HomeMy WebLinkAboutUTILITY TAX - CABLE TELEVISION - Ordinance 3118 ORDINANCE NO. 3118
AN ORDINANCE OF THE CITY OF HUNTINGTON BEACH
AMENDING CHAPTER 3 . 36 OF THE HUNTINGTON BEACH MUNICIPAL CODE
BY ADDING SECTION 3 . 36. 110 ENTITLED
"CABLE TELEVISION USERS TAX "
The City Council of the City of Huntington Beach does ordain
as follows:
SECTION 1. Chapter 3 .36 of the Huntington Beach Municipal
Code is hereby amended by adding new section 3 . 36. 110 to read as
follows:
3 . 14 . 070 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.
SECTION 2 . The City clerk shall cause each ordinance to be
posted in three places designated by the City concil within the
City and to be published by title with a brief summary at least
once within fifteen days after its adoption in a daily, semi-weekly
or weekly newspaper, published in the County or the City and
circulated in the City, which is selected by the City Council for
that purpose.
SECTION 3 . This ordinance shall take effect thirty days
from the date of its passage.
REST OF PAGE NOT USED
� UtilityProposed 5 /o
Cable TV Services
SUMMARY
• City's existing 5% utility tax would be applied to Cable TV
services.
• Estimated annual new revenue is $750,000.
• Revenue would be used:
1 ) To exempt police and fire departments from budget cuts
applied to other departments ($498,000).
2) Downtown Footbeat Patrol ($152,000).
3) Proactive HazMat Program & other fire services
($100,000).
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• Average cost per Cable TV customer is $1 .45 per month.
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Utility Tax/Franchise Fee Survey - Cable TV Services
Orange County Applies Cable TV
Cities Utility Tax- to Cable Franchise Fee
Westminster 5.0% Yes 5.0%
Seal Beach 5.0% No 5.0%
Huntington Beach 5.0% No 5.0%
Santa Ana 4.0% (5.0% Proposed) No 5.0%
Buena Park 3.0% No 5.0%
Placentia 3.0% Yes__. 3.0%
Irvine 1 .5% No 5.0%
Other Southern California Cities
Torrance 6.0% Yes 5.0%
Hawthorne 3.5% Yes 5.0%
Culver City 11 .0% Yes 5.0%
Long Beach 7.0% (10% Proposed) Yes 5.0%
Los Angeles 10.0% No 10.0%
Glendale 7.0% Yes 5.0%
Burbank 7.0% No 3.0%
Pasadena: 8.9% Yes 5.0%
Statewide Survey
• In a 1987 survey, 82 cities in the State of California had imposed a utility tax (ranging
from 1 to 11 %, with 5% most common).
0 39 of the 82 cities (48%) apply the utility tax to Cable TV services.
CALIFORNIA CITIES
UTILITY USERS TAX
CABLE TV SERVICE
UTILITY
CITY TAX
CULVER CITY 11. 0%
HERMOSA BEACH 10. 0%
INGLEWOOD 10. 0%
PALOS VERDES ESTATES 10 . 0%
PASADENA 8 . 9%
SAN BERNADINO 8 . 0%
SAN PABLO 8 . 0%
SANTA MONICA 8 . 0%
SACRAMENTO 7 . 5%
VALLEJO 7 . 5%
GLENDALE 7 . 0%
RIVERSIDE 6 . 5%
STOCKTON 6 . 5%
SANTA BARBARA 6 . 0%
SANTA CRUZ 6 . 0%
TORRANCE 6 . 0%
TULARE 6 . 0%
ALAHAMBRA 5 . 0%
COMPTON 5. 0%
GILROY 5 . 0%
OROVILLE 5 . 0%
PACIFIC GROVE 5. 0%
REDWOOD CITY 5. 0%
SALINAS 5 . 0%
SAN LOUIS OBISPO 5. 0%
SANGER 5. 0%
SANTA ROSA 5. 0%
WESTMINSTER 5. 0%
HUNTINGTON BEACH (PROPOSED) 5. 09t,
REDONDO BEACH 4 . 8%
LONG BEACH 4 . 5%
PORTERVILLE 4 . 0%
SEASIDE 4 . 0%
WHITTIER 4 . 0%
HAWTHORNE 3 . 5%
BEAUMONT 3 . 0%
INDIO 3 . 0%
MODESTO 3 . 0%
PLACENTIA 3 . 0%
LOS ALTOS 2.. 9%
Source: Paragon Cable
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Orange County Cities
Cost for Basic Cable TV Service
Monthly Fee Monthly Monthly Monthly
City Basic Service Franchise Fee Utility Tax Total
Placentia $26.45 $0.79 $0.79 $28.03
Seal Beach 26.45 1 .32 0 27.77
Buena Park 26.45 1 .32 0 27.77
Santa Ana 25.45 1 .27 0 26.72
Huntington Beach 23.95 1.20 1.20 26.35
(PROPOSED)
Westminster 23.95 1 .20 1 .20 26.35
Irvine 24.45 1 .22 0 25.67
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Huntington Beach 23.95 1 .20 0 25.15
(CURRENT)
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0RANGE COUNTY CITIES
COST FOR BASIC CABLE 'ITV SERVICE
BASIC SERVICE FRANCHISE FEE UTLILITY TAX
$'s PER MONTH
30
28
26
24
22
2 0 -- -- -
18
16
14
12 -
10
8 -- -
4 - - --
2 -
0
HTG BCH Irvine Westmin HTG BCH Snta Ana Buena Pk Seal Bch Placent
(5% PROP)
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POTENTIAL NEW REVENUE
SOURCES
Utility Tax - Cable TV
$750,000 per year - recommended for August 1 , 1991 effective date
Comprehensive fee study
Potential new fee revenue - $3 to $9 million.
MSI Report to be completed in August
Evaluate city fees
Identify the relationship between fees and services provided
Street Lighting Assessment District
$1 .5 million per year - recommended for January 1992 implementation
Sewer Maintenance Fee
$1 million per year - recommended for January 1992 implementation
Utility Users Tax
$2 million per year for every 1% increase in the tax - to be evaluated after
MSI study is completed
Pol ice/Fire Tax
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$2 million plus per year - not recommended for 1991/92 consideration
Business License Fee
Consultant study to be completed by.. February 1992.
PASSED AND ADOPTED by the City Council of the City of
Huntington Beach at a regular meeting thereof held on the 17th
day of of June , 1991
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ATTEST: APPROVED AS TO FORM:
City Clerk - Ci y Att Y j SI?2
REVIEWED AND APPROVED: A ED P EDD:
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City Administrator t mi istrative vices
3118
Ord. No. 3118
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 the 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 therof held on the 3rd day of June
19 91 , and was again read to said City Council at a regular
meeting therof held on the 17th day of June 19 91 , and
was passed and adopted by the affirmative vote of at least a majority of
all the members of said City Council .
AYES: Councilmembers:
Winchell , Green, Kelly, Robitaille, Moulton-Patterson
NOES: Councilmembers:
Silva
ABSENT: Councilmembers:
MacAllister
City Clerk and ex-offi o Clerk
of the City Council of the City
of Huntington Beach, California
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CITY OF HUNTINGTON BEACH q�
INTER-DEPARTMENT COMMUNICATION
HUNTINGTON BEACH O(0, X O
To MICHAEL T. UBERUAGA From ROBERT J. FRAN /
CityAdministrator Deputy City Admin o �
Subject UTILITY TAX ON CABLE TV Date JUNE 10, 1991
FOLLOW—UP INFORMATION
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This memorandum will provide data and information as follow—up to questions that.
have been raised regarding the utility tax on Cable TV.
1 . SENIOR CITIZEN EXEMPTION — Our existing utility tax ordinance permits
low income' senior citizens to be granted an exemption from paying
utility taxes on water, gas; electricity and telephone. The same
exemption would apply to cable TV utility taxes. Eligibility for the
exemption is based on federal guidelines and permit exemption/waiver
for senior citizens (age 62) whose income is below $17,000.
2. POTENTIAL LOSS OF CABLE TV CUSTOMERS — Don Weddle, Director of Public
Affairs for Paragon Cable, commented at the June 3 Public Hearing that
Paragon estimates. an 8 to 10% loss in customers if the utility tax is
extended to cable TV. City staff has estimated a potential 6%
customer loss after reviewing a "Price Point Study" prepared for
Continental Cablevision for a group of Los Angeles County areas.
Staff analysis attached (see #3 below for actual experience in
Westminster) .
3. CUSTOMER LOSSES — CITY OF WESTMINSTER — The analysis in #2 above is
based on a consultant' s survey of cable users in Los Angeles County.
To determine actual losses staff reviewed the historical data
available from our neighboring city Westminster. The City of
Westminster implemented a 5% utility users tax on cable TV services in
1987. The city staff from Westminster has indicated that they are not
aware of any loss in the number of customers by Paragon Cable
following the implementation of their 5% utility -tax.
(Note: Information/data has been requested from Paragon to determine
actual number of subscribers in Westminster before and after the
implementation of their utility tax on. cable TV services. As of the
7 writing of this memorandum, no ' information has been received from
Paragon and they have not returned City staff' s calls requesting such
information.)
UTILITY TAX ON CABLE TV
FOLLOW-UP INFORMATION
Franchise fee revenue, and therefore Paragon"s total gross revenue,
has increased as follows in Westminster since the implementation of
their utility tax in 1987:
Westminster Revenue - Cable TV
Calendar Year Revenue Change
1990 $ 211 ,877 9.7%
1989 193,188 29.7%
1988 149,004 15.0%
1987* 129,513 - 0,5%
1986 130,193
*5% Utility Tax Implemented
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4. REGULATION OF CABLE TV RATES - The City and the Public Cable
Television Authority (PCTA) have no rate regulation authority over
rates charged by Paragon Cable. In the early years (19701s) of cable
TV services, PCTA had rate regulation authority. The Cable Act of
1984 prohibited rate regulation provisions in franchises. Local
C jurisdictions, including PCTA; no longer have authority over rates
charged for cable TV services.
5. MONTHLY CABLE TV SERVICE RATE HISTORY - Since the passage of the Cable
Act of 1984, rates for basic cable service have increased from $12.50
to $23.95 per month (92% increase or 9.7% per year) . . In addition,
Paragon has shifted franchise fees (5%) and other charges from the
basic rate to a separate customer charge.
6. AVERAGE' COST OF UTILITY TAX APPLIED TO CABLE TV - Paragon Cable has
indicated that the average cable customer's monthly bill will increase
$2 per month or $24 a year for the utility' tax on cable TV services.
E City staff has estimated the average cable customer' s monthly bill
` will increase $1 .45 per month. Phone calls to Paragon Cable to
request how their $2 a month average was computed have not been
returned. A meeting with Don Weddle, Paragon Cable, and PCTA
Executive Director Howard Stevens to discuss these issues was
cancelled by Paragon. Staff's estimated $1 .45 average cable customers
monthly bill for the utility tax is based on the following estimates:
Calculation -- Average Monthly Utility Tax on Cable TV Services
Estimated Annual Revenue from 5% Utility Tax $ 750,000
Number of Cable TV Customers (Huntington Beach) 43,000
Average Annual Utility Tax Costs ($750,000 divided by 43,000) $17.44
Average Monthly Utility Tax Per Customer. ($17.44 divided by 12) $ 1 .45
7. Tax Equity - Attached is a summary of "tax equity" issues.
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CITY OF HUNTINGTON BEACH
Utility Tax on Cable TV Services
Tax Equity Issues
The purpose of this summary is to review the issue of the "equity" or "fairness"
of a utility tax on cable TV. The City has received some comments in public
hearings that the utility tax on cable TV is "unfair" or "inequitable" because
the tax applies only to those who receive cable TV services, while the revenue
is used to provide services to all parts of the community, not just services to
cable TV users. While this comment is accurate in terms of the way the tax
revenue is collected and used, it is not accurate to conclude that the tax is
"inequitable" . What follows is a discussion regarding other taxes and fees
which comments on some of the principles involved so that the "equity" issue is
_ put into perspective.
TAX EOUITY - Most tax revenues are not "earmarked" for specific purposes. Part
of the difficulty with our proposed utility tax on cable TV services is that the
"need" for the new tax is related to exempting Police and Fire Departments from
budget cuts. Therefore, it is natural to conclude that the utility tax on cable
TV services is "earmarked" for Police and Fire services. This is not correct,
however, since the utility tax on cable TV servies is a General Fund revenue.
(The City Council direction in March of this year was for the staff to identify
a potential new revenue source for the General Fund so that Police and Fire
Departments could be exempt from most budget reductions being required of other
departments.)
In determining an equitable potential new revenue source, the utility tax on
cable TV services was considered as equitable or more equitable than
alternatives. This tax is to be paid by those who presumably can afford cable
TV services. Therefore, it is paid by those who can afford the tax. Low income
senior Citizens can be totally exempted from paying our utility tax on not only
cable TV services, but also on water, electric, gas, and telephone billings.
OTHER TAXES - A review of some of the other tax revenue sources in the General
Fund can show that the cable TV on utility tax is as equitable or more equitable
than most tax revenues:
1 . Property Tax - Because of the provisions of Proposition 13, two
neighbors who live .in homes valued identically can be paying
significantly different property taxes (one neighbor can pay 5 to 10
t times more than the other) for the same city,services. From the point
of view of tax payments for services received, this is unfair. In
terms of the underlying principles of Proposition 13, the tax is fair.
2. Transient Occupancy Taxes - The City levies a 10% room tax, or
transient occupancy tax, on billings for hotel room rates . This tax
revenue is •used to support General Fund services for all residents in
the City, not just hotel occupants, who are primarily non-residents..
3. Cigarette/Alcoholic Beverage Taxes - These taxes are based on the sale
of cigarettes and alcohol but the tax revenue is used for support of
services for all residents.
CITY OF HUNTINGTON BEACH
Utility Tax on Cable TV Services
Tax Equity Issues
Continued
4. Sales Tax - Sales tax revenue is derived from sales within the City
even if the sales are to non-residents who receive very few services
from the City. Sales tax revenue is used by the City primarily for
services for residents. For example, high priced items such as
automobiles and appliances that are sold within the City represent a
large portion of our annual sales tax revenue. This tax is considered
equitable because individuals purchasing these higher priced items
presumably can afford the items and the higher level of tax. The or
tax', therefore, is not "equitable" in terms of the services received
by the specific taxpayer. It is, however, equitable based on ability
to pay.
5. Income Taxes - Although the City receives no income tax revenue, the
income tax is also a good example of the amount of tax payment being
equitable based on the ability to pay of the taxpayer, but inequitable
based on services received by the taxpayer in comparison to other
income taxpayers.
FEES - In contrast to tax revenues , user fees are always intended to be
"equitable" based on the services provided to the user. Following are typical
fees and fee revenue received by the City:
1 . Refuse Fee - The fee for refuse services charged to residents is
directly related to the cost of the service provided.
2. der Rates/Fees - Water rates are closely related to the cost of
providing water service to residents.
3. Parks and Recreation Fees - These fees are directly related to the
City cost for providing tennis classes, junior lifeguard program,
swimming lessons, etc.
4. Developer Fees - State law requires the City to limit its developer
fees to cost of providing services or facilities relating to the
development.
5. Building/Planning Fees - The cost of plan check fees, building fees,
etc. , is related to and is specifically required to cover only the
cost of providing the service for which the fee is levied.
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POTENTIAL CUSTOMER DISCONNECTS
CABLE TV SERVICES
A. "PRICE POINT STUDY" DATA**
$1 .20 Basic
% Who Would Disconnect* If: $0.80 Premium
Increase:
$2 Basic Fee $1 .20 Basic Fee City Staff
% of $3 Basic Fee + $1 Premium $0.80 Premium Estimated
Customer Group Customers Increase** Increase** Increase Disconnects
Basic Service Only 28% . 29.2% 14.9% ? 8%
Basic & Premium 72% 15.4% 11 .7% ? 5%
Service
% Who Would Drop 17.8% 14.2% ?
A Premium Service
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B. HUNTINGTON BEACH ESTIMATES
Multi.plied By
% of Estimated Revenue
City Staff Calculations: Customers Disconnect % Decrease
Basic Service 28% 8% 2.2%
Basic + Premium Service 72% 5% 3.6%
Total 5.8%
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Estimated Revenue Loss - Utility Tax
s
5:8% x $750,000 $43,500/Year
* Percentage of Customers -who said they would "definitely" or "probably"
disconnect or drop a premium service.
** Source of Data:
"Price Point Study" In: Wilshire, Covina and South Central Los Angeles
Prepared for: Continental Cablevision
Prepared by: Malarkey - Taylor Associates, Inc.
Dated: August, 1990
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fl CITY OF HUNTINGTON BEACH
INTER-DEPARTMENT COMMUNICATION
HUNTINGTON BEACH
To City Attorney From City Clerk
Subject Five votes required — Cable Tax Date June 10, 1991
In addition to reviewing the City Charter to see if five votes are required for the Cable
Television Users Tax, please review as it applies to the State Code you provided to me
four days ago on public hearings for fees.
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