Discussion of Crime Control Prevention District Telecommunications Services Sales Tax & Legislative Changes Related to Local Sales & Use Tax on Residential Use of Gas & Electricity Presented to: City Council Presented By: Fort Worth Police Department Law Department February 9, 2010

Residential Use of Gas & Electricity Legal Section 2 of SB 575 [codified at Texas Tax Code ], effective January 1, 2010 allows Crime Control and Prevention Districts to collect sales tax on residential use of natural gas and electricity.

Telecommunications Legal Summary Section of the Texas Tax Code, in effect at the time the CCPD was created, allows CCPD to collect sales tax on telecommunications.

Summary Local Sales Tax Revenue City of Fort Worth Fort Worth Transportation Authority Fort Worth Crime Control District Sales TaxYes (1%)Yes (0.5%) Telecommunication TaxYes (1%)Yes (0.5%)No Residential Use of Gas & Electricity TaxYes(1%)No Note: A total of 64 Special Purpose Districts in Texas currently collect the Telecommunication Tax.

Legal Summary Note: If a resolution is received by the Comptrollers office by March 31, 2010 then the tax can be imposed as of July 1, 2010 Process to implement either the residential use of natural gas and electricity or the telecommunications taxes the CCPD Board must: 1. hold a public hearing; and 2. pass a Board Resolution adopting the tax. *Council action is not required.

Revenue: FY 2010 Projection - $1,800,000 (Full Year)* FY 2010 Projection- $ 500,000 (July – Sept)* * Reported information includes business usage figure above is an estimate of residential use. Residential Use of Gas & Electricity Example A residential electricity or gas subscriber in Fort Worth who pays $60.00 per month. Current City of Fort Worth tax:$0.60 Potential CCPD tax:$0.30 An annual increase of $3.60 to the consumer

Telecommunications Sales Tax Revenue: FY 2010 Projection - $2,504,315 (Full Year) FY 2010 Projection- $ 644,682 (July – Sept) Services subject to tax: Basic local exchange service Installation & service connection fees Intrastate long-distance telephone calls Call waiting/forwarding Paging Mobile telephone service Fax service Mobile radio Service Rented equipment in connection to telecommunications service

Telecommunications Sales Tax Telecommunications services are subject to State sales tax, local sales tax is optional. Local Sales tax is limited to telecommunication services occurring between locations in Texas. Tax is based on where call originates, except mobile services tax is determined by customers place of primary use (home/business). Example A mobile subscriber in Fort Worth who pays $60.00 per month for unlimited calls. Current City of Fort Worth tax:$0.60 Potential CCPD tax:$0.30 An annual increase of $3.60 to the consumer

Telecommunications Sales Tax Tax $5.46 CCPD Tax $0.30 Phone Bill $65.71 Customer’s Name

Overview key areas Sales tax Proposed Revenue $45,632,857 Adopted Revenue CCPD Sales Tax Revenue $3.4 Million Deficit* *Based on Oct & Nov collections

CCPD Sales Tax Revenue This is an additional tax that will not impact the General Fund General Fund Difference to CCPD allocated tax on Telecommunication and Residential/Business Use of Gas and Electricity: $4,717, $5,606, $5,224, $4,298,517* Projection for full year ($1,106,560 for July – Sept)

Recommendation Delay action to consider within the broader context of the City’s overall budget in conjunction with other potential tax increases.