Council turns down cell phone tax

City staff had recommended the cell phone tax, as landline telephones are taxed as a utility and cell phones should be treated the same way. It was also suggested as a way to boost declining utility revenue in the General Fund budget, which pays for city salaries and services.

But council members at the regular meeting Monday night said the tax was unneeded and opposed the tax.

It's not an occupation tax but an aggravation tax, Councilman Jack Rogers said he heard from the public. People supported continuing the one cent city sales tax and implementing the half cent sales tax because they saw a need for it, he explained, as it would support economic development and lower property taxes. But there seemed to be no valid reason to tax cell phone usage.

"So there's a tax on landlines - so what? So we impose another tax to make it even?" he asked.

But Mayor Dennis Berry pointed out that taxes from land lines have been declining the past few years, due to the popularity of cell phones. Over the past seven years, revenues to the General Fund from land line taxes have decreased, from $55,259 in 2001 to $18,800 in 2006-07.

If we decline to tax cell phones as a utility, then the city should discontinue taxing landline phones as a utility, Mayor Berry maintained, to make it more equitable.

Councilman Aaron Kircher disagreed.

"Just because we tax one doesn't mean we have to tax the other," he said. "We're getting by fine for now. What we have is working for us."

If there is a deficit in the future, the council can revisit the issue at that time, Kircher said.

Council member Colleen Grant had the same opinion. None of the people who contacted her were in favor of the tax and were not convinced it was necessary, she told the council.

"That was the question. Do we really need it?" she said.

Instead, she said many wanted to delay the tax to see what will happen when the half-cent city sales tax takes effect in July.

City Manger Kurt Fritsch said he understood the sentiment behind public response opposing the tax but reiterated Mayor Berry's concern, that taxes from land lines have shrunk, affecting the General Fund. The General Fund is still balanced, Fritsch said, which is a legal requirement of cities and towns, but communications taxes are still down. Since cell phones are a utility just as gas and electric are, it makes sense to tax cell phones, he said.

In addition, revenue collected from the one cent and half cent city sales tax do not go into the General Fund budget as utility taxes do. Revenue collected from city sales tax is already designated for specific projects, he said.

Funds collected from the one cent sales tax are to be split between property tax relief and certain projects, such as improvements on J Street. Fifty percent of the proceeds from the half-cent tax will be allocated to the McCook Economic Development Corp. with the other half directed to city infrastructure needs.

Previously, the City Council asked city staff to look into the cell phone tax, he said, yet added that ultimately, it was up to the council to decide what to do.

Red Willow County Commissioner Leigh Hoyt stated that originally, utility taxes were used to help cities and counties to maintain or expand the service, such as new lines for gas or telephones. Cell phones don't require that kind of extensive labor, he said.

Other members of the public also chimed in. Former McCook City Councilman Dick Trail pointed out that the new tax would only accelerate people to discontinue their landlines and local businessman Don Klein asked how accurately the local cell phone companies would assess the tax.

"Is there any assurance that they won't charge customers 5 to 7 percent?" he challenged the council.

Councilman Lonnie Anderson, who earlier asked in the meeting for the cell phone tax be shelved for a few years, called the question for a vote. With five nays, including one from Mayor Berry, the proposal to charge a 3 percent occupation tax on cell phones was disconnected.

Afterward, during Council Comments, Councilman Kircher thanked the city staff members for the hard work they put in for the proposal and Mayor Berry remarked that despite the disagreements, he appreciated the discussion among the council and the public and that they were able to resolve the issue without a lot of strife.

"That couldn't have happened a few years ago," he commented.