Exhibit JL-7
$174,460,000. The method utilized by SWB in computing ad valorem
taxes is reasonable and should be adopted herein. The staff computation of Social Security taxes is reasonable and should be adopted herein.
I-]
27.
Federal Income Taxes. The Commission finds that SWB has test year
expenses of $184,311,000 for Federal income taxes. The Commission
finds that the staff method of calculating Federal income taxes, as
shown in Staff Exhibit 9-C (Jansen), is reasonable and should be
adopted herein.
The staff amount of such taxes is adjusted upward to
reflect a higher revenue requirement.
28.
29.
11
30.
11
Return.
The Commission finds that a reasonable return for SWB in the
test year is $335,253,000. The return figure is calculated by applying
the rate of return on adjusted value of invested capital (8.38063) to the
adjusted value of invested capital of SWB ($4,000,334,000) which
produces a figure of $335,253,000.
From this amount $1,879,000 is
deducted to eliminate the income effect of Tier A contributions in
excess of the recommended return. This results in an allowable return
of $333,374,000.
Revenue Deficiency.
The Commission finds the test year cost of
service or revenue requirement of $1,881,713,000 will permit SWB to
recover its operating expenses together with a reasonable return on its
invested capital.
This amount includes the effect of settlements
of $8,247,000 between SWB and the interconnected independent telephone companies herein.
Test year revenues for SWB are
$1,757,174,000, and the revenue deficiency of SWB for the test period is
$124,539,000.
Rate Structure. In general the rate structures proposed by SWB are
based on sound ratemaking principles and are compatible with the rate
design philosophy adopted by the Commission in earlier cases, and such
rate structures are sufficient, equitable, consistent in application to
each class of customers, are not unreasonable, preferential, prejudicial,
or discriminatory, and will produce the proportionate part of the
required revenues to eliminate SWB's revenue deficit.
The value of
service concept in the telephone industry is a historical concept widely
accepted as a proper pattern for rate design and should not be discarded
by the Commission without concrete cost data to support such change
at this time. The value of service concept contemplates that universal
telephone service is desirable and that the basic local residential and
business rates should be kept at a minimum level consistent with the
concept that the company earn a fair rate of return on its invested
capital; therefore, the Commission adopts the residual ratemaking
principles proposed by the company except as changed herein.
a.
After due consideration of the cost studies submitted by the
company, the evidence and testimony of the staff and each of the
intervenors, and the impact of rate changes In each class of
customers, the Commission finds that the following revenue
allocation is reasonable and
equitable and will produce
$124,539,000 in additional revenues to SWB:
Service
Revenue increase
11
Long Distance
WATS
Coin
Directory Assistance
Service Connection, Moves, and Changes
Key Telephone
Miscellaneous Equipment
Private Branch Exchange
Centrex
Private Line
Touch Tone
Other
Local Gross Receipts
Local Exchange
TOTAL
5
-0-0-0-025,232,000
17,930,000
13,524,000
6,600,000
6,488,000
19,078,000
(647,000)
4,598,000
31,736,000
-0124,539,000
-8-
D40235 NC RFP 5-5-490
150
-94
Exhibit JL-7
b.
As proposed by the staff and the company, there shall be no
change in existing rates for Long Distance,
1VATS, Twenty-Cent
Coin, and Directory Assistance.
c.
Service Connection, Moves, and Changes are adopted as proposed
by SWB. Additionally, as proposed by the staff, the company shall
consult
with the staff for the purpose of considering the
possibility of restructuring the application of existing advance
wiring charges in a future proceeding.
d.
Key Telephone and Miscellaneous Equipment rates are adopted as
proposed by the company with the following exception:
Those
items of service now priced at the extension rate shall retain the
current rate of $1.50.
e.
^
As proposed by the company, $2,381,000 in additional revenue
shall be recovered from PBX services for which there was cost
support.
Those items of service now priced at the extension rate
shall retain the current rate of $1.50.
The company's proposed
rates for PBX services for which the company proposed an acrossthe-board percentage increase shall be adjusted downward in order
to recover the remaining PBX revenue deficiency.
f.
Centrex
non-recurring charges and optional service feature rates
ar
e adopted as proposed by the company. No change in existing
Centrex exchange access rates
Centrex eve
revenue deficiency shall 1 be approved.
from r Centrex
intercom rates.
g•
The private line tariff proposed by the company shall be adopted
with the following exceptions:
(1)
(2)
19
(3)
(4)
^
The charge for a local channel between the serving office
and the customer facility shall not be flat-rated as proposed
in the tariff but instead shall be distance-sensitive.
The
rate shall be applied In quarter mile increments and the
specific charge per increment should be determined by SWB
with the approval of the Commission. These rates should
generate an amount of revenue equal to that generated by
the flat rates proposed by the company.
SWB shall not be allowed to consider fractional miles as full
miles in determining the distance between any two serving
offices.
The company shall revise the proposed tariff to
allow for the rounding of mileage calculations to the next
highest quarter mile.
It is in the public interest that prior to realigning the
boundaries of serving offices, SWB shall notify the Commission at least sixty (60) days in advance of such realignment.
The Commission staff shall have the option of requesting a
public hearing on such realignments, at which the Commission
may approve or disapprove such. If no objection is
indicated by the staff within twenty (20) days
after the
proposed realignment is reported, no hearing or Commission
order shall be deemed necessary.
The company's proposed tariff states that Type 102 service
"may be implemented by either metallic channels or by
other means at the telephone company's option."
While
realizing the economic necessity for SWB to add or convert
to carrier facilities, the Commission also recognizes the
customers' need for an adequate planning horizon. SWB shall
make
at the
th availability, of
facilities andl shall nnotify t customers fogr
such services
at least one year in advance of those facilities
not being available.
-9-
D40235 NC RFP 5-5-4911
151
Exhibit JL-7
(5)
Because of the fact that there may be insufficient data
presently available to make the above changes, the company
shall not implement increases in private line tariffs as
authorized herein until such time as adequate information is
developed and furnished to the Commission and such tariff is
approved by the Commission.
(6)
The private line rates which have been determined by Long
Run Incremental Analysis shall be tracked by the company
by use of methods developed by the company in consultation
with the Commission staff. The results of such tracking
shall be reported to the Commission on a quarterly basis.
^
h.
Touch-tone rates as restructured by the company to conform with
requirements of the FCC Registration Program are adopted.
I.
Rates for services included in the Other Category of Service are
adopted as proposed by the company with the following exceptions:
j.
k.
(1)
Those items of service now priced at the extension rate shall
retain the current rate of $1.50.
(2)
Telephone Answering Service rate increases shall be limited
to 115 percent of the existing rate.
The proposal of SWB to pass through local gross receipts taxes is
reasonable and should be adopted. These taxes shall be broken out
and shown on each customer's bill as a separate item, in such a
manner that the customers of each municipality shall pay their
portion of such a levy by their particular municipality.
The
Commission finds that rural ratepayers should not be required to
pay such levies because no benefits are derived to them
therefrom.
There shall be no changes in existing Local Exchange Service rates
except as stated below.
(1)
Although the staff's proposal to reduce extension rates to
the cost of the instrument alone and to recover the material
cost of inside wiring through the non-recurring wiring
installation charge has merit, it should not be adopted at
this time because of its impact on basic local service rate
levels.
(2)
The existing extension rate of $1.50 shall be unbundled into
an on-going inside wiring charge of $.50 and instrument
charge of $1.00. Local flat rates shall be unbundled into an
access
charge, such charge bein determined by rate
band, and an instrument charge of j1.00. Any customer
providing a customer-owned instrument shall not pay the
$1.00 instrument charge for that instrument.
(3)
A relatively higher rate for multiline hunting service is
justified on both a cost and a value of service basis. At this
time a charge limited to 105 percent of the existing oneparty business flat rate is adopted to take into account the
customer impact of the rate increase. It is anticipated the
additional revenue generated by multiline hunting will offset
any revenue decrease anticipated from instituting a oneparty residential measured service rate.
^
31.
31
Residential Measured Rate Service. Telephone service having become accepted as a necessity of life and livelihood, it is the position of
_10-
D40235 NC RFP 5-5-492'
152
Exhibit JL-7
the Commission that phone service should be made as broadly available
as possible and yet still reflect true costs, and the alternative pricing
system proposed by ACORN Witness ileo (ACORN Exhibit No. 2)
provides a logical basis for such an alternative.
Hence, it is
within the public interest that within six months of final approval of
this order SWB implement as an alternative service to residential
customers a form of measured, low initial cost service to be called
Residential Measured Rate Service and to be subject to the following
guidelines:
a.
Offered to,residential customers only.
b.
Each customer to have the option of the standard flat rate as
outlined in this order or the Residential Measured Rate Service,
but not both.
c.
Offered in the exchanges outlined below where measured business service is presently available and in three other exchanges
where it is not. The 15 exchanges where it is to be offered will
give the Commission a demographic and engineering basis on
which to make a determination at a later date whether the service
should be made available on a broader basis. Those exchanges
include:
46
(1)
ESS Wire Centers With Measured Business Service
Austin Metro Exchange
Amarillo
Corpus Christi Metro
Dallas Metro
Fort Worth Metro
Galveston
Harlingen
Houston Metro
Lubbock
San Antonio
San Benito
Wichita Falls
(2)
ESS Wire Centers Without Measured Business Service
Beaumont
Tyler
Midland
®
d.
Customers electing to switch to the Residential Measured Rate
Service will pay the standard service ordering charge and central
office charge, if applicable. The rate for Residential Measured
Rate Service shall be equal to the two-party flat rate provided for in this order.
That rate is between sixty percent
(60%) and seventy percent (70%) of the single party flat rate
in each exchange. An allowance of 25 free calls shall be basic,
and allowed for with no extra charge, with each call above the
minimum to be billed at eight cents (8fi) per call. This structure
will produce the following rates by rate group.
Rate Group
^
Rate
1
2
3
4
5
6
7
8
9
10
$3.30
3.40
3.55
3.70
3.85
3.95
4.20
4.45
4.75
5.00
-11-
D40235 NC RFP 5-5-4931
153
Exhibit JL-7
e.
Six months after Residential Measured Rate Service has been
implemented, the company will conduct a generic demographic
study to be designed jointly by the company and the staff of the
Commission to determine whether the utilization warrants the
expensive process of equipping all SWB exchanges for such service
and to determine whether the plan outlined should be modified.
Any intervenor in this docket, subject to a written request to SWB
and the Commission, shall be permitted to examine and make
recommendations and suggestions relative to such study and
recommendations for modifications, if any.
,
f.
The company shall notify eligible residential customers of the
availability of one-party residential measured service and the
conditions under which it is offered through a bill insert to be
mailed to all eligible customers with the first billing cycle after
the service becomes available. Three months later another such
bill insert shall be mailed.
g.
Under Substantive Rule 052.02.04.042(a)(2) the company is not
obligated to inform a prospective customer of the lowest price
service available unless the customer requests it. However, the
company, in the interest of enhancing a full, objective measured
service trial, shall, for a period of six months from the date the
service is available, advise all customers to whom residential measured service is available of its existence when such
customers request new service or move to a new address.
Conclusions of Law
1.
The Commission has jurisdiction over the subject matter in this
proceeding pursuant to art. 1446c, V.A.C.S.
2.
All of the intervenors have a justiciable interest in this proceeding in
that each intervenor represents a different class of customer and is
concerned as to the issues of unreasonable discrimination, if any, of
rates as between classes of customers.
3.
SWB has the burden of proof to establish its revenue deficiency under
Its present rates and the amount of such revenue deficiency which will
be collected under its proposed rates pursuant to art. 1446c, V.A.C.S.
4.
SWB has proven that it has a revenue deficiency of $124,539,000 in the
test year presented.
5.
The rates prescribed in this order will allow SWB to recover its
operating expenses along with a reasonable return on its invested
capital pursuant to the requirements of art. 1446c, Section 39, V.A.C.S.,
but will not yield more than a fair return upon the adjusted value of the
invested capital used and useful in rendering service to the public as set
forth in art. 1446c, Sections 40 and 41, V.A.C.S.
6.
The invested capital of SWB is the actual money cost or the actual
money value of any consideration paid other than money for the
property at the time it shall have been dedicated to public use, less
depreciation.
7.
The rate of return granted herein is sufficient to assure confidence in
the financial soundness of SWB and is adequate, under efficient and
economical management, to maintain and support its credit and enable
it to raise the money necessary for the proper discharge of its public
duties; is comparable to those returns of other similar companies having
comparable risk; and is sufficient to assure confidence in the financial
integrity of SWB so as to maintain its credit and to attract capital
(Federal Power Commission v. Hope Natural Gas Company, 320 U. S.
591, 88
L. Ed. 333; and Bluefield Water Works and Improvement
Company v. Public Commission of West Vir^inta, 362 U. S. 679, 67 L.
Ed. 1176).
10
-12-
D40235 NC RFP 5-5-494
154
Exhibit JL-7
.
^•
,.
8.
The Commission has the authority and duty to set proper rates in all
instances whether such action requires increasing, decreasing, or
changing the rate pattern with respect to any or all rates contained in
the tariff of SWB, regardless of whether the rates in the proposed tariff
are different from the old rates or not, and no prior notice by the
Commission to the applicant is required for such action; however,
notice was given in the General Counsel's answer filed with the
Commission on March 16, 1978, and was given orally to SWB in the prehearing conference of March 27, 1978, which notice was acknowledged
by SWB.
9.
The rate design as set out in the Findings of Fact herein is reasonable
and is not unreasonably discriminatory, prejudicial, or preferential and
shall be adopted by this Order.
10.
In rate bands approved for basic local residential and business services,
SWB shall not change the rates charged in any rate band because of
growth in population of a given area or city without prior Commission
approval.
11.
Construction work in progress can only be approved for inclusion in the
rate base when there is a positive showing that such inclusion is
necessary for the financial integrity of the company.
Order
It is, therefore, ORDERED that SWB shall file a revised tariff in accordance
with the Conclusion, Findings of Facts, and Conclusions of Law herein sufficient to
generate revenues not greater than those prescribed in this Order. Such tariff shall
be filed in two copies with the Commission Filing Clerk within fifteen (15) days
from the date this Order is signed and rendered, and SWB shall file a copy thereof
with each group of intervening parties herein. Party intervenors must notify the
Commission staff in writing, with a copy to SWB, of any disagreements with the
revised tariff within seven (7) days after receipt thereof. The Commission staff
shall have twenty (20) days from the date of such filing of the revised tariff to
review it for approval or rejection. The tariff shall be deemed to be approved and
shall become effective upon the expiration of twenty (20) days after filing or
sooner upon notification by the Commission Secretary. In the event of rejection,
SWB shall be notified and a copy sent to all groups of the intervening parties herein
by the Commission Secretary, and SWB shall have fifteen (15) additional days to file
an amended tariff, and the same procedure shall be repeated as provided herein.
The revised and approved rates shall be charged by SWB for telephone service used
after the tariff approval date. This Order is deemed to be final on the date of
rendition. Approval of the tariff, for all purposes, shall be deemed to be final on
the date of its effectiveness,-either by operation of this Order or by notification by
the Commission Secretary, whichever occurs first.
It is further ORDERED that SWB shall continue to provide in telephone
directories all customer information previously set out in Docket No. 78. SWB need
not continue filing its quarterly Directory Assistance Report in accordance with
the Final Order in Docket No. 78; however, SWB should file quarterly reports to the
Commission staff concerning percent customers being billed, average bill, and
information on how the Directory Assistance Plan set forth in Docket No. 78, and
not changed herein, is impacting the average customer.
All motions, requests, applications, and requests for Findings of Fact and
Conclusions of Law not expressly granted herein are denied for want of merit.
11
-13-
D40235 NC RFP 5-5-4951
155
^., .
^," . - ► : .
_
Exhibit JL-7
..
1978..
AND SIGNED AT AUSTIN, TEXAS, on this the -'S
day of August,
is
PUBLIC UTILITY COMMISS
N OF TEXAS
A41
SIGNED:
f 7/1
G EORGE M. COWDEN
SIGNED:
ARRETT ORRIS
SIGNED:
'--^ALA R.
WIN
ATTEST:
P H I L I P F. RICr
SECRETARY O THE COMMISSION
^l
^
-14-
D40235 NC RFP 5-5-4^
156
EXHIBIT JL - 8
157
EXHIBIT JL-7
L.._._j.__.
No supplement to this tariff will
be issued except for the purpose
of canceling this tariff.
General Exchange Tariff
Rules and Regulations Applying to All Customers' Contracts
Section 26
Original Shoot 10.
RULES AND REGULATIONS APPLYING TO ALL CUSTOMERS' CONTRACTS
XL SPECIAL CHARGES, FEES AND TAXES
(N)
There shall be added to the customer's bill for service, an additional charge equal to the pro rata share
of any occupation, franchise, business, license, excise, privilege or other similar charge or tax, now
or hereafter imposed upon the grow receipts or revenue of the Telephone Company by any municipal
taxing body or municipal authority whether by statute, ordinance, law or otherwise, and whether
presently due or to hereafter become due.
The charge applicable to each customer will appear separately on the customer's regular monthly bill
and shall be determined on a basis equal to the tax levied by each municipal taxing body or municipal
authority. The amount of charge to the customer shall be computed by dividing the tax expressed
as a percentage by 100% minus the tax expressed as a percentage and multiplying the decimal thus
obtained by the customer's service charges to which such tax applies as reflected by the following
formulat
Tax %
- Tax
x
Service Charges Subject to Tax = Amount of Charge to Customer
The amount of charge to the customer will be rounded to the nearest cent.
(N)
PUBLIC UTILITY COMMISSION OF TEXAS
APPROVED
AUG 14 '78 DOCKET 1704
FILL__ . ...... ...... BY ..................
TARIFF CLERK
"L_,T OD
(N ) Indicates a New Rate or R egulation
Issued:
August 4 , 18
T
,
8ffecti vez
A ugust
,
By DOYLE Ii ROGERS, Vice President-Texas
Southwestern Bell Telephone Company
Dallas, Texas
158
EXHIBIT JL - 9
159
Exhibit JL-9
JoINT PPDPOBAL
lSAm By
So[fl^1E51^1 9ELL TELEFBM ComANY
AND
ME TFlMS MtAVICIPAi. LEACUE
RE^M
MUNICIPAL FEE CIiDINi4NCE
DISQISSIQNS
7-25-90
)MXMMU
D40235 C Generl8&5016
Exhibit JL-9
nIDSg
TAB 1 ............................................... BACKCRORA^ID
I
TAB 2 ......................... .......... ....... ...... PURPOSE
TAB 3 ............................................... PRESENT METHOD
OF OPERATION
TAB 4 . ..............................................
PROPOSED METHOD
OF OPERATION
TAB A ...................................... iJr]IFM APPLICA1I014
TAB B . ..................................... RATE RATIO
APPLICATION
TAB 5 . ..............................................
CLASS OF SERVILE
VARIANCE
TAB 6 .. .............................................
FIRST PAM9W PARAMETERS
TAB 7 . ..............................................
FEDERAL RESERVE INDEX
TAB 8 ...............................................
IMPLEMENTATION PROCESS
TAB 9 ..............................................
QUESTIONS AM 14NS4ER.S
TAB 10 .............................................. PROPOSED ORDINANCE
X"fIimlt7d
D40235 C Gene1al 905017
Exhibit JL-9
MUNICIPAL FEE APPLICATION IN TMS
A HISTMICAL OVERVlFIq
WOM:^^)^.i4V •^I
Southwestern Bell Telephone is extremely proud of its relationship with our Texas communities. Indeed, through the years, the company
has placed great value in the cooperative and productive partnerships
forged with the cities in countless areas, ranging from economic
development to service innovation to local education enhancement.
Given this tradition of collaboration, it is particularly
disheartening to witness the increasingly contentious environment
which recently has developed surrounding another issue of mutual
importance to the cities and the company-the application
of municipal
fee payments.
The following background provides an overview of the events leading up
to today's controversy over municipal fee arrangements. It addresses
the dramatic changes in the telecamnnications industry which have
precipitated not only considerable confusion, but also costly legal
and audit disputes. In sum, it offers the historical insights needed
to determine whether a new, alternative approach to municipal fee
calculation and application is in the best long-term interests of the
cities, the company and its customers.
With the advent of the telephone business during the late 1800s,
cities began passing ordinances to regulate telephone companies.
Because
these companies were placing facilities in and along public streets,
alleys and rights-of-way, many cities assessed fees and required free
telephone service and reimbursement of city expenses in connection with
their oversight of work performed by the utility in and along the streets
within city limits.
Over the years, fee payments to the cities were
modified and these fees were eventually increased, generally consisting
of a percentage of revenues from certain local services whose rates were
regulated by local city governments.
The expense to the telephone companies for these fee payments to
cities was originally included in the cost of providing services
regulated by the cities; and city councils allowed this expense for
sXKiridOM
D40235 C General 005018
162
Exhibit JL-9
2
rate-making purposes.
Because cities had differing revenue needs and the
amount of work performed in rights-of-way varied, fees (and services)
assessed also varied statewide. Consequently, at the time the Public
Utility Commission of Texas was established by the Texas Legislature in
1975, local service rates varied considerably among the cities in Texas.
The Commission decided to simplify the local rate structure and grouped
cities into rate groups based upon the number of customer lines operating
locally.
During the transition from municipal regulation to statewide
regulation, Southwestern Bell Telephone Company recovered its costs for
these municipal fees in the statewide rates set by the PUC. In 1978, the
Commission found that these municipal fees should be paid by the
individual customers located within the municipality imposing the fee.
A
tariff was adopted that provided for a "pass through" of any municipal
fee to customers within that city's limits. As a result, these municipal
fees are much like the city sales tax: both are collected from telephone
customers by Southwestern Bell Telephone Company then remitted to the
appropriate city.
The sales tax and these municipal fees are reflected
separately on customers, bills; the amount of any city municipal fee is
reflected as a "special municipal charge".
Currently, 535 Texas cities collect municipal fee payments from
Southwestern Bell Telephone Company and its customers. The total fee
payment to these cities in Texas amounted to $54,624,292 for the year
1989, or an average of $8.31 per customer line.
Most cities in Texas assess a 2 percent (2%) fee on a base of
services referred to as "local exchange telephone transmission service."
However, the rate is generally higher in metropolitan areas, ranging from
3% to 5 1/2%. The services to which the percentage applies vary and have
XX163fdHtW
D40235 C General 005019
163
Exhibit JL-9
3
historically been negotiated between Southwestern Bell Telephone Company
and the individual city. The rates and services covered are embodied in
ordinances, many of which became effective as long as 10, 15 or 20 years
ago.
Because Texas cities regulated the rates for local services
within their jurisdictions prior to the establishment of the Public
Utility Commission of Texas in 1975, these fee bases primarily consisted
of the local access line and certain related local services. Over time,
many of the larger cities expanded the fee base to include other service
revenues, such as directory assistance.
No Texas municipal fee
assessments have ever included long distance services. Hence, no amount
has ever been recovered from Texas customers or paid by Southwestern Bell
Telephone Company on revenues from long distance services.
Of course, since most of these ordinances were enacted, there
have been dramatic changes in the telephone industry.
After the
court-ordered divestiture and regulatory changes imposed on the telephone
industry by the FCC, confusion has arisen as to the impact of these
changes on municipal fees.
Many cities have recognized that it is unfair
to require Southwestern Bell Telephone Company to collect municipal fees
from its customers on services which face competition when the company's
competitors are not required to collect such fees on similar services.
In addition to municipal fees on the local access line and
certain related local services, Southwestern Bell Telephone Company ► s
customers in many municipalities now also pay a local sales tax on the
same services.
Recognizing the changing nature of the telecommunications
industry, in the mid-80's the Legislature enacted new laws that gave
cities the opportunity to impose a new local sales tax on
J(70xOU"M
D40235 C General 005020
164
Exhibit JL-9
4
telecommunications services.
Most cities have exercised this option.
It's estimated that Texas cities received more than $15.7 million from
local sales tax on telecommunications products and services during 1989
from Southwestern Bell Telephone Company customers alone.
At the present
time, Southwestern Bell Telephone Company's customers have from 11 to 17
percent added to their telephone bills for taxes and municipal fees.
Municipal fees for reimbursement to cities of their oversight of
telephone company work within their boundaries are treated in a myriad of
ways in other states. The following provides a brief overview of
activities in other states and sets the stage for a new look at municipal
fee payments in Texas.
Ul(tom"
D40235 C General 005021
165
Exhibit JL-9
SUMMARY OF MNICIPAL FEE
APPLICATION IN OTE12R STATES
Southwestern Bell Telephone and the Texas Municipal League
have for some time discussed the need to explore potential
alternatives to the company's current municipal fee arrangements with
Texas cities. With this mutual goal in mind, the company in late-1989
embarked upon a research effort to identify the various methods of
municipal fee application being used in other states. The research
was conducted by Dr. Robert L. Bland, associate professor of political
science at the University of North Texas, who is a recognized expert
on municipal financing matters and the author of the Texas Municipal
League's Financin g City Government in Texas: A Revenue Handbook for
Officia s. Dr. B an 's researc wor k was supplemented
addi t ional information obtained by SWBT's Headquarters staff in St.
additiona
Louis. If any one conclusion can be drawn from the research, it would
be that there are many sheer diverse methods being employed
nationwide. Indeed, as the following highlights suggest, these
approaches run the gamut from a city excise tax in California to
Ohio's pre-emption of municipal fee applications by a state gross
receipts tax.
- Kansas - The fee can be based on four different methods
1) percent o
oca revenues 2) flat rate 3) amount per access line
and 4) class of service based on local exchange revenues. The fees
range from 3-5% of total revenues.
The charges are passed on to the customer and appear as a
separate line item on the bill.
- Missouri - Municipal fees are paid on a flat fee or
percentage of revenues. The amount varies from city to city. There
is no maximum which can be levied. The highest rate currently paid is
10%.
The fee is passed on to the customer and appears as a
separate line item on the bill. it is also included as part of the
rate base.
- Oklahoma - The company pays 2% of the local service
revenues generat
ed within the city limits.
The company passes the cost of municipal payments on to
its customers as an allowable expense in the rate base.
- Michigan and Ohio do not pay municipal fees. These fees
have been pre-empte d
the state.
The operating company pays a gross receipts tax to the
state of Ohio as well as property tax. Michigan levies a single
business tax and a property tax.
7Q6)(IitltlA2t7d
D40235 C General 005022
166
Exhibit JL-9
2
- Telephone companies in Illinois pay municipal fees on a
city-by-city basis. In Chicago, the fees are based on revenues within
the city limits. In some other cities, the fee is based on access
lines within the city.
^- in California, there are no municipal fees. The
California State Constitution exempts telephone companies and
railroads, as interstate businesses, from such payments. This section
of the California Constitution has been challenged twice and upheld
both times.
However, California cities levy an excise tax on
telephone services. Rates are locally determined and range from 5-12%
with most at the 5% level. The tax is itemized as a separate charge
on customers' invoices and is administered locally.
- In Colorado, there is a municipal fee that applies to
local exchange service only at the rate of $1.12 per account per
month. This fee is passed on to the customer as a municipal charge.
- In Arizona, cities do not levy municipal fees as a
regulatory function, but do levy taxes such as occupation and license
taxes. These occupation and license taxes are passed directly on to
the end user as local "sales" taxes. These taxes are based on
percentages of intrastate revenues.
- In Oregon , municipal fees are generally applied to local
exchange service and range from 3-7%. Beginning July 1, 1990 all fees
will be passed directly to the customers.
- In Washington, most cities impose business or occupation
fees, which are passed entirely to the customer as a separate line
item on the customer's bill. The fees are based on a percentage of
local revenues.
BYMXMOiei
D40235 C General 005023
167
Exhibit JL-9
PURPOSE
As mentioned earlier, cities and the Company have enjoyed an
overall excellent relationship built on a variety of partnerships. The
major obstacle to enhancing that relationship has centered on opposing
contentions concerning municipal fees.
-•
Therefore, to minimize these contentious issues, we recommend
implementation of a new method that:
o Recognizes some cities, need for increased revenues to
compensate for their oversight of Company activity within city
limits.
o Provides a means for cities to share in the economic vitality of
their community via a growth additive.
o Provides for more accurate year-over-year revenue forecasts by
cities.
o minimizes administrative and audit expenses for both Company and
cities.
o Recognizes the changing environment and the highly competitive
nature of the telecommunications industry.
o Assesses customers a fair and understandable pass-through
charge for services rendered.
UMEiqU
D40235 C General 005024
168
Exhibit JL-9
PRESENT CITY PAYMENT METHOD
The following information outlines the steps and considerations used in
current-day negotiations of municipal ordinances.
The column on the left is the
description of the process, and the right column demonstrates the impact of the
process on two ficticious, but reprsentative cities.
PROCESS
CIT? MODEL - TEAR 1989
(examples _00 YTI. REVENUE BASE
1. REVENUE BASE
A. Determine "local exchange telephone
transmission services" for inclusion in
revenue. Negotiations generally include
such items as:
CIT7[ A
CITY B
Number of access lines:
31,000
700,000
A. Revenue Base Includes:
- List of exchange access arrangements
- Auxillary services, such as special
line features like custom calling, etc.
- Installation charges
- Coin revenues
- Directory assistance charges
- Private line services
- Other competitive servies
- Res, Bus,
Semi- public
recurring
Same as City
A, but also
includes:
- Directory
listings
- Directory
assistance
- Local private
line
- Installation
charges
- Coin revenues
- Non-recurring
charges
B. Historically, revenues associated
with certain services have never been
included in municipal payments.
However, disputes have arisen over
the inclusion of revenues such as:
- Access charges and other long
distance revenues
- End User Common Line Charges
- Revenues earned by separate entities
C. Determine the pass through amount:
1. To arrive at a "ballpark" range
of revenue for the city, negotiations
occur over the list of services to
be included, as well as the
percentage to apply to those revenues.
C. Customer pass through
based on the services noted
above, plus these percents:
2X
4Z
- Residence municipal charge:
Residence line, no features:
$ .18
$ .42
2. Based on the customer's
selection of services and order
activity, the "special municipal
charge" on his bill may vary each
month, causing customer confusion.
Residence line, Touch-Tone,
all custom calling, and Non-Pub
$ .37
$ .79
Plus municipal fee on
installation charges:
None
$2.60
sxaxarxOaxat
D40235 C General 005025
169
Exhibit JL-9
- Business municipal charge:
Business line, Touch-Tone:
$ .47
$1.09
Business line, Touch-Tone
all custom calling, extra
listing:
$ .77
$1.51
Plus municipal charge on
installation charges:
None
$4.00
II. MUNICIPAL PAYMENT
A. There is no guaranteed amount,
and the amount varies from year
to year, depending on:
II. MUNICIPAL PAYMENT
The amount is
not specified.
Using the above examples,
revenues to the city should
approximates
- grovth/loss of access lines
- services selected by customers
$205,000
$9,500,000
B. Less than expected payment amounts
generate cities' interest in verification
of the process. This verification is time
consuming and costly to both city and
company and their citizens and customers.
Verification includes steps to:
- determine if all customers within
city's limits have been properly
assessed
- determine if all revenues from
appropriate sources are included
in revenue computations.
"K2t*XyA
D40235 C General 005026
170
Exhibit JL-9
PROPOSED MEMM OF OPERATION
The proposed method of establishing agreements for municipal fees
for the City's oversight of telephone company work within the City's
boundaries removes from the negotiation process those issues which have
caused recent contention between cities and the telephone company, The new
method is a simple, straight forward process that includes three major
components:
1.
Negotiation of a specified sum of money to remit to
the City.
2.
Increasing the annual city payment by a growth
factor for those years when positive growth is
experienced.
3.
Revision in the method of calculating the customer's
pass-through of municipal charges.
SPECIFIED SIAY! WE THE CITY:
The Company and the City would negotiate'a specific sum of money
for the City's first annual payment under the agreement. This first annual
payment becomes
"minimum"
reementthe City for any
annual payments d^ durin^the thit of thee apaid
agreement.
No longer will the City and the Company need to negotiate the
services to be included as "local exchange telephone transmission service",
nor will they negotiate the percentage to apply to revenues generated by
these services.
The first year's payment will be the minimum annual amount
established through the negotiation process. Subsequent years' payments
will be increased by a "growth factor" calculated using data from a
recognized, established economic index produced by a credible third party.
The calculation process will determine the percent improvement for
the twelve month average index compared to the preceding year's twelve
month average index. If this is a positive percent improvement, the next
year's annual payment to the City will be determined by increasing the
previous year's annual payment by the same percent.
If the growth factor is unchanged from the previous year, or if it
should be a negative figure, there will be no reduction in the City's
annual payment. In these cases, the next year's payment will equal the
previous year's annual payment to the City.
MYtlAlOltaO
D40235 C General 005027
171
Exhibit JL-9
2
The economic source used for growth calculations will be the same
for each City. Also, the growth percentage will be based on the growth
experienced by the state.
The calculation of the growth factor and its application are
explained on pages 5-7`of the sample ordinance in Tab 10. (The sample
ordinance uses the Texas Industrial Production index (produced by the Texas
Federal Reserve) as the source data for the growth factor. The use of this
index is illustrative only.]
Ct35'1COR PASS-TFIIKOfXZs
The current method of multiplying revenues generated from certain
telecommunications service by a percentage becomes obsolete under this
proposal. The Company reviewed two methods which could replace the current
procedure. Once determined, all pass-through calculations will be computed
the same for all cities.
In each method reviewed, the Company considered that customers
within the city limits billed any interstate end user coin line (EUCL) as
authorized by Federal Communications Commission would be billed monthly for
a share of the municipal charge due the City. This is discussed on pages
7-8 of the sample ordinance in Tab 10.
In one method (illustrated in Tab A), the municipal charges to be
passed-through (known as the "pass-through"), would be divided equally
among all customers within the City's boundaries. The Company would
determine the pass-through amount to apply to each customer's line, and
multiply that amount by the number of lines billed to each customer. The
pass-through will appear on a separate line of the customer's bill.
Residence customers will have the same pass-through per line as business
customers.
The other method (illustrated in Tab 8) would proportion the
municipal charge to customers in accordance with the difference that exists
between the different monthly rates charged for telephone service in the
various classes of service. A ratio would be developed by dividing the
total pass-through by the sum of the annual billing for the recurring
charges for the local exchange access rate element stated in the Company's
tariffs and to which a interstate EUCL charge is applied.
For each customer, this ratio would be multiplied by the sum of
all such charges billed to that customer. The result will produce the
municipal charge to be shown on that customer's bill. Details of this
procedure are discussed in Attachment A, pages 1-2 of the sample ordinance
in Tab 10. With this method, residence customers will have a lower
municipal charge than business customers. The example in Tab 5
demonstrates this difference.
$s^XNX
D40235 C Gene T^Q05028
Exhibit JL-9
DETFS KINIIM TM TOTAL PASS-1ffiiQM:
The Company will remit to the City the total money due for each
year's annual payment. However, this amount may, or may not, equal the
total municipal charges collected from customers during the year. The
Company will perform certain calculations to develop a pass-through amount
to customers that will result i`n-adequate collections to met the City's
annual payment.
The total customer pass-through will be calculated by adding
together the City's annual payment, and a sum representing the Telephone
Company's forecasted uncoliectibles for the current year, together with an
adjustment equal to the overcollection or undercollection of municipal
charges received from customers the preceding year. This is explained in
Attachment A, pages 2-5 of the sample ordinance in Tab 10.
=Kwdbvw
D40235 C General 005029
173
Exhibit JL-9
PROPOSED CITY PAYMWT METHOD
UNIFORM APPLICATION
ALTERNATIVE A
This example takes the first year's payment amount and computes examples of how
the ;company would determine„-the municipal charge to be billed for, each access
line. Each exchange access arrangement in the city limits that is billed an End
User Common Line (EUCL) charge will,be billed a municipal charge.
PROCESS
CITY MODEL
(examples only)
I. REVENUE BASE
V
I. REVENUE DUE CITY
Negotiate a guaranteed, set
amount due the city for the initial
year.
(NOTE: Payments for subsequent years of
the agreement would be computed by adding
a growth factor, if applicable, to the
previous year's payment. See explanation
behind Tab 4.)
II. AMOUNT OF "PASS THROUGH" TO CUSTOMERS
A. Add the company's uncollectible factor
to the city payment amount to obtain
the amount to be passed through to
customers.
B. Divide the annual city payment
amount by the total number of
access lines that reflect an "End
User Common Line Charge" and then
divide by 12 months to get the
amount of the "special municipal
charge" that would apply to each
such access line.
C. Customer's municipal charge
stays the same, until adjusted
the following year for the growth
factor (if any); over/under
collections; company uncollectible
factor; and/or change in the number
of access lines reflecting a EUCL
charge.
Xaax*J6oKao
CITY A
CITY B
Number of access lines, in
city limits, and billed EUCL:
31,000
700,000
Year 1:
Negotiated payment amount:
$200,000
$10,000,000
II. AMOUNT OF "PASS THROUGH"
TO CUSTOMERS
A. Add 2X uncollectible:
$204,000
$10,200,000
B. Using the above amount
and dividing by the
number of access lines:
31,000
700,000
Equals $6.58
per line,
divided by 12
months =
Equals $14.57
per line,
divided by 12
months -
$.55 per line,
per month
$1.22 per line,
per month
D40235 C General 005030
174
Exhibit JL-9
III. VERIFICATION - the only step
needed is to verify that total
payments received during the year
equal the guaranteed amount plus
growth factor, if any, which would
have been determined at the
beginning of the calendar year.
NOTE: SDUTHiTBSTERN BELL HAS INDICATED THAT THIS APPROACH, IF ADOPTED, WOULD
REQUIRE MAJOR COMPUTER PROGRAMMING CHANCES AND COULD NOT BE IMPLEMENTED FOR AT
LEAST 24 MONTHS FOLLOVING A COMMITMENT TO USE THIS APPROACH.
70WIIlitlE7Aatid
D40235 C General 005031
175
Exhibit JL-9
PROPOSED CITY PAYIffiTr METHOD
USING END USSR COMMON LINE CHARGES
ALTERNATIVE B
This proposal prorates the municiapl fee to each customer in proportion to the
rate charged for the customer's local exchange access rate element of his
service.
PROCESS
CM MODEL
(ezamles on y)
I. REVENUE BASE
1. REVENUE DUE CITY ( example)
A. Negotiate a guaranteed, set
amount due the city for the initial
year.
A. CITY As
(NOTE: Payments for subsequent years of the
agreement would be computed by adding a
growth factor, if any, to the previous year's
payment. See explanation in TAB 4)
II. PASS THROUGH TO CUSTOMERS
CITY B:
Number of access lines:
31,000
700,000
Year One, Negotiated amount:
$200,000
$10,000,000
II. PASS THROUGH TO CUSTOMERS
A. Add the company's uncollectible factor
to the city payment amount to obtain the
amount of pass through.
B. The.total amount to be passed through
would be divided by the total amount of
annual recurring chargef for the local
exchange access rate element to determine a
percentage. The customer's sum of
recurring charges will be multiplied
by this percentage.
A. Add 2X uncollectible:
$204,000
$10,200,000
A. Annual recurring charges:
$5,000,000
$140,000,000
Amount to be collected
divided by annual recurring:
4.08X
7.29X
B. Customer's fee, based on the
following recurring charges:
- Residence recurring charge:
$9.10
$10.40
multiplied by the above
percentage equals:
$ .37
$ .76
- Business recurring charge:
$22.30
$25.25
multiplied by the above
percentage equals:
$ .87
$1.84
C. Customer's municipal charge stays the
same, until adjusted the following year for
the growth factor (if any), over/under
collections, company uncollectible factor,
and/or change in the number of access lines
reflecting a EUCL charge.
BaAQUOlnbtit
D40235 C General 005032
176
Exhibit JL-9
III. VERIFICATION - the only step needed is
to verify that total payments received during
the year equal the guaranteed amount plus
grovth factor, if any, which vould have been
determined at the beginning of the year.
NOTE: SOUTSSISSTS[{N BBLI. TELEPHONE COttPANY HAS INDICATED THAT THIS APPROACH MAKES
USE OF BUSTING PBOGRAlQQNG AND COULD BE INPygMENM ^M 90 DAYS FOLLOW=
FINAL PASSAGE OF AN APPROPRIATE ORDINANCB, AND COMM BE EFFECTIVE ON A
PSOSPBCrIj/B BASIS ON JANUARY 1, 1991.
gxwkkXw
D40235 C General 005033
177
Exhibit JL-9
CLASS OF SERVICE VARU=
ALTPlaQiTIVB B
This demonstrates how Alternative a will spread, or proportion,
the total municipal pass-through among the various classes of telephone
service described in Company tariffs.
Each class of service can have a different rate, as noted below.
By developing a ratio between the total pass-through and total billing for
a City, it becomes possible to produce a different municipal charge for the
EAA's within the various classes of service.
The following demonstrates this process:
EVOM
1.
Determine "FEE" Ratio:
Total Pass-Through ^$ pass-through to total billing
Total Billing
Example:
2.
204,000
5,NT,6d
^
.0408
-
4.08%
Determine each customer's municipal charge:
Class
of
Pass
Through
Monthly
Fee
Total
Municipal
Charge
Number
of
Per
Lines
Shown
Service
Rate
X
Residence/
2 - Party -
5.90
x
.0408
$ .24 x
1
m
$ .24
Residence/
1 - Party o
9.10
x
.0408
.37
x
I
^
$ .37
13.65
x
.0408
.57
x
1
•
$ .57
Single
Line Q
21.30
x
.0408
-
$ .87 x
1
•
$ .87
BusinessMultiLine -
25.15
x
.0408
s
$1.03
x
3
W
$3.09
Business
Trunks -
33.65
x
.0408
^
$1.37
x
15
W
$20.55
Ratio
=
Line
x
( Example)
^
On Bill
Business-
Measured II
Business-
XXNFANM.V
040235 C General 005034
178
Exhibit JL-9
PARAMETER FOR FIRST ANNUAL PAYMENT
Several factors have effected the amount of annual pa yments to
cities in Texas. Divestiture, varying revenue bases, applicable percentage
and tenure of current agreements have impacted, to differing de grees,
individual cities' annual pa yment. Experience indicates that the effect of
divestiture on payments is the most contentious issue in discussions
between the cities and the company.
To reduce the effects of these issues, p rovide the opportunity for
a similar starting point for all cities and not burden customers with
substantial fee increases, an initial pa yment amount p arameter has been
developed for the first agreement in each city. Simply, the negotiated
first annual payment as described in Section.6, pay e 5 of the ordinance
would not exceed the largest annual payment to that city during the past
ten years.
This method would allow cities to take advantage of a higher
pre-divestiture payment level, above average growth, or any increase from
recent negotiations. Each city could review its payment history; select
the largest annual payment, review any potential effect on its citizens and
agree with the company on that amount for the first annual payment.
Certainly, some cities may wish to reduce the payment level to their
citizens and that also is acceptable under these parameters.
1C2SlSAH"KX
D40235 C General 005035
179
Exhibit JL-9
THE TEXAS INDUSTRIAL PRODUCTION INDEX
The Federal Reserve Bank of Dallas has produced the Texas
Industrial Production Index (TIPI) continuously since 1958.
The index
measures the output of Texas' mining, manufacturing and utilities sectors
and provides a regional counterpart to the national industrial production
index compiled by the Board of Governors of the Federal Reserve System in
Washington, D.C.
The index is used by the Federal Reserve, business, government,
the academic communities and others interested in monitoring the economic
activity in the state. TIPI is intended to supplement the wealth of other
data that are used for regional analysis but are limited in timeliness or
scope.
For example, employment data are timely but are not comprehensive,
and may not accurately reflect income that is generated. Likewise, direct
measures of income or output, such as personal income and gross state
product, are available for all states and industries, yet, are only
available after considerable time lags ranging from several quarters to
several years.
TIPI on the other hand is available on a monthly basis
during the first 10 days of the month.
For computation of the municipal fee annual growth factor, a
current 12-month average will be compared to the immediately preceding
12-month average.
2KMkMXO8t
D40235 C General 005036
180
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D40235 C General 005037
/9/
Exhibit JL-9
PROPOSED
IMPLEMENTATION PROCESS
Assuming ratification of Alternate B b y the Board of the Texas
Municipal Lea g
ue in its October meeting, the following steps will begin as
soon as possible after notification to the Company:
--
A joint letter from the TML and the Company will be sent-to all
cities served by Southwestern Bell Tele p
hone Company advising them
of the new method, positive action by the TML Board and
recommending cities consider renegotiation of their current
ordinance to incorporate this change.
--
Southwestern Bell External Affairs Mana g ers will contact
Mayors/City Managers after receipt of the above letter to present
the idea in more depth and respond to questions.
--
In those cities where the chan g
e is received favorably, local city
and company representatives will take appro p riate action to
negotiate ordinances incorporating this method.
--
For ease of implementation and accuracy of billin g procedures the
effective date for ordinances ne g otiated using Alternate
B will be
January
1 of the year following final City Council adoption e.g.,
neg otiated
and final adoption November 1990, effective date Sanuary
1991; second example, ne g otiated and authorized March 1991,
effective date January 1992.)
^mal
D40235 C General 005038
182
Exhibit JL-9
MUNICIPAL FEE, ORDINANCE PROPOSAL
QUESTIONS AND ANSVERS
1• Q. Why has SVBT recommended a change in the method of paying and
collecting municipal charges?
A. First of all, both the company and the Texas Municipal League
determined that a change in the current procedure was needed.. There
has been a tradition of cooperation between SfiBT and the cities we
serve. However, recently the issues surrounding municipal fee
payments have caused cities and the company to witness an increasingly
contentious environment. To preserve the cooperative and productive
partnerships with Texas cities, an alternative approach to municipal
charge calculation is in the best long-term interests of the cities,
the company and the citizens/customers.
2. Q. How will this proposal improve and preserve the relationships between
the company and the cities?
A. As we have witnessed since Divestiture, the rapidly changing
telecommunications environment has created various interpretations
between the company and cities concerning the "revenue base" used for
the application of municipal charges. The lengthy dialogues and
verification processes resulting from these different viewpoints are
time consuming and costly to both the company and cities. By adopting
this proposal, there would no longer be a need to negotiate a "revenue
base", the verification process would be simplified, and a means of
growing city revenues would be provided.
3. Q. When does the company propose to implement this plan?
A. Providing that the Texas Municipal League's board of directors concur
in October, we will be prepared to offer this plan effective January
1, 1991.
4. Q. Yill a time limit be imposed to accept
this offer?
A. No. SWBT will be able to put these new procedures in place
as quickly
as cities choose. Given the number of contracts throughout the state,
certainly three to five years would be a reasonable time frame for
all cities to adopt new ordinances under this
concept.
5. Q. Does an existing contract have to expire before a city could adopt
this proposal?
A. No. After receiving joint notification from the Texas Municipal
League and the company, cities could then approach the company and
request that a new ordinance be negotiated.
^RX"W
D40235 C General 005039
183
Exhibit JL-9
6. Q. Vill the company be soliciting cities to
adopt a new ordinance based
on this concept?
A. After the joint notification to cities by the TML and the company,
SVBT managers will meet with cities to answer any
questions and to
provide additional information based on the cities' interest. Cities
that want to pursue the new concept
could initiate action at that,
time.
7. Q. qill this proposal become mandatory at such time existing ordinances
expire?
A. No. A city may continue with the type of ordinance that exists today,
if that should be their decision.
8. Q. Vill the Public Utility Commission support this proposal?
A. Our existing tariffs allow the company to pass through to our
customers these city municipal charges. We believe that this concept
is within the scope of the tariffs as they exist today. Thus, this
proposal does not require a filing for PUC approval. The PUC will, of
course, be notified of this new approach.
9.
Q. How will this proposal impact any negotiations that are in process?
A. It will enhance and simplify negotiations in process for new
contracts.
Negotiations are enhanced because the cities have an
additional option -- this new approach.
Choosing the new approach
will certainly simplify the entire process.
10.
Q. Would the cities have to forego any payment claims under the old
contract in order to accept this new method?
A. It is important to note that the new method is intended to apply on
a oin forward basis.
Negotiating a specific rate of payment
shoul d e minate the contention about payment amounts that exists
today.
"Kat"M
D40235 C General 005040
184
Exhibit JL-9
7^6/90
R8V •MILk
91MME PD.
AN aMM= WMWM TIM CZTY !7p
Alm 9wIMMMS
=L 7EUMMM ^'!!NY AGM 'II91T
TE[F^ CCKPM 5'OMi. OMUnME '10 FMF7CP AM RRIlNEA^'^ =9
MM' WIIiM, ANMM, FMM, Q^, NAM=, a=M19 AND
aim PIM
AM APF[1^II^2JCF.4 At=, ACrCSg, We
am, ^$, A80VE, AND LN8t ALL PMK.IC SII^^S, AqIIMBS,
ALMY''
..+, PM= CWM= AM PlACM IN SAID CQq, III= CEMN
10=ATC'i$ AlID 7w mm CC'.17t SEglIL FIDCELVE AHI6mL
, AIL AS MMi P^7iT^
WWM, Soutlwestern Bell Telephone C=qwY, hereinafter referred
to as the "Ta].ephom Campaay" is now and has been engaged in the
telephans
business in the State of Texas and in
flztheranoe thereof, has erected and
maintained
certain
ite^as
of its plant acaatzvcticn in the City of
, Texas, hereinafter referred to as the "City,"
for many
Years Pursuant to surh. rights as have been granted it by and under
the laws
of the State of Texas, and subject to the exercise of such reasonable rights
of regulation under the police power as have been lawfully WM*A3d by and.
under said laws to said city; and
MMM, it is to the mutual advantage of bath the City and the
TalePhcm Oa¢npany that an agreement should be entered into betwom the
Telephone Cmopany and the City establishing the ooaiditians under i&ich the
Telephone Ccmpany shall continue to erect and maintain its plant in the City;
- Page 1 -
X14J(fiXA"
D40235 C General 005041
185
Exhibit JL-9
RE'V. 7/26/90
D1tAPT
^I THUMMe BB1'PcFmRnm BY= CI'LYcma=
Cr MM CL'1'Y CIF
. TSX1.S' MOM:
SflCi'IM 1- qCY^'II^1ZCN
M MAINMEMMM OF TErZB3= PLiM
MIS poles, wires, anchors, cables, fiber, mvftles, cma.its, and ather plant
OaAstraction and apPut,enarcM used in or incident to the givinq of telephone
service and to the maintsmroca of a telephone b.Ljinegs and systm by the
TQ1e}^haa1ls cxapany in the City shall remain as now ^gd, subject to
such cha^ as =der the regulations and conditi= prescribed in this
Ordinance (hereinafter referred to as this I^AgreemgntN) may be considered
1"8a1y to public health and safety by the City in the exercise of its
lawful Pow+ers and by the Telephone Company in the exercise of its business of
furnishing telephone service; and the Telephone c.anuny shall continue to
exercise its statutory- riorts to place, xOMwe, aonstiuc.^t and reoo=tzvct,
extend and maintain its said plant and appurtwmwes as the business and
F='POSes for which it is or may be incoi porated may fr= time to tine xeqlir+s
along, across, on, over, thrvU0r above, and under all the public streets,
avesaies, alleys, sidewalks and public 9mar]s and PI aces within the present
ljmits of the City and within said limits as the sane fiom time to time may
be extended, subject to the regulations and cmr.Uticng prescribed in this
- Page 2 -
X4?(#JO"
D40235 C General 005042
186
Exhibit JL-9
1tEV. 7/26/90
DItAFT
SE==K 2 - saPERVLSICK SY QTY OF 7DCA7IQd
OF PXI5 AM CCNM=S
All poles to be Placed shall be of sound material and reasonably straight,
and shall be set so that they will not Interfere with the flow of water in
any gutter Cr drain, and so that the same will iaterfere as little as
practicable with the ordinary travel on the street Cr sidewalk. The location
and route of all poles, stubs, goys, arkhors, caaxhzits, fiber and cables to
be placed and ommtr^ucted by the Telephone CmVwq in the cmstructicn and
maintenance of its telephone system in the City shall be subject to the
lawful, reasonable and
ter regulation, vorrtrcl, and direction of the City
Council or of any City official to wh®t such duties have been Cr may be
delegated.
,
SEC=M 3 - SIIREE33 M BE
WE" TO 600D c3mm==
The surfaoe of any sttieet, avsnue, allay, highway Cr public place disturbed
by the Telephone Cmq:aTI,Y in bui],CliM, pOnStruCtilng, r8mwiM Cr 1ffii *tm i
^
its telephone plant and system shall be restored witbin a
reesm1ble time
after the CCmg2leticn of the work to as good
a amditiCn as' before the
C^1. IrAnt of work aid maintained to the satisfaction Of the City C=X41,
or of any City official to Wh= such duties have been or may be delegated,
for We year from the date the surface of said
street, avm=, alley,
bi5hmy, or public place is broken for such construction or mlifttowm work,
- page 3 -
S.101(Wq6kX
D40235 C General 005043
187
Exhibit JL-9
RZV• 7/26/90
DRAFT
after which time responsibility for such mint^e shall
the City.
No street,
avernie,
become the duty of
alley, highway or public Plaae sha].1 be
W==bezed for a lager period than shall be neoesaary, to womts the wMk.
SFX.TICN 4-TWCI*M RmDVAL OF WIIW
Upon request• ^WePhcne CmqmY shall remove or raise or lower its aerial
wires, fiber or cables taaporarily to Permit the mwiM of hauses or other
bulky str^es. The expMsse of such temporary removal,
raising or lowerin7
of aerial wires, fiber or cables shall be paid by the benapitted party or
parties, and the Telephone C=party may require such Payment in advance. The
Telephone Company shall be given not less than forty-eight hmrs advance
notice to arrange for such temporary aerial wire, fiber or cable charnqes.
SIMITCN 5 - UM 'IIZIltM]G
The right, license, privilege and Permission is hereby granted to the
Telephone C=pany, its =cessors and assigns, to trija trees upcxs and
ayedwqinJ the strests, avenues, alleys, sidewalks, and public plates of the
City, so as to prevent the br^s of such trees from coming in contact with
the wires, fiber or cables of the Telephone OmoparYy, aid when so ordered by
the City, said trfaaning shall be done under the SIVarvision and direction of
- Page 4 -
XURd"dd
D40235 C General 005044
188
Exhibit JL-9
7/P^6/90
^•MUL
the City C=w-il or of any City official to whom said cCuties have been or my
be delegated.
`S'DCIMW 6 - 1NNIIl,L rA9i
CT.[^f l0^'IIC^AL ^ PASS ^
TO ^
1^imm Paya^tIt An^^1t az^d Arnn^al s^g^=
As
consideration for this Agreement and to ccapensate the city for its
sqperintendwne of this Aqremoent, the Tsle#=m C=pmy shall collect 8=
its cuetcmare within the c=porata linjt of the City of
the
=niciPal charges aescrilaea below. The aruaual cash ocrAa de,y. {c, paid to the
City during the first year of this Agreement shall be $
(hwxe3tLafter referred to as the "Mininan Payment Amomt„).
After the
ocmPleticzz of the first year of this Aqree=*, the araml casti aazwsideratian,
shall be the Mini=m Payment Art
^azed, if applicable, by the I#G:mft
Factor" raihich is defined below, and which shall be referred to collectively
hereinafter as the "Annual Payment".
Growth
ctor;
The Growth Fact= shall be calculated by dividing the mean average Ttom
Trrhuatri a1
Production Dndex produc.ed by the Federal Reserve Bank of Da7las
(the °Ir%dex") for the twelve month period eriding with the month of Deoember
- Page 5 -
XX(ICIM(dd
D40235 C General 005045
189
Exhibit JL-9
REV.DRA
7/^2r6/90
of the Year imadiately preceding the year in Uic3i the particular Arnal
Payment is to be made (i.e., payment year mirn:s one) by the mom average
Ind" for the twelve month period err]iM with the month of Decembet two years
PrecenJ the year in which the pwi h,l". k=al Payment
is to be maft
(i.e.,
payment year minus two). The Growth Factor calculated in the
Prec8dirq sentQt:oe, if greater than one, shall be multiplied by the pzv4icm
YOar' $ Annual Payment (i.e., payment year minus one) to determine the do3j.
amount of the Aru:ual Payment for the current year. if the Gtcwth Factor
calculated above is one or less, the Arnmi Payment for the current year
shall be equal to the previous year's Arnwal Payment. The Growth Pactor
calculation shall be made d=ing the first Natter of the second and each
subsequent year of this A^.
Stated another way, the annual cash consideration to be
paid for a five year
period (using the years 1991 ttra4i
1995 as an exmq1e) shall be calculated
as follows:
F.Xanq31a: Mini== Pmroe*+t Am= O++r•*h F'ictor -and r,mml- P.,n^ar,^•
^
Year 1
Jan. 1-Dea. 31,
1991
Year 2
Jan. 1-Deo. 31,
1992
Mini== Payment Am=rt
( uMpAn)
MPA X 1991 Growth
Factoor, if any
s At7ua1 Payment 1992
("1►P 1992")
(1991 Mean Average
1=10C I"qQ1"3 *-. 1990 MT)
- Page 6 -
X16K6p0M
D40235 C General 005046
190
Exhibit JL-9
PXV• 7/26/90
DRAFT
Year 3
Jan. 1-Dec. 31,
1993
AP 1992 x Grvwtli
Fact= 1992, if any
(1992 MI -* 1991 MI)
Year 4
Jan. 1-Dec. 31,
1994
AP 1993 x Growth
Fact= 1993, if any
(1993 MI :- 1992 MI)
Year 5
Jan. 1-Dec. 31,
1995
AP 1994 X Growth
Fact.cac 1994, if any
(1994 MI i 1993 1+0►I)
° ArMUa1 FaYmmt 1993
(°AP 1993")
" Amual Payment 1994
("AP 1994'1)
- Armual payment 1995
The MW= Payment Aurxatt ard the subsequemlt AMmua1 pgZ=ft shall
be paid
to the City in four (4) equal
the first of which shall be paid
on May 31, with the remaining
to follow on August 31, NovembW
30 and Febzvaty 28, =ept the final, install^t for the fifth year of this
A9zeelment.
After makiM any necessary adjustmettt for the balance of any
ovet+oollectian or undezoollectian of rmmicipai charges, as discussed below,
collected froAt Customets during the term of this Agreement remaining after
the 0110-time adjustmmzt set forth in Attaclvient A to this Agreement has been
cmpleted, the final iristsllment for the fifth year of this Agreement shall
be Paid to the City on May 31 following the fifth year of this Agr9ment.
The Bmlc;nal Oarae Pass M=Lvh to 02s*mare;
ElOgirmin; with the effective date of this Agreement, each TeleyhwA Cmqeny
cust,aanar within the earporate limits of the
City billed any interstate end
user cmion line ("Mm")
Charge [sometims referred to as an interstate
subscriber line charge (°SIole i, as authorized by the Federal coOmazi.catiaos
- Page 7 -
BMDQ7t0ENAR
D40235 C General 005047
191
Exhibit JL-9
TtEV.0^7^6/90
O=Ri-SSion ("TW) . shall also be billed naazttsl
Y a Pro rata share of the
M^^ PaYmm* Amount or Antnual Payments to be. paid to the
City.
To
calculate such pro rata dam, the Telephone Cmqxriy shall use the method set
forth in Attac?merit A to this Agra"14-' (
Iftich is attac23ed hereto and made a
part of this Agreement as if set forth in fn2l herein) miless the Public
Utility p=nf ssion of Tema ( lopwi)
authorizes arxVor raquit+es sane otbw
method, in which
case the Telephone coaqatsy shall use the method a*1wrized
ar,d/or required by the FUc.
OvefioLection^et^collectian ^f I^icit^al Q^ar^res;
The Telept=e ClCMPanY shall maintain a i: oorrl reflecting any overoollecticn
or urxlercollection of municipal charges
received from, =zt=ers within the
corporate limits of the City for
each year of this Agreammt. Each such
record Shall be maintained for five ( 5) years after pecaber 31 of the year
to which it relates.
To aopetsate for any overoollection or underoollect,icn
of municipal charges received from customers within the corporate limits of
the City, the 'Telepham Conq,anY shall use the method set forth in Attac^nt
A to this Agreement unless the PW authorizes arA/or requires some other
method, in 'which case the Telephone cmtgwy shall - use the method authcL-Izad
arxVor required by the RTC.
-Page 8-
XXXXM"ltl
D40235 C General 005048
192
Exhibit JL-9
REV. 7/26/90
DRAFT
Within a reasonable response time following receipt of reasonable written
notice, the Tele#=ra O=pany shall make avallable for review by the city all
non-prrorriatasy and rmrccnfidential records reflecting any oves^ao3 leatla, or
underoollection of =azicipa]. Charged received ftun custmerg within the
corporate limits of the City during the te= of this Agmement.
Notwithstard{nq any other provision in this Agreement, the total sum of m=W
Paid the City over the term of this Agreement, shall nereir exceed (l) the
aggregate of aamicipal charges received from alstcaaets within the =q=ate
limits of the City aver the term of this Agteement ► nor (2) the ato=t the
RTC authorizes the Telephone aoopany to collect from its aist==s within the
corporate limits of the City over the te= of this Acpnesment.
SECMCYT 7 - PA1MM QF CASB ^tATICli 7D BE nr L'Q^7J 0^ Ai+iY
^
PA^lS FJC^MPr U:^AL GENERAL CSt SPE='AD VALCM
OR SAI
mum
The City agrees that the cash oonsideratimn set forth in the precediM
Section hereof shall be Paid and received in lieu of any tax, license,
charqe, fee, street or alley rental or other character of dbarge for use and
ooa4=nc.y of the streets, alleys, and public places of the City; in lieu of
any pole tax or inspection fee tax; in lieu of any easement or franchise tax,
whether levied as an ad valorem, special, or other character of taxi in lieu
of any permit or other fee; and in lieu of any imposition other than the
usual qerexal or special ad valor= taxes or aal.es taxes now or hereafter
- Page 9 M4MM"
D40235 C General 005049
193
Exhibit JL-9
REV.EIR&7^6/90
lawfully levied.
Shculd the City rat
have the legal pvw= to a9M that the
payment of the foregoing cash oozideratimz shall be in lieu of the t.s,
liOBrSeB, charges, fees, rentals, easement or Psanchise taxes or permit fees
aforesaid, then the City agrees that it will apply so mici of said payment as
may be rNcessasy to the satisfactjcn of the Ta,1ephoys cuqxuyes Cbljqa{j=r
if any, to pay any such taxes, licenses, ctlaxqes, fees, ],eltals, easement or
frarchise taxes and permit fees.
M'TTCff 8- ATDOROM ZO FaFS AND SPACE IlN r ",Tq
-
NathuM contained in this Agremgmt shall be cmwtrued to reWire arpe=it
any pole attachments for electric light or per wires or c==Micatic=
facilities or system not provided by the Telephone O=Vwy to be attached to
the Telephone CcqIWny's
poles or fixtures by the City or for the City, nor to
require or permit any electric light or power wires ar^=tj=W
facilities or systems not provided by the Tele#=r- CmqzW to be placed in
any duct in the Telephone Coapanyls carr1lits by tthe City crfor the City. If
the City desires pole attac2ments for electric light or power wire$ e^.
ecmnmmicatienis facilities or system not provided by the Tlelephaoe
any,
or if the City desires to place electric light or per Wires or
=Madcations faei].ities or system not provided by the Telephone ^in
any Telephone e=pany duct, then a flathex separate,
agreement
shall be prerequisite to such attad=mzt(s) or such use of any duct by the
- Page 10 -
XXxIOS"
D40235 C General 005050
194
Exhibit JL-9
REV.DVA7^6/90
OitY•
NothitxJ contained in this Agrement shall d:ligate or restriat, the
Tal%*Am o=Way in esaemcisiM its right valw7tarily to star- into pole
attadanent, Pole usage, joint ownership or other wire space and facilities
agr+eemmts . with light ard/or power cmpanies and with
other wire using
c=Mdes which nay be privileged to operate within the City.
SDCTICN 9 - mm OF 7I^S Af3RMMMIT
This Agreement shall be in full force and effect for a five (5) year period
beginning with the effective data specified in the Sections of this
Agreement
entitled "Af,XEPn,NCE OF AGFMEw1T AND EFFDCI'IVE DATE".
SDCFICff 10 - SUCCEMXM 2M
ASMM
,
The rights, POWWS, limitati=, duties, and restrifticm provided for :in
this Agreement shall inure to and be binding upon the parties hereto and upon
their respective successor(s) and assign(s) of at least fifty pezvvent (309)
of the assiyrLitg party ' s assets located within the oarparate limits of the
City as of the date of such assigiment.
- Page 11 -
XaN/RtlMdd
D40235 C General 005051
195
Exhibit JL-9
REV. 7/26/90
DRAFT
sBmmm 11 - nMEMN,*iq
As a condition. of this Agreeeent, the Telephom cmpW shali protect,
indemnify and hold the City harmless for the Te1.Epftya CMVanY's share of all
claim for damages to persons or property arising directly or indirectly cut
of the ocrostruction, maintenance or cperation of its facilities, when injury
is caused, or alleged to have been caused, wholly or in part, by any act,
mission, negligence, or m
_ i___.
^uft of the Telephone CMqpwW or any of its
cantractors, officers, agents or employees, or by any person for whose act,
amission,
negligence,
responsible.
cr mizcQf%IuCt the Ztslephane C=qerly is by law
This provision is not intended to create liability for the
benefit of third parties but is solely for the bmsfit of the Tele;3b,ana
Campany and the City.
SDCITON 32 - aoVERN3M IM; L'IIan1Tmm
Mils Agreement shall be governed by and construed In a==dance with the
laws, court decisions and administrative law decisions of the state of Tems;
Fz'wided, however, should either party desire to p==1a any claim or cause of
action against the other relating to this Agreement, rxAmithstarding any
provision of any statute, law, coutt decision, Unniaipal charter or crdinance
to the ccntraiy, the party desiring to assert such claim or cause of action
mast do so in a form with appropriate jurisdiction within four (4) years of
- Page 12 &141LWP]0fqt
D40235 C General 005052
196
Exhibit JL-9
R8V.ER76/90
the date that such
or cmues of action first arose or said claim or
use of action shall be forever barred.
SECT= 13 - PARML 2;9==
If any sectioai, sentenoe, clMusQ, or phrase in this Ac¢+eeamzt
is for any
reason held to be t^ooa^stitutic^ai, ultra vim, void or for any
reason
uaenfosroeable, the validity of the r®aini.M portions of this Agrment shall
not be affected trgweby.
SBTTQff 14 - RU'FAL Cr yCRMMMEM Am Ammumm
.
is hereby repealed;
Provided, however, such repeal shall take effect at 11:59 P.M. on Deoerabw 31
immediately preceding the e.ffective date specified
in the Section of this
Agreement entitled "ACCEMNC6 OF AGREEHEW AND EmCr1yE DATE".
All ott=
ordirlawas and agre.aments and parts of ordinances and agrOMW*A in cantlict
herewith are also repealed, which
repeal shall take effect at the time and on
the date specified in the preceding ear*et:oe.
- Page 13 -
7Q6x01116OX04
D40235 C General 005053
197
Exhibit JL-9
REV. 7/$6/90
MtApT
S=IICN 15 - 'MSC OF AIL CIAM I_AMO qp CIMM=
NM93ER _____
l
ra
As a part of the oonsideratioo for the aacaptat= of this Agreement by the
Telepl=e ConWiy, the City hereby fully releases, d,ischargm, settles and
OMP=Lizes any and all alaims Miich have been maids or caW.d have been
asserted in vonnectian with Ordinance M=ber
^ aftted
,
and its Prodecessw crdinances, if any, and the City hereby releases and
ciischarges
the
TelePhorw
C=pwYy,
and
its
parent(s),
St717Bidf^r
affiliates, suocesSCrs and assigns fm any and all Olaf, actioa'3S, cmLses
of acticn and contr^ersies, uhather heretofore or hereafter arUirq, whether
now known or not, directly or indirectly arising cult of or o=zected with
Ordinance Manber
and its ^ ^^ if any.
SDCIZXN 16-ACIMMWM OF AGREMM AND 0, 11 Mr TPI;
MM
The Telephone C=pany shall have ninety (90) days fizaa and after the final
passage of this Ordinance to file its written aooeptar= of this otdirianoe
with the city Secretary.
Upon such acceptance beiag filed, this ftdinall=
shall take effect prospectively and be in force from and after Jaralasy 1,
199
and shall effectuate arri make birjdirq the Agreement set forth herein.
City shall deliver a ParoWly certified cr
Telephone
any within three (3) wmkirq days of its fina], passage.
- Page 14 -
"Mom"
D40235 C General 005054
198
Exhibit JL-9
RBV. 7/a6/9o
DIRMPT
Passed and approved this
day of
, A.D. , 19
YAYCr.
City of
.
'IIMM
M7ti
C:Lt:y Secretary
I'
, city Se=etaty of the City of
, Texas, do hereby ERUIV-tlat the foregoirg is a true and
correct copy of Orciinance Number .
, finally pasaed and approved by
the city of
. TOM, at a regular meeting held an the
day of
, 19
.
C:Lt:y Se- tBtuy
- Page 15 -
Xx(ximY(m
D40235 C General 005055
199