Exh 6AAGENDA ITEM #6A
JULY 09, 2001
City of Atlantic Beach
City Commission Meeting
Staff Report
Agenda Item: Resolution No. 01-14, of the City of Atlantic Beach electing not to require permit
fees from providers of communication services, increasing the local communications
service tax, and providing for notice to the Department of Revenue.
Background This resolution addresses one aspect of the Communication Services Tax
Simplification Tax Law that will go into affect October 1, 2001.
Please read the attached overview of the law before uroceeding. The Florida
League of Cities provided this executive summary that exnlains the overall
arovisions of the new law.
The following .resolution onh• addresses the nation as described on Wage three
of the summary to add a small percentage to our pre-determined rate in lieu of
charging uermit fees to communication service aroviders.
This is a resolution for an election not to require and collect permit fees from any
providers of communications services that use or occupy municival roads or rights-of-
wav for the provision of communications services. and for an election to increase the
local communications services tax by 0.12%. Each municipality and county is required
to make an election regazding permit fees under section 337.401(3)(c), Florida Statutes
(2000), and notify the Department of Revenue. Current law states that the Depaztment of
Revenue must be notified of the election by certified mail postmarked on or before July
1, 2001. This date is changed in section 34, Enrolled CS/CS/SB 1878 by the 2001
Florida Legislature to July 16, 2001. A copy of section 337.401, Florida Statutes (2000),
and a copy of the pertinent sections of Enrolled CS/CS/SB 1878 are attached for your
review.
The communications service tax rate was set by the state for the City of Atlantic Beach.
The rate was set at an amount that is intended to keep our revenues neutral with respect to
the current taxes and franchise fees that the new state law prohibits us from charging.
The conversion rate for Atlantic Beach for October 2001 to September 2002 is 6.4%, the
rate for October 2002 forward is 5.9%. The .12% referenced in tlvs resolution is intended
to be in lieu of permit fees and would be added to this state determined rate. If we choose
to charge permit fees, .12% would be deducted from the state determined rate. This is a
total rate difference of .24% depending on the election made. Based on the elections of
AGENDA ITEM #6A
JiJLY 09, 2001
other cities made to date, Florida League of Cities has indicated that virtually every city
has opted for the .12% increase rater than to charge a permit fee. The City's current
permit fee is $25. The basis for revenue estimates for which the rate will apply for the
City of Atlantic Beach from the providers according to the League of Cities was
approximately $4.9 million. The rates as determined by the state will go into effect
without any further action from the City.
If the estimates are good, the City of Atlantic Beach should benefit from this tax reform
by an additional $25,000 depending on sales. Currently we receive approximately
$270,000 from taxes and franchise fees and the new rate should generate approximately
$295,000. Based on recent estimates provided by the Florida League of Cities, the permit
fee portion would generate $11,760 of revenues compared to the $1,500 to $1,800 we
currently receive.
If the City elects to require and collect permit fees from any providers of communications
services that use or occupy our roads or rights-of--way, the City must abide by the permit
fee restrictions provided in section 337.401(3)(c)l.a., Florida Statutes (2000), including,
for example, a cap of $100 per permit. In addition, the state determined local
communications services tax rate shall be automatically decreased by 0.12% (Section
337.401(3)(c)l.a
A certified copy of this Resolution on permit fees and any tax increase will be sent by
certified mail postmarked on or before July 16, 2001 to: Revenue Accounting -
Communications Services Tax, Florida Department of Revenue, Post Office Box 6609,
Tallahassee, Florida 32399-b609.
Recommendation: To approve Resolution No. 01-14
Attachments: Executive Summary, Florida League of Cities' Analysis of the
Communications services Tax Simplification Law
Resolution No. 01-14
AGENDA ITEM #6A
JULY 09, 2001
Executive Summary
Florida League of Cities'
Analysis of the
Communications Services Tax Simplification Law
During the 2000 Regular Session, the Florida Legislatuue created the "Communications
Services Tax Simplification Law" (CS/CS/CS/SB 1338 or Chapter 2000-260, Laws of Florida),
bringing with it the most comprehensive fiscal reform effort by the Legislature in the past fi$een
years. The legislation creates a new simplified tax structure for communications services which
will be codified in a new Chapter 202 of the Florida Statutes. It combines seven different state
and Ioca2 taxes or fees and replaces these revenues with a two tiered tax composed of a state tax
and a local option tax on communications services. The new tax structure will be effective
October 1, 2001. The major provisions of the bill aze as follows.
Tax Base
The Simplified Communications Services Tax, both the state. tax and local
communications services tax, is imposed on a broad base of telecommunications and cable
services and does not discriminate between services or providers. The tax base includes the
transmission of voice, data, audio, video, or other information services, including cable services,
by or through any medium or method now in existence or herea$er devised, including electronic,
radio, satellite, cable, optical, and microwave. This broad tax base reflects the intent that all
communications services be taxed at the same rate and that taxes and fees be competitively
neutral. Also, most existing disparities between state and local level taxes will be eliminated
through the imposition of the Simplified Communications Services Tax.
State and Local Communications Services Tax
The Simplified Communications Services Tax is comprised of two separate and distinct
taxes. A state tax and a local option communications services tax each having its own rate. Each
tax wiIl be sepazately stated on a customer's bill. Effective October 1, 2001, the existing state
sales tax on telecommunications services is replaced with a new state level communications
services tax that will be combined for administrative purposes with the state gross receipts tax.
The state will also tax direct-to-home satellite service and will distribute the proceeds to local
governments through the Half-Cent Sales Tax Program.
Effective October 1, 2001, the new local communications services taxes will automatically
become effective in municipalities and the unincorporated areas of counties at rates developed
using local government and industry data from 1999. (The revenues being replaced by the local
communications services tax aze referred to as the "replaced revenue services.") While 1999 data
is being used to establish rates to be implemented in 2001, local governments should not
experience any decrease in revenues because the rates developed will be applied to taxable
transactions occurring in the yeaz 2001. Therefore, while the rate being applied is based on
informafion from 1999, the amount of revenues generated is not limited to the amount of revenue
1
AGENDA ITEM #6A
JULY 09, 2001
generated in 1999, Thereafter, municipalities and counties will have the authority to alter by
ordinance local communications services tax rates up to a maximum tax rate which duplicates
their maximum revenue raising capacity under current law. Municipalities and charter counties
will have a uniform maximum tax rate and non-charter counties will also have a uniform
maximum tax rate. A municipality or county will not have a lower or different maximum tax rate
if it has not actually exercised its maximum revenue raising capacity. So, under the bill, a
municipality or county need not take any action to increase or preserve its maximum tax rate
authority.
For municipalities and charter counties, the replaced revenue sources consists of: the
municipal public service tax on telecommunicafions (the municipal utility tax 7% and 10%
options) including pre-paid calling arrangements; franchise fees on cable and telecommunications
service providers; and, depending upon elections made at the local level, permit fees relating to
placing or maintaining facilities in rights-of--way. For non-charter counties, the replaced revenue
source consists only of franchise fees on cable service. The tax imposed by a municipality will
apply to communications services that originate or terminate in Florida and aze chazged to a
service address in the municipality. The tax imposed by a county will apply to communications
services that originate or terminate in Florida and aze chazged to a .service address in the
unincorporated area ofthe county.
Tax Rates
The state's Revenue Estimating Conference ("REC") is tasked with determining several
new tax rates at the state and local government levels. The REC will make rate
recommendations to the Legislature for consideration during the 2001 Regular Session.
At the state level, the rates to be calculated include revenue-neutral rates for the gross
receipts tax and the new state tax. At the local level, the REC will develop two tax rates: 1. an
individual conversion or "initial" rate for each municipality and county; and 2. a maximum or
"revenue capacity" rate that will be the same for all municipalities and charter counties (non-
charter counties will have a different maximum rate). The conversion or "initial" rate will vary
for each municipality and county based on the amount of revenues fo be replaced and the tax
base within. each individual municipality and county. The conversion or "initial" rate for each
municipality and county is designed to accomplish two main goals. First, allow a smooth
transition at the local level by eliminating the necessity to re-enact or adopt various new tax rates
due to the changes created by the Legislature. Second, to account for varying consumption
patterns in some jurisdictions. It is possible that the conversion rate in certain jurisdictions will
exceed the maximum rate established by the Legislature. Conversion or "initial" rates will
become effective automatically on October 1; 2001.
The REC will also calculate maximum or "revenue capacity" rates for local governments.
The maximum rates will duplicate the current "capacity" of the replaced revenue sources, so that
jurisdictions which currently levy taxes and fees at less than the legal maximums will not
experience a reduction in revenue raising authority. Municipalities .and counties that have
"initial" rates below the maximum rates will be authorized to increase the rates by ordinance up
to the maximum rate.
2
AGENDA ITEM #6A
JULY 09, 2001
Realizing that the data for the conversion or "initial" rates may not be accurate for each
jurisdiction or certain unique consumption patterns may exist, the biII authorizes a municipality
or county to exercise emergency taxing authority by ordinance if needed to replace any revenues.
The bill establishes a process for emergency taxing authority.
Franchise Fees
Under the bill, municipal and county authority tc require franchise fees of
telecommunications and cable service providers is eliminated as of October 1, 2001, when the
new tax is effective. However, the local government tax rates aze increased to offset for lost
franchise fee revenues and revenue capacity. The bill removes franchise fee authority primarily
because similar communications services may be provided by service providers using local
government rights-of--way and by service providers not using such rights-of--way. Under the bill,
it is the intent to have all communications services providers in a particular municipality or
county pay the same rate, making the amount paid by providers of similar services
nondiscriminatory and competitively neutral. Municipalities and counties retain all non-
franchise fee regulatory authority over the use of rights-of--way by communications services
providers. Municipalities and counties also retain the authority to collect franchise fees from
other users or occupants of the rights-of--way.
Permit Fees
The bill states an intent to treat all providers of communications services that use or
occupy local government roads or rights-of--way for the provision of communications services in
a nondiscriminatory and competitively neutral manner with respect to the payment of permit
fees. Municipalities and counties aze given the option of continuing to require permit fees from
communications services providers or increasing the local communications services tax rate in
lieu of permit fees. Each municipality and county must make this one time selection and inform
the Department of Revenue by July 1, 2001, with the election taking effect October 1, 2001.
Municipalities and counties specifically retain all existing authority to require and collect permit
fees from other users or occupants of the roads or rights-of--way and to set appropriate permit fee
amounts.
Public Rights-of--Way Regulations
Municipalities and counties retain the authority to manage and regulate all users of the
public rights-of--way, including communications services providers, under their police powers;
however, the bill alters the franchising process effective January 1, 2001 and again effective
October I, 2001. Section 337.401, Florida Statutes, is amended effective January 1, 2001 to state
that municipalities and counties must treat telecommunications companies in a nondiscriminatory
and competitively neutral manner when imposingrules or regulations governing the use of rights-
of-way. Rules or regulations relating to telecommunications companies' use of rights-of--way
must be generally applicable to all telecommunications companies and may not require a
telecommunications company to apply for or enter into an individual license, franchise or other
agreement as a condition of placing telecormunications facilities in the rights-of--way.
3
AGENDA ITEM #6A
JULY 09, 2001
Telecommunications services providers are to be regulated under general ordinance provisions
regulating the use of the rights-of--way. For municipalities and counties that have already adopted
a general ordinance regulating the use ofrights-of--way by telecommunications service providers,
the bill does not require adoption of a new ordinance.
After January 1, 2001, in addition to any other notice requirements, a municipality or
county that adopts an ordinance governing a telecommunications company placing
telecommunications facilities in the rights-of--way must provide notice to the Secretary of State's
office. This notice is to be published on the Secretary of State's website. The failure of a
municipality or county to provide such notice does not render the ordinance invalid.
Telecommunications services providers that use the rights-of--way must continue to pay
the statutorily authorized franchise fees in section 337.401, Florida Statutes; (generally 1% for
local services providers) until the Simplified Communications Services Tax becomes effective
October 1, 2001. However, the payment of franchise fees is no longer contingent upon entering
into franchise agreements.
It is important to note that these changes to section 337.401, Florida Statutes, effective
January 1, 2001, do not impact the franchising activities for cable service providers. All
municipal and county authority regazding the negotiation of cable franchises, including in-kind
contributions and community benefits, is retained as provided under federal law. However,
section 337.401, Florida Statutes, is amended again effective October 1, 2001, and cable service
providers will then have to be treated similazly to telecommunications services providers
regarding the use of rights-of--way, but local governments continue to retain the authority to
negotiate for in-kind services.
Section 337.401(3)(e) and (f), Florida Statutes, are amended to remove franchise fee
authority on communications services providers effective October 1, 2001. The authority of
municipalities and counties to require franchise fees from providers of communications services,
with respect to the provision of such services, is specifically preempted by the state. The bill
identifies unique circumstances applicable to providers of communications services when
compared to other utilities occupying municipal or county rights-of--way and states the reasons for
the different treatment of communications services providers. The primary reason is that similar
communications services may be provided by providers that use and do not use rights-of--way. It
is the stated state desire to treat providers of communications services in a nondiscriminatory
manner and to have the taxes, franchise fees and other fees paid by providers of communications
services be competitively neutral. Municipalities and counties retain all authority to collect
franchise fees from other users or occupants of the rights-of--way.
Cable In-Kind Contributions
While the bill does not propose immediate changes to the authority of municipalities and
counties to negotiate for cable in-kind requirements, institutional networks, and contributions for
the use or construction of public, educational, or governmental access facilities, the Legislature
did recognize the uniqueness of such agreements. The Legislature noted that federal law
currently only imposes on providers of cable service the requirements for in-kind contributions
4
AGENDA ITEM #6A
JiTLY 09, 2001
and that under section 337.401, Florida Statutes, in-kind contributions cannot be required from.
providers of telecommunications services. The Legislature also noted potential competitive
inequities between cable service providers and providers of video programming through wireless,
satellite, Internet; and other delivery systems. The Legislature has directed the appropriate
legislative committees to study and evaluate, during the 2001 Regulaz Session, an appropriate
state policy regarding these issues including the option of placing a value on in-kind contributions
and including this as a part of the computation of replaced revenues under section 202.20, Florida
Statutes. This would mean that the value of in-kind contributions could be offset by cable service
providers against the tax imposed under Chapter 202, Florida Statutes.
Advisory Committee
The Department of Revenue will appoint an advisory committee to assist it on
implementation and transition issues and identify issues for further legislative consideration. The
committee is to be appointed by August 1, 2000 and include state and local government, industry,
and consumer representatives.
Centralized Administration
The Department of Revenue will administer the state and local communications services
taxes. Each provider will file a single monthly return, accompanied by a single payment, for the
state and local communications services taxes. The Department will distribute the local taxes to
the jurisdictions which levied them. The audit function for the state and local communications
services taxes will also be centralized with the Department. The Department is authorized to
retain a portion of revenue generated under the local communications services tax for
administrative expenses.
Assignment of Customers for Local Taxes
One of the most important features regarding the local communications services tax and a
key aspect of the bill is the concept of "situsing" or identifying taxable transactions within a
particular municipality or unincorporated area. Local governments must work with the
Department of Revenue to properly identify service addresses to each municipality. and county. If
municipalities and counties fail to provide the Department with accurate service address
information, the municipality of county risks losing tax proceeds that it should properly receive.
The bill creates several options which a communications services provider may use to assign
customers for local tax purposes.
Miscellaneous Provisions
The bill contains numerous other provisions that aze described in more detail in the full
Analysis. These other provisions relate to: bonding authority; compensation of providers;
customer tax refunds; tax billing and reporting; Department rulemaking; prepaid calling
arrangements; effective dates; and an extensive repealer clause.
As of June 10. ?000
5
AGENDA ITEM #6A
JULY 09, 2001
RESOLUTION NO. 01-14
A RESOLUTION OF THE CITY OF ATLANTIC BEACH,
FLORIDA, RELATING TO REQUII2ING AND
COLLECTING PERMIT FEES FROM PROVIDERS OF
COMMUNICATIONS SERVICES AND INCREASING THE
LOCAL COMMUNICATIONS SERVICES TAX;
PROVIDING FOR INTENT; PROVIDING FOR ELECTION
NOT TO REQUII2E AND COLLECT PERMTT FEES;
PROVIDING FOR ELECTION TO INCREASE LOCAL
COMMUNICATIONS SERVICES TAX; PROVIDING FOR
NOTICE TO THE DEPARTMENT OF REVENUE;
PROVIDING FOR SEVERABILITY; PROVIDING AN
EFFECTIVE DATE.
WHEREAS, section 337.401(3)(c)1., Florida Statutes (2000), requires each municipality
to make an election regarding the payment of permit fees by providers of communications
services and further requires each municipality to inform the Department of Revenue of the
election by certified mail by July 1, 2001; and
WHEREAS, a municipality may require and collect permit fees from auy providers of
communications services that use or occupy municipal toads or rights-of-way for the provision
of communications services. However, to ensure competitive neutrality among providers of
communications services, a municipality that elects to exercise its authority to require and collect
permit fees will have an automatic reduction in the rate of the local communications services tax
for the municipality, as computed under section 202.20(1) and (2), Florida Statutes (2000), as
amended, by a rate of 0.12%; and
WHEREAS, alternatively a municipality may elect not to require and collect permit fees
from amp provider of communications services that uses or occupies municipal roads or rights-
of-way for the provision of communications services. If the municipality elects not to require
and collect permit fees, the total rate for the local communications services tax as computed
under section 202.20(1) and (Z), Florida Statutes (2000), as amended, for that municipality may
be increased by ordinance by an amount not to exceed a rate of 0.12%; and
WHEREAS, section 34, Enrolled CS/CS/SB 1878 by the 2001 Florida Legislature
further amends section 337.401(3)(c)1., Florida Statutes (2000), to state that the Department of
Revenue must be informed of a municipality's election by certified mail postmarked on or before
July 16, 2001; and
WHEREAS, section 34, Enrolled CS/CS/SB 1878 by the 2001 Florida Legislature
further provides that if a municipality elects not to require and collect. permit fees from any
provider of communications services that uses or occupies municipal roads or rights-of--way for
AGENDA ITEM #6A
JULY 09, 2001
the provision of communications services, the total rate for the local communications services
tax as computed under section 202.20(1) and (2), Florida Statutes (2000), as amended, for that
municipality may be increased by resolution by an amount not to exceed a rate of 0.12%. The
bIll further provides if a municipality elects to increase its rate effective October 1, 2001, the
municipality shall inform the Department of Revenue of such increased rate by certified mail
postmarked on or before July 16, 2001; and
WHEREAS, section 337.401(3)(c)1., Florida Statutes (2000), further provides that if a
municipality does not make an election and notify the Department of Revenue, it is presumed
that the municipality elects not to require and collect permit fees from. any provider of
communications services that uses or occupies municipal roads or rights-of--way for the provision
of communications services, and such municipality will be authorized to increase its tax rate by
an amount not to exceed a rate of 0.12%; and
WHEREAS, whatever election the municipality makes, such election shall take effect on
October 1, 2001.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY OF ATLANTIC
BEACH, FLORIDA.AS FOLLOWS:
SECTION 1. Intent.
It is the intent of the City of Atlantic Beach, Florida to make an election under section
337.401(3)(c)1., Florida Statutes (2000); as amended by section 34, Enrolled CS/CS/SB 1878 by
the 2001 Florida Legislature, regazding the City of Atlantic Beach, Florida's decision on whether
to require and collect permit fees from any providers of conmmunications services that use or
occupy municipal roads or rights-of--way for the provision of communications services.
SECTION 2. Election Not to Require and Collect Permit Fees.
The City of Atlantic Beach, Florida elects not to require and collect permits fees from any
provider of communications services that uses or occupies municipal roads or rights-of-way for
the provision of communications services. As provided in section 337.401(3)(c)1., Florida
Statutes (2000), this election shall take effect October 1, 2001.
SECTION 3. Election to Increase Local Communications Services Tax.
Pursuant to section 337.401(3)(c)l.b., Florida Statutes (2000), as amended by section 34,
Enrolled CSICS/SB 1878 by the 2001 Florida Legislature, the City of Atlantic Beach, Florida
elects to increase its total rate for the local communications services tax as computed under
section 202.20(1) and (2), Florida Statutes (2000), as amended, by an amount of 0.12%, and this
election shall take effect October 1, 2001.
SECTION 4. Notice to the Department of Revenue.
AGENDA ITEM #6A
JiJI,Y 09, 2001
The City of Atlantic Beacb, Florida directs that notice of the above elections be provided
to the Departrnent of Revenue by certified mail by July 16, 2001, as provided in section 34,
Enrolled CS/CS/SB 1878 by the 2001 Florida Legislature.
SECTION 5. Severability.
The provisions of this Resolution are declared to be severable and if any section,
sentence, clause or phrase of this Resolution shall, for any reason, be held to be invalid or
unconstitutional, such decision shall not affect the validity of the remaining sections, sentences,
clauses, and phrases of this Resolution but shall remain in effect, it being the legislative intent
that this Resolution shall stand notwithstanding the invalidity of any part.
SECTION 6. Effective Date.
The effective date of this Resolution/Ordinance shall be immediately upon its passage by
the City of Atlantic Beach, Florida.
Attest:
MAUREEN KING
City Clerk
JOHN S. MESERVE
Mayor, Presiding Officer
Approved as to form and correctness:
ALAN C. JENSEN, ESQUIItE
City Attorney