Cities and special districts that have adopted and imposed fees or charges on telephone services in order to fund their emergency 911 systems may be impacted by the recent appellate court decision in Bay Area Cellular Telephone Co. v. City of Union City.  In this case, the court reviewed a challenge to a fee imposed by the City of Union City (the “City”) to fund its 911 emergency communication system.  The “Emergency Communication System Response Fee” (the “Fee”) was imposed on every person who maintained access to the City’s 911 communication system by subscribing to local telephone service within the City.  For individuals who maintained wireless telephone service, the Fee was imposed if he or she had a place of primary use within the City.  The Fee was paid on a flat rate, per line basis, in an amount established in the ordinance adopting the Fee.  The Fee was collected from the telephone subscriber by the service provider and remitted back to the City.  Revenues from the Fee were deposited into an emergency response fund, to be used solely for the expenses of the City’s 911 communication system. 

The plaintiffs in this case provide wireless telephone service to individuals within the City.  They alleged that the Fee was (1) an invalid tax imposed in violation of California Constitution article XIII C; (2) an illegal property-related fee imposed in violation of California Constitution article XIII D; (3) an illegal special tax pursuant to California Government Code section 50076; and (4) an illegal fee imposed on wireless subscribers.

The Court of Appeal held that the Fee was a special tax subject to the two-thirds voter approval requirements of California Constitution article XIII C.  The Court noted that the Fee was not imposed in exchange for a voluntary decision to seek a governmental service, rather it was imposed in response to the decision to seek telephone service from a private telephone service provider.  Additionally, it was not a user fee because it was not charged for use of the City’s 911 system, but rather was charged for access to the system. The fact that the revenues from the Fee were dedicated for the specific purpose of funding the City’s 911 emergency response system was also dispositive on the issue of whether the Fee was in fact a special tax.

Any city or special district that has imposed a similar fee should closely review the structure of its fee to ensure that it comports with the analysis of this court decision. For more information regarding this case, please feel free to contact any member of our Municipal Taxation & Prop 218 Law Group. The Taxation & Prop 218 Law Group is a sub-group of experts within our Municipal Law Practice Group, dedicated to serving cities and other public agencies throughout California.