California 911 Phone System Fees Raise Ire, Prompt Lawsuits

When San Jose's city council voted last week to add $21 a year to residential telephone bills to help pay for the 911 system, it dumped the city into a pot that's starting to boil over.

"Stealth taxes!" cry opponents of what has become an increasingly popular revenue-raising device for cities and counties.

"Fees for service," respond backers of the system.

The distinction between a fee and a tax is crucial in California, where Proposition 218, approved by voters in 1996, requires public approval of new taxes by a two-thirds vote. "If voters approve it, well, then that's kind of a different story," said telephone company spokesman John Britton. "That's how it's supposed to work."


Britton's company, SBC California, is suing Stockton over that city's new $1.50-a-month levy on phone bills. That lawsuit follows similar ones against Union City by AT&T and Verizon. Britton hopes the court will bring "clarification" once and for all to the fee-vs.-tax issue.

Voters in unincorporated Santa Cruz County, and in the city of Watsonville, will decide in November whether to repeal 911 phone charges of $1.47 a month and $2 a month, respectively. A local resident is also suing over the county's levy.

San Leandro, faced with a potential $9.3 million deficit, is expected to impose a $2 per month 911 levy at its Tuesday council meeting.

Santa Clara County just said no to a 911 levy in April. "Inappropriate," said county Supervisor Pete McHugh.

Cupertino proposed a $1.80 levy, cut it to $1, then dropped the plan when the chamber of commerce and Apple Computer complained. But City Clerk Kimberly Smith said the levy could rise again.

In San Mateo County, county manager John Maltbie's suggestion for a 911 levy "never went anywhere," one key stumbling block being whether the county "had the authority to impose it over the entire county or just the unincorporated area."

If San Francisco's is the mother of all such levies, dating from 1995, then Gian Luigi Ferri is its father. Ferri was the gunman who rampaged through the multi-story law offices of Pettit & Martin at 101 California one summer day in 1993, killing eight people and wounding six. Ferri himself was the ninth to die.

"The management information system in the San Francisco 911 Dispatch Center is inadequate to the tasks required," an audit found after the massacre. The study argued for a combined police-fire-health 911 system, and the board of supervisors passed a 50-cent-a-month tax to pay for the new system. The law provided for regular increases; the rate becomes $2.75 a month Nov. 1.

But the cities and counties that have followed San Francisco have been impelled by a different kind of emergency.

"With the state takeaways and the decline in the economy and the increase in labor costs, cities look for every possible opportunity to increase things on the revenue side," said David Culver, finance director for the city of Santa Cruz.

Tax watchdogs agree that it's a trend, and a "dangerous" one at that. "They're springing up all over the place," said Jon Coupal, president of the Howard Jarvis Taxpayers Association. "I testified against one in the county of Sacramento. They're proposing one in South Lake Tahoe. Manteca. They keep popping up.

"But," said Coupal, "the fact that Union City and Stockton were served with complaints kind of threw some cold water on the headlong rush."

Opponents argue that California already has a state tax to fund 911 equipment. But Michael McDougall, who directs the Santa Cruz County 911 call center, said it is inadequate. The center has gotten two distributions of $300,000 each over the last five years, according to McDougall. The center's annual budget is $4.5 million.

Another reason for the trend toward separate 911 levies is that general utility taxes have become a target. When a voter revolt in March 2002 struck down Santa Cruz County's $10-million-a-year utility tax, the county instituted a 911 levy that brings in $1.525 million a year, according to auditor Gary Knutson.

The levy in the city of Santa Cruz is much higher, now $3.49 a month, but so far has incited no formal protest, possibly because city voters demonstrated their support by decisively defeating an attempt to wipe out a city utility tax in November 2002.

The Santa Cruz 911 levy, which is separate, shows up as "local government fee" on SBC bills. "As long as we don't charge in excess of the cost of that service, I think it falls within the definition of a fee," said Culver.

McDougall said that money pays for the telephone aspects of the system, including sophisticated caller-locating hardware and software. But he said operators, dispatchers and coordinators are not covered by the tax.

San Jose's new tax was sold to City Council members as an alternative to cutting the work force -- "180 to 200 more positions, including 120 from the police department, most of them officers," said mayoral spokesman David Vossbrink.

There are other differences between the new San Jose ordinance and the 911 levies imposed elsewhere.

Most of them have caps on how much a business must pay -- $10,000 in San Francisco and in Santa Cruz, for example, but only $33.09 in Santa Cruz County.

In San Jose, the cap is $20,000.

"I just think it sends the wrong message to businesses," said Vice Mayor Pat Dando, one of three council members who vote against the levy last week.

And San Jose's levy is temporary. It will disappear in two years unless renewed by the council. Dando doesn't like that, either. "I don't think we should start funding" core responsibilities such as public safety "with fees that are going to sunset in two years," she said.

"Since we know cities currently are being challenged" over the levies, "why not wait for the result of those lawsuits?" Dando asked.

That's what Sunnyvale is doing, after approving a fee in concept.

It could be as long as two years before that happens, though, according to Tony Acosta, deputy city manager in Union City, where the telephone companies have been playing tag with the city over its $3.22-a-month levy.

In their original lawsuit, Verizon and AT&T made an equal-protection argument under the U.S. Constitution, Acosta said. When the city's attorney promptly moved to transfer the case to federal court, the telephone companies dropped the suit.

Then they reinstated it in state court -- without the federal claim. Cingular joined up too, Acosta said. "Everybody's suing everybody."

But the city is arguing that the telephone companies can't sue, because they're exempt from the 911 fee. He accuses them of hiding behind a subscriber in order to bring suit. "Nice try, but no cigar," Acosta said.

San Jose Mercury News via the Associated Press