Resolution No. 2765
CD
Z ~ 8 28
Z II
o 010 II
)(>z~Ol ~
01ll00l~..29
..o.ZZ"Zir
o.o:~~o:g
.. 0: e > Z 0 " 30
!:! ..... c ~ ::l
"l-ceoll.J.J
~z>)o:z:ce~
1II...!:~Uo 31
u-uo . ~
ZU II Z 01
_ 00;:
> 0 Z ...
::ffi 32
>
1
2
3
4
5
6
7
RESOLUTION NO. 2765
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON URGING
ITS STATE LEGISLATIVE REPRESENTATIVES TO SPONSOR AND SUPPORT
A CONSTITUTIONAL AMENDMENT WHICH WILL PERMIT CITIES IN
CALIFORNIA TO LEVY 2CYo GROSS RECEIPTS TAX ON TELEPHONE COMPA-
NIES DOING BUSINESS THEREIN.
THE CITY COUNCIL OF THE CITY OF VERNON RESOLVES AS FOLLOWS:
WHEREAS~ municipalities are prohibited by California Constitution
Article XIII.. Section 14~ from taxing telephone companies at a higher rate than
8 I they tax mercantile., manufacturing and business corporations; and
9
10
11
12
13
14
15
16
17
IS
19
20
21
22
23
24
25
26
27
WHEREAS, municipalities may require mercantile, manufacturing
and business corporations to compensate them for the use and occupancy of
city streets and ways; and
WHEREAS., municipalities may not require telephone corporations
to compensate them for the use and occupancy of city streets and ways., except
in areas within the 1905 boundaries of a city which in May# 1905~ had a free-
holders I charter giving it power to grant franchises to such telephone corpora'"
tions 1 and
WHEREAS, telephone companies., unlike mercantile., manufacturing
and business corporations~ use and occupy city streets and ways for the major
portion of their distribution systems within cities~ including poles.. overhead
wiring~junction boxes and exposed equipment which obstruct the view of per....
sons traveling on adjacent highways and interfere with the rights to light.. air
and view of adjacent property owners; and
WHEREAS~ it appears reasonable and just that telephone companies
should be required to pay a fair compensation to municipalities for the use and
occupancy of city streets and ways~ as mercantile.. manufacturing and business
corporations are required to do under identical circumstances.
NOW, THEREFORE.. BE IT RESOLVED:
SECTION .1:
That State Assemblyman George A.Willson is
hereby requested and urged to sponsor and support in the 1965 Legislative
Session an amendment to Section 14 of Article XOl of the State Constitution
which would permit municipalities to levy a 2~ gross receipts tax on telephone
companies doing business therein., such tax to be in lieu of any telephone
-1-
CD
~It) 28
z zO II
o 010 II
)(>z~Ol ~
01ll0..~..29
..o.ZZ"Zir
o o:~co:o
..tie>~0~30
!:! ..... c ~ ::l
"l-ceoll.J.J
~z>)o:z:ce~
III!:!:~U ~ 31
UuU 0 i ..
~ II 0 ~
> g Z ...
::ffi 32
>
1 franchise fee charged by such municipality.
2
SECTION 2:
That State Senator Thomas M. ReelS is hereby
3 requested and urged to support in the 1965 Legislative Session the foregoing
4 constitutional amendment.
5
. SECTION 3:
The City Clerk is hereby directed to transmit
6 certified copies of this Resolution to State Assemblyman George A. Willson
7 and to State Senator Thomas M. Rees.
8
SECTION 4:
The City Clerk of the City of Vernon shall
9 certify to the passage of this Resolution~ and thereupon and thereafter the
10 same shall be in full force and effect.
11 ADOPTED and APPROVED this 20th day of April., 1965.
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
~ City Clerk
. .
Mayor (;if the City of V
\/
STATE OF CALIFORNIA )
( SSe
COUNTY OF LOS ANGELES )
I., ... F. A. ZIEMER" City Clerk of the. City of V ernon~ do hereby
certify that the foregoing ResolutionT being Resolution Ne. 2765.. was duly
adopted by the City Council of the City of Vernon, and approved by the Mayor
of said City.. at a. regular meeting of the Cit.y Council held on April 20.. 1965.
F .C:!~~7~'uY Clerk
-2-
OFFICE OF THE MAYOR
CITY HALL
LONG BEACH, CALIFORNIA
EDWIN W. WADE
MAYOR
March 29, 1965
~CEIVED
fL/;. // ~~
~
CITY r',[ r::- . R
J . ._'~1f
APR 6 1900
~~
Honorable Mayor and City Council
City Hall
Gentlemen:
We are enclosing a copy of a form resolution adopted
by the City Council of the City of Long Beach on
March 23, 1965, urging our State Legislative Repre-
sentatives to sponsor and support a Constitutional
Amendment which will permit cities in California to
levy a 2% gross receipt tax on telephone companies
doing business therein.
For your information we are also enclosing arguments
in support of the above amendment.
Your favorable consideration of this proposal is
urgently requested.
Very truly yours
?~ij/~/e
EDWIN W. WADE --.........
Mayor, City of Long Beach
G-G- C~~ C~7
'1/ 7/ ~ J-
11"" '.f'- ",!.
ARGUMENTS IN SUPPORT O.F THE CITY OF LONG BEACH PRO--
POSAL OF A CONSTITUTIONAL AMENDMENT WHICH WILL PER-
MIT CITIES TO ACQUIRE 2% OF GROSS FRANCHISE FEES FROM
REVENUES OF TELEPHONE COMPANIES GENERATED WITHIN
EACH RESPECTIVE CITY.
I.BASIS FOR CHARGING TELEPHONE)
COMPANIES FRANCHISE FEES FOR )
USE OF PUBLIC PROPERTY )
(STREETS AND WAYS) )
)
The telephone companies use city
streets and ways for the major portion
of their distribution systems within the
cities. These distribution systems
include poles, overhead wiring and
cables, junetion boxes and other line equipment; also~ underground ducts and
vaults and underground wiring and cables.
The installation and maintenance of these facilities cause substantial inconven-
ience to the public. The above-ground installations are generally distasteful and
mar the appearance of the streets and ways, and frequently, partially obstruct
views from residential and commercial buildings which is objectionable to the
owners and occupants of these.
City governm.ents afford fire and police protection to the telephone company's
properties and provide such other general services as are normally used by the
company and its personnel. These services are similar to those provided to busi-
nesses conducted on privately...owned property. The streets and ways are public
property and, in this instance, are used by private capital for earning a profit.
For the above reasons it is reasonable and just that telephone companies should be
required to pay a fair com.pensation to the cities to support local government.
The franchise tax is a "userts type tax" and is not a tax on the stockholder.
It has long been the practice throughout the United States for many, if not all,
large cities to require the privately-owned public utilities to compensate the cities
for the use of public property.
II.ACCOUNTING TREATMENT OF )
FRANCHISE TAXES OF PRIVATELY )
OWNED UTILITIES BY REGULATORY}
BODIES )
)
The accounting procedure prescribed by
both the Federal Power Commission
and the Public Utilities Commission of
the State of California provide s that
franchise fee s paid by telephone com-
panie s are considered an "operating tax" and are included as an expense item
similar to labor, materials~ etc., used in providing the utility.s service and are ---
thus recoverable through the revenues collected. In fixing the tarifis of privately...
owned utilities, the regulatory bodies authorize the rates of each utility so calcu...
lated as to enable the utility to earn suffi-cient revenue to pay all expenses, includ-
- 1 ..
.... . r t
ing both operating and income taxe s, and have remaining a sufficient net revenue
to earn a fair and reasonable rate of return on the utility. s net investment. It
follows that the rates charged by utilities are such that they are compensated for
their expenses, including franchise fees. It is clearly evident that the consumers
of the utilities. services, indirectly, pay the franchise fees.
m.TAX BURDEN ON UTILITIES
CONSUMERS VS. TAX BURDEN ON
PROPERTY OWNERS
Personal and property taxes assessed
by governmental agencie s have steadi-
ly climbed in practically all areas in
California and throughout the United
State s and have indeed reached a very burdensome level.
)
)
)
)
Since the telephone utilities use public property for the major portion of their dis-
tribution facilities and, in addition, receive services from the City, it would ap..
pear fair that the users of the companies. service be required to pay a fair share
of the city1s tax burden through the rates authorized and charged by the utilities.
It should be made exceedingly clear that a franchise tax is a burden on the con-
sumer of the utilities. services and not a bllrden on the stockholders of the com-
pany as the franchise fees are recoverable from revenue paid by the consumers.
IV .AMOUNT OF FRANCHISE FEE ) For over a half century privately-
) owned public utilities paid compensa-
tion to citie s for use of city streets
and ways which are public property. This practice has been followed not only in
California, but throughout the United States. The formula for establishing these
fee s has varied, however. it has been noted that pre sently telephone utilitie s in
SOme cities in Florida., Missouri and Texas pay fees of 10% of the gross revenue
and in a number of other areas telephone companies pay franchise fees on the
basis of 50;0 of the gross revenue.
It has not been established whether or not any, or all, of the se required fee s were
based on a comprehensive study which would include:
1. A fair rental for the public property occupied by the utility.s
fac ilitie s i
2. Full compensation for expense incurred by the city resulting
from street surface damage and maintenance, expense of
special policing, inspections, and other services per-
formed by city employeesi
3. Inconvenience and loss of man-hour time resulting from
part~l and I or complete blockading of city streets during
construction and maintenance of the utilityJs installations.
.. 2 ..
~ -( (-;,~ ~ ....'
V. PROBABLE INITIAL REASON FOR STATE )
OF CALlFORNlAJS CONSTITUTIONAL )
PROVISION THAT EXEMPTS CERTAIN )
PRIVATELY-OWNED UTILITIES FROM )
PAYING FRANCHISE FEES )
)
In the early days, during the
development of the we at, it was
de sirable to per suade public utili-
ties to make substantial invest-
ments in plant and equipment
above the immediate requirements
of the area to be served. One of the devices for providing this persuasion was to
exempt the se private utilitie s from certain governmental fees. This was done
for railroads, power used for lighting and for communication services. We
under stand there were 11) gas distributing companie s at the time the pre sent State
constitutional provision was enacted and therefore gas companies have not been
(and are not now) exempt from paying franchise fees..
With the growth of population, commerce, and industry in the west, all of the
major privately-owned public utilities in California have prospered and expanded
and no longer need be persuaded to continue their services and to expand their
facilities. They are continually seeking approval of the regulatory commissions
for expansion of their respective operations and, it appears certain, that what-
ever capital investments wEi~e made in the early days by these utilities have long
since been recovered through depreciation charged to expense and recovered
through revenue.
- 3 -