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Home My WebLink About9.a. Consider Resolution Regarding U.S. Senate Telecommunications BillsV CITY OF ROSEMOUNT EXECUTIVE SUMMARY FOR ACTION City Council Meeting Date: April 6, 2004 AGENDA ITEM: CONSIDER RESOLUTION AGENDA SECTION: REGARDING U.S. SENATE Legislative /lntergovern mental TELECOMMUNICATIONS BILLS PREPARED BY: JAMIE VERBRUGGE, CITY AGENDA NO. 9-0. ADMINISTRATOR ATTACHMENTS: RESOLUTION APPROVED BY: RECOMMENDED ACTION: Motion to adopt a resolution supporting the Access Tax Ban Extension and Improvement Act (S.2084) and opposing the Internet Tax Nondiscrimination Act (S.150). ACTION: ISSUE The United States Senate currently has before it competing legislation regarding the future classification of telecommunications and taxation policy related to those forms of telecommunications. S.2084 would extend the current moratorium on internet taxation while maintaining the existing definition of telecommunications. S.150 would redefine telecommunications such that states and local governments would potentially be restricted from collecting taxes related to the operation of those services. BACKGROUND According to the National League of Cities (NLC), the nation's cities need sensible legislation that defines "Internet access" in a way that preserves the ability of local and state governments to collect telecommunications taxes and franchise fees to continue to support vital focal services. NLC has taken a position supporting S.2084, the Internet Access Tax Ban Extension and Improvement Act, offered by Senators Lamar Alexander and Thomas Carper because it: • Defines "Internet access" in a way that preserves the ability of local and state governments to continue to collect telecommunications taxes and franchise fees which are a critical source of revenue for local services and an important mechanism for local officials to protect consumers. • Calls for a two -year extension to the existing moratorium on the imposition of new telecommunications taxes, which Congress, the FCC, industry, and local governments time to determine the appropriate tax treatment for emerging telecommunications. S.2084 would preserve the ban on email or Internet access taxes, as well as multiple nad discriminatory taxes, while at the same time protect the existing tax base for local services. In addition, the bill would establish parity among all types of Internet platforms, whether telephone lines, cable modems, or DSL, which provides clear protections for consumers and tax guidance for local and state governments. Passage of S.150, the Internet Tax Nondiscrimination Act, would define "Internet access such that digital subscriber lines (DSL) offered by local telephone companies and cable modem offered by cable systems would be exempt from all state and local telephone and utility taxes. S.150 would exempt local and state tax collection of gross receipts taxes, rights - of -way fees, franchise fees, and other existing taxes on telecommunications services at an estimated cost of more than $9 billion per year. This loss of local revenue would directly translate into a loss of local services to cities and towns across the nation. The City of Rosemount has received over $230,000 in the past two years from cable franchise fees. The ability of local governments to collect franchise fees, a long -held Court- affirmed traditional municipal power to compensate the use of public property for private profit, would be lost if S.150 were passed. The impact across the State of Minnesota would be the loss of over $40 million in franchise fees to local governments. SUMMARY The resolution for consideration before the City Council aims to do two things specific to the interests of the City of Rosemount and its residents — (1) preserve the ability of local governments to continue collecting cable franchise fees, and (2) protect the integrity of long held traditional municipal powers related to local taxing jurisdiction as it relates to use of public rights of way. If approved by Council, the resolution will be sent to the City's congressional delegation with a cover letter from the Mayor clarifying the City's interest in this important legislation. 2 CITY OF ROSEMOUNT DAKOTA COUNTY, MINNESOTA RESOLUTION 2004 -- A RESOLUTION SUPPORTING ACCESS TAX BAN EXTENSION AND IMPROVEMENT ACT (S. 2084) and OPPOSSING THE INTERNET TAX NONDISCRIMINATION ACT (S. 150) WHEREAS, the United States Congress is currently considering legislation to make the Internet Tax moratorium permanent and to expand the moratorium to include telecommunications services; and, WHEREAS, final passage of the Internet Tax Nondiscrimination Act (S., 150) is likely to exempt, by its definition of "Internet access ", digital subscriber lines (DSL) offered by local telephone companies and cable modem offered by cable systems from all state and local telephone and utility taxes; and, WHEREAS, S. 150 threatens a traditional municipal power that provides local government the ability to impose gross receipts -based franchise fees as "rent" for use of public rights -of -way on companies, such as telecommunications and cable service providers, that use public property for private profit; and, WHEREAS, over one hundred years of court- supported municipal rights are at stake, including City of St. Louis v. Western Union TeL Co., 148 US 92, 99, 13 S.Ct. 485, 488 (1893) which clarified that right -of -way fees are not taxes but payments in the form of rent, and City of Dallas v. FCC, 118 F.3d 393 (5th Cir. 1997) which reiterated the holding of St. Louis when it found that a franchise fee is not a tax, but an expense of doing business that is essentially a form of rent; and, WHEREAS, S. 150 would result in a huge tax giveaway to the telecommunications industry at the expense of state and local taxpayers, small businesses, and working families by preempting local and state tax collection of gross receipts taxes, rights -of -way fees, franchise fees, and other existing taxes on telecommunications services at an estimated cost of more than $9 billion per year; and, WHEREAS, local governments in the State of Minnesota would face losses of revenue in excess of $40 million, which would- directly translate into losses of local services to residents; and, WHEREAS, the City of Rosemount received over $230,000 in 2002 and 2003 in cable franchise fee revenues, the loss of which would adversely impact services and taxpayers; and, WHEREAS, an alternative proposal, the Internet Access Tax Ban Extension and Improvement Act (S. 2084), would define "Internet access" in a way that preserves the ability of local and state governments to continue to collect telecommunications taxes and franchise fees which are a critical source of revenue for local services and an important mechanism for local officials to protect consumers; and, RESOLUTION 2004 -. .. WHEREAS, S. 2084 calls for a two -year extension to the existing moratorium on the imposition of new telecommunications taxes, which give Congress, the FCC, industry, and local governments time to determine the appropriate tax treatment for emerging telecommunications; NOW, THEREFORE, BE IT RESOLVED that the City of Rosemount strongly encourages the United States Congress to pass the Internet Access Tax Ban Extension and Improvement Act (S. 2084) which defines "Internet access" in a way that preserves the ability of local and state governments to collect telecommunications taxes and franchise fees to continue to support vital local services. BE IT FURTHER RESOLVED that the City of Rosemount expressly oppose S. 150 as it is currently written because it minimizes traditional municipal powers and will have far- reaching adverse impacts on the ability of cites and states to collect fair compensation related to the use of public property for private profit. ADOPTED this day of , 2004, by the City Council of the City of Rosemount. William H. Droste, Mayor ATTEST: Linda Jentink, City Clerk CERTIFICATION I hereby certify that the foregoing is a true and correct copy of a resolution presented to and adopted by the City Council of Rosemount at a duly authorized meeting thereof, held on the day of , 2004, as disclosed by the records of said City in my possession. (SEAL) Linda J. Jentink, Rosemount City Clerk Motion by: Second by: Voted in favor: Voted against: Member absent: 2