephone service is furnished for a guaranteed amount, the amounts paid under such guarantee plus any fixed monthly or other periodic charge shall be included in the base for computing the amount of tax due; nor shall the term "telephone- communication services" include maritime-mobile services as defined in Section 2.1 of Title 47 of the Code of Federal Regulations, or as that section may be amended from time to time. 3.36.040 Telephone tax--Intrastate use. Notwithstanding the provisions of Section 3.36.020, the tax imposed under this chapter shall not be imposed upon any person for using intrastate telephone communication services to the extent that the amounts paid for such services are exempt from or not subject to the tax imposed by Section 4251 of Title 26 of the United States Code, as such Section existed on January 1, 1970, without regard to Section 3.36.020. 3.36.050 Electricity tax. There is imposed a tax upon every person in the City using electrical energy in the City. The tax imposed by this Section shall be at the rate of five (5%) percent of the charges made for such energy and shall be paid by the person paying for such energy. "Charges" as used in this Section shall include charges made for: (a) Metered energy; and (b) Minimum charges for service, including customer charges, service charges, demand charges, standby charges and annual and monthly charges. In the case of a service user employing cogeneration technology the tax imposed by this Section shall be based upon the legal rate per kilowatt cogenerated, as charged by the applicable public utility. 2 G:SF:961egdraft:utiltax 5/20/97-#3 3.36.060 Use of electrical energy. As used in this Section,the term "using electrical energy" shall not be construed to mean the storage of such energy by a person in a battery owned or possessed by him for use in an automobile or other machinery or device apart from the premises upon which the energy was received; provided, however, that the term shall include the receiving of such energy for the purpose of using it in the charging of batteries. The term shall not include electricity used in water pumping by water corporations; nor shall the term include the mere receiving of such energy by an electrical corporation or governmental agency at a point within the City for resale. 3.36.070 Gas tax--Imposed. There is imposed a tax upon every person in the City using gas in the City which is delivered through mains or pipes. The tax imposed by this Section shall be at the rate of five (5%)percent of the charges made for such gas. 3.36.080 Gas tax--Exclusions. There shall be excluded from the base on which the tax imposed in this Section is computed: (a) Charges made for gas which is to be resold and delivered through mains or pipes; (b) Charges made for gas to be used in the generation of electrical energy by an electrical corporation; (c) Charges made by a gas public utility for gas used and consumed in the conduct of the business of gas public utilities; and (d) Charges for gas used in water pumping by water corporation. (1598-1 ono) 3.36.090 Water tax--Imposed. There is imposed a tax upon every person in the City using water in the City which is delivered through mains or pipes. The tax imposed by this Section shall be at the rate of five (5%) percent of the charges made for such water and shall be paid by the person paying for such water. 3.36.100 Water tax--Exclusions. There shall be excluded from the base on which the tax imposed in this Section is computed charges made for water which is to be resold and delivered through mains or pipes; and charges made by a municipal water department, public utility or a county or municipal water district for water used and consumed by such department, utility or district in the conduct of the business of such department, utility or district. 3.36.110 Cable Television Users Tax. (a) There is hereby imposed a tax upon every person in the City using cable television service. The tax imposed by this section shall be at the rate of Five Percent(5%) of the charges made for such service and shall be paid by the person paying for such services. (b) The Tax imposed in this section shall be collected from the service user by the person furnishing the cable television service. 3.36,120 Exemptions. Nothing in this chapter shall be construed as imposing a tax upon any person if imposition of such tax upon that person would be in violation of the Constitution of the United States or the Constitution of the State of California. 3.36.130 Collection of tax. The amount of tax imposed by this chapter shall be collected from the service user by the service supplier. 3 G:SF:961egdraft:utiItax 5/20/97-#3 3.36.140 Collection--When made. The tax shall be collected insofar as practicable at the same time as and along with the collection of charges made in accordance with the regular billing practice of the service supplier. 3.36,150 Collection--Commencement. The duty to collect tax from a service user shall commence with the beginning of the first regular billing period applicable to that person which shall begin as of January 1, 1971, or afthe beginning of the first regular billing period thereafter which would not include service prior to January 1, 1971. Where a person receives more than one billing, one or more being for different periods than another, the duty to collect shall arise separately for each billing period. 3.36.160 Fill a r-etum an du Reporting and Remitting.. (a) Each service supplier shall make a return to the Tax Administrator, on forms provided by him, stating the amount of taxes billed by the service supplier during the preceding month. At the time the return is filed,Tthe full amount of the tax collected shall be iffelUded With the ret••n• _Ara filPea • 44 remitted to the Tax Administrator. The Tax Administrator is authorized to require such further information as he deems necessary to er-y properly determine if the tax herein imposed is being levied and collected in accordance with this chapter. must be pestmar-ked with prepaid postage an pr-eporl.. addressed, o personal!), deliver-e.l to the Tom. e r before the 20t of P, ment Tax returns must be received by the Tax Administrator on or before the 20th day of the following month. Returns and tax remittances are due immediately upon cessation of business for any reason. Should the due date occur on a weekend or legal holiday, the return must be received on the first regular working day following a Saturday/Sunday, or legal holiday. (b) Service Users and the Tax Administrator may enter into an agreement to remit taxes by way of electronic funds transfer or similar means. (c) The Tax Administrator, or the Tax Administrator's designated representative, may request from a person providing transportation services of gas or electricity to service users within tine City a list of the names and addresses of its trans ortation customers within the CIO pursuant to Section 6354(e) of CKapter 2.5 of Division 3 of the California Public Utilities Commission. (d) If any person subJ'ect to record-keeping under this section unreasonably denies the Tax Administrator, or the Tax Administrator's designated representative, access to such records, then the Tax Administrator may impose a penalty of$500 on such person for each day following the initial date that the person refuses to provide such access. 3.36.170 Delinquent when. Taxes collected from a service user which are not filed with the Tax Administrator on or before the due dates provided in this chapter are delinquent. 3.36.180 Pelt,,E Interest and Penalties. Penalties for-delinqueney in paymefit. r-equir-ed to eelleet and r-emit at the rate of fifteen of any tar,e-AIII-eeted a-r-any defieieney detefmination, shall a#aeh and be paid by the per-SEHI (a)Taxes collected from a service user which are not received by the Tax Collector on or before the due dates provided in this chapter are delinquent. 4 G:S F:961 egdraft:uti I tax 5/20/97-#3 (b)Any service supplier who fails to remit any tax imposed by this chapter within the time required shall pay a penalty of ten percent (10%) of the amount of the tax. Said penalty shall be paid in addition to the amount of the tax. (c)Any service supplier who fails to remit any delinquent remittance on or before a period of thirty Aelinquent 30) days following the date on which the remittance first became shall pay a second delinquency penalty of ten percent (10%) of the amount of tax in addition to the amount of the tax and the penalty first imposed. (d)If the Tax Collector determines that the non-payment of any remittance due under this chapter is due to fraud, a penalty of twenty- five percent (25%) of.the amount of the tax shall be added thereto in addition to the penalties stated in subsections (b) and (c) of this Section. (e)In addition to the penalties imposed, any service,supplier who fails to remit any tax imposed by this chapter shall pay interest to the City at the rate of one and one-half percent (1-1/2% per month or fraction thereof on the amount of the tax, excllusive of penalties, from the date on which the remittance first becomes delinquent until paid. (f) Every penalttyy imposed and such interest as accrues under the rovisions of this Section shall become a part of the tax herein required o be paid. 3.36.190 Penalty--Imposed by administrator. The Tax Administrator shall hm,e power- impose the additional penalties and interest upon persons required to Geller. pay and remit taxes under the provisions of this Chapter for-f auer- egl:,.enee in r-epeFtiag Ew paying .,t the rate of'fifteen (1 coi)p „t of the ameunA of the tax eelleete 3.36,200 Penalty--Combining nature. Every penalty imposed under the provisions of this chapter shall become a part of the tax required to be paid. (1598-10/70,2211-8m) 3.36,210 Actions to collect. Any tax required to be paid by a service user under the provisions of this chapter shall be deemed a debt owed by the service user to the City. Any such tax collected from a service user which has not been paid to the Tax Administrator shall be deemed a debt owed to the City by the person required to collect and pay. Any person owing money to the City under the provisions of this chapter shall be liable to an action brought in the name of the City for the recovery of such amount. (1598-10170,2211-8/77) 3.36.220 Failure to pay--Administrative remedy. Whenever the Tax Administrator determines that a service user has deliberately withheld the amount of the tax owed by him from the amounts remitted to a service supplier, or that a service user has failed to pay the amount of the tax for a period of two or more billing periods, or whenever the Tax Administrator deems it in the best interest of the City, he may relieve the service supplier of the obligation to collect taxes due under this chapter from certain named service users for specified billing periods. The Tax Administrator shall notify the service user that he has assumed responsibility to collect the taxes due for the stated periods and demand payment of such taxes. The notice shall be served on the service user by handing it to him personally or by deposit of the notice in the United States mail, postage prepaid thereon, addressed to the service user at the address to which billing was made by the service supplier; or should the service user have changed his address,to his last known address. If a service user fails to remit the tax to the Tax Administrator within fifteen days from the date of the service of the notice upon him, which shall be the date of mailing if service is not accomplished in person; a penalty of twenty-five (25%) percent of the amount of the tax set forth in the notice shall 5 G:S F:961 egdraft:uti Itax 5/20/97-#3 be imposed but not less than five dollars. The penalty shall become part of the tax herein required to be paid. (1598-10/70) 3.36.230 Assessment--Administrative remedy. The Tax Administrator may make an assessment for taxes not paid or remitted by a service supplier or service user persen required to p" of . The Tax Administrator shall mail a A notice of the assessment which shall refer briefly to the amount of the taxes and penalties imposed and the time and plaee vAien sueh assessment shall be submitted to the Gity Geunefl fAr. eenfifma4ien or- The Tax Administrator shall mail a copy of such notice to the Be supplier or the service user, allowing ten fourteen (14) days to appeal the assessment. the ante of the hearing and shall and be heafd at the hearing pr-avided his objeetion is filed in Nwiting with the TwE Administrator-prior-t the tiff, sot f the hearing. 3.36.240 Assessment g Appeal. At tl,o t;-...o fiKe for-, sider-inn the ., r+-I the ! 45, Gouneil shall hear-the s o to.1 .,.Ah a „4je..tio filed a aforesaid an (a)If the service user or service supplier is aggrieved by any decision of the Tax Administrator, or with the failure to grant a refund or exemption as provided for under this Chapter, he may appeal to the City Administrator, or his or her duly authorized designee, by filing a notice of appeal with the City Clerk within fourteen (14) days of the decision which aggrieved the service user or service supplier. The City Clerk shall thereupon fix a time and place for a hearing of such appeal. The City Clerk shall give notice to such person of the time and place of hearing as herein provided. (b) The decision of the City Administrator, or his or her duly authorized designee, shall be final. 3.36.245 Audit by City. The City shall have the right to inspect all books, accounts and records of the service supplier which the City deems necessary to properly determine if the tax herein imposed is being levied and collected in accordance with this Chapter. The service supplier shall make available all books, accounts and records at a location within Los Angeles or Orange County and during normal business hours. 3.36.250 Records. It shall be the duty of every person required to collect and remit to the City any tax imposed by this chapter to keep and preserve, for a period of three years, all records as may be necessary to determine the amount of such tax as he may have been liable for the collection of and remittance to the Tax Administrator, which records the Tax Administrator shall have the right to inspect at all reasonable times. (1598-10/70) 3.36.260 Refunds. (a)Whenever the amount of any tax has been overpaid or paid more than once or has been erroneously or illegally collected or received by the Tax Administrator under this Chapter, it may be refunded as provided in this Section. (ab) A person required to collect and remit taxes as imposed and by this Chapter, may claim a refund or take as credit against taxes collected and remitted the amount overpaid, paid more than once or erroneously or illegally collected or received when 6 G:S F:961egdraft:utiltax 5/20/97-#3 it is established in a manner prescribed by the Tax Administrator that the service user from whom the tax has been collected did not owe the tax;.provided, however, that neither a refund nor a credit shall be allowed to the service supplier unless the amount of the tax so collected has either been refunded to the service user by,or credited to charges subsequently payable to,by the seiwiee user-to the person required to collect and remit such tax to the City. Lbc) No r-e fu ,1 shall be paidunder-the r .,,�.of this Seet; unless the ..1.�,;,,,,.�,,,t C established his fight.+hero+.. by, itte r-eeer-ds s1,.,.,ing tant;floment thereto A service user who has not otherwise received a refund or a credit against future taxes from the service supplier pursuant to subsection (b) of this Section may claim a refund directly from the Tax Administrator for any amount overpaid, paid more than once, or erroneously or illegally collected or received when it is established that the service user from whom the tax has been collected did not owe the tax. The Tax Administrator shall notify the service supplier of his/her determination and the amount of any refund due to the service user which amount, if any, shall be promptly refunded or credited to the service user by the service supplier in accordance with subsection (b) above. (d)Notwithstanding other provisions of this Section, whenever a service supplier, pursuant to an order of the California Public Utilities Commission or a court of competent jurisdiction, makes a refund to service users of charges for past utility services, the taxes paid pursuant to this Chapter on the amount of such refunded charges shall also be refunded to such service users, and the service supplier shall be entitled to claim a credit for such refunded taxes against the amount of tax which is due upon the next monthly returns. (e)A service supplier may refund any sums due to the service user in accordance with this Section or by the service supplier's customary practice. (f) No credit or refund shall be allowed or paid by the City under the provisions of this Section unless the claimant has submitted a written claim to the Tax Administrator within one year of the overpayment or erroneous or illegal collection of said tax. Such claim must clearly establish claimant's right to the refund by written records showing entitlement thereto. The submission of a written claim, which is acted upon by the Tax Administrator, shall be a prerequisite to a suit thereon. The Tax Administrator shall act upon the refund claim within the time period set forth in Government Code Section 912.4. If the Tax Administrator fails or refuses to act on a refund claim within the time prescribed by Government Code Section 912.4, the claim shall be deemed to have been rejected by the Tax Administrator on the last day of the period within which the Tax Administrator was required to act upon the claim as provided in Government Code Section 912.4. It is the intent of the Tax Administrator that the one year written claim requirement of this 7 G:SF:961egdraft:utiltax 5/20/97-#3 subsection be given retroactive effect; provided, however, that any claims which arose prior to the commencement of the one year claims period of this subsection, and which are not otherwise barred by a then applicable statute of limitations or claims procedure, must be filed with the Tax Administrator as provided in this subsection within ninety (90) days following the effective date of this ordinance. The above refund procedure has been adopted by the City pursuant to Government Code Section 935. 3.36.265 Additional Powers and Duties of Tax Administrator. (a)The Tax Administrator shall have the power and duty, and is hereby directed to enforce each and all of the provisions of is Chapter. (b)The Tax Administrator shall have the power to adopt rules and regulations not inconsistent with provisions of this Chapter for the purpose of carrying out and enforcingg the payment, collection and remittance of the taxes herein imposed. A copy of such rules and regulations shall be on file in the Tax Administrator's office. (c)The Tax Administrator may make administrative agreements to vary the strict requirements of this Chapter so that collection of any tax imposed herein may be made in conformance with the billing procedures of particular service su plier so long as said agreements result in collection of the tax in conformance with the general purpose and scope of this Chapter. A copy of each such agreement shall be on file in the Tax Administrator's office. (d)The Tax Administrator shall determine the eligibility of any person who asserts a right to exemption from or a refund of, the tax imposed by this Chapter. 3.36.270 City exempt. The taxes imposed by this chapter shall not apply to the City. 3.36.280 Senior citizens--Exemption. The tax imposed by this chapter shall not apply to any individual service user sixty-two years of age or older who uses telephone, electric, water or gas services, in or upon any premises occupied by such individual,provided the combined adjusted gross income as used for federal income tax reporting purposes of all members of the household in which such service user resides does not exceed the "HUD Income Guidelines - Very Low Income Category" currently on file at the City's Office of the Housing Rehabilitation Administrator, for the calendar year prior to the fiscal year(July 1 through June 30) for which the exemption provided by this chapter is applied. 3.36.290 Application required. Any service user, meeting the requirements for exempt status, may file a verified application with the Director of Finance on a form furnished by him. The Director of Finance, or his designee, shall review all applications and certify those service users as exempt who meet the requirements for the exemption provided by this chapter. 3.36.300 Notification to service supplier. The Director of Finance, or his designee shall compile a list of all exempt service users,together with the addresses, account numbers, if 8 G:SF:961egdraft:utiltax 5/20/97-#3