Pass: 20,254 / 51.40% Yes votes ...... 19,147 / 48.60% No votes

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The UUT was first adopted in 1969. The current tax rate is 10%. The revenues from this tax -- approximately $12 million in fiscal year 2007-2008 --- are deposited into the City’s general fund and pay for City services such as police, fire and paramedic and for City programs including those in recreation, the environment and the schools. Since the existing law was written nearly 40 years ago, its language does not match the many changes in communication services and technology that have occurred since 1969. Under the California Constitution, Article XIII C, a majority vote of the electorate is necessary to approve a change to the UUT.

The existing UUT law relies for its interpretation and enforcement on definitions and policies created over many years under the Federal Excise Tax. This federal law was repealed 2 years ago. The repeal complicates interpretation and enforcement of the existing UUT. One result of both the repeal of the federal law and the age of the existing UUT law is that not all persons or businesses are being taxed the same even if they use the same or similar equipment or services. Also, since the repeal, some California cities, with utility tax ordinances almost identical to the City’s, have been sued because the repeal led to disputes on how to apply these cities’ laws to current communication services and technology. Should the City be sued, or should a decision be reached in one of these lawsuits that affects how the City’s law is applied, the City’s UUT revenue could be reduced.

To address these issues the proposed ordinance amends the current law and adds various definitions to the UUT law, including a definition for “telecommunication services”. The proposal applies the UUT to all telecommunication services regardless of the technology, equipment or services used. The proposal also removes all references to the Federal Excise Tax. The proposal makes no change to the tax rate. The existing tax rate is kept at 10%. Exactly how, if at all, the proposed ordinance would affect the amount of tax paid by any taxpayer would depend upon a number of factors, including the terms of the services agreement with the service provider and whether the provider has to change its billing and collection practices. The proposal provides an exemption for low income senior citizens and for disabled persons. The proposal also provides an exemption for services that cannot be taxed under federal or state law as well as an exemption from tax for digital downloads, such as music, ringtones, games, and similar digital products.

A “yes” vote is a vote in favor of adopting the amended UUT ordinance. A “no” vote is a vote against adopting the ordinance. A majority of “yes” votes is required for the ordinance to be enacted.

Prepared by:

Marsha Jones Moutrie, City Attorney
Joseph Lawrence, Assistant City Attorney

Arguments Submitted

Full Text of Argument In Favor, Rebuttal

Full Text of Argument Against, Rebuttal

City of Santa Monica

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