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Internet S.150 ltrs to legislatMEMORANDUM O~oberl, 2003 TO: FROM: SUBJECT: The Honorable Mayor and City Council Members Michael C. Van Milligen, City Manager S. 150, "The Internet Nondiscrimination Act" Cable Franchise Administrator Merrill Crawford recommends City Council approval of letters to Senator Chades Grassley and Senator Tom Harkin regarding concerns with S. 150, "The I nternet Nondiscrimination Act." I concur with the recommendation and respectfully request Mayor and City Council approval. Michael C. Van Milligen MCVM/jh Attachment cc: Barry Lindahl, Corporation Counsel Cindy Steinhauser, Assistant City Manager Merrill Crawford, Cable Franchise Administrator CITY OF DUBUQUE, IOWA MEMORANDUM September 30, 2003 MEMO TO: Michael C. Van Milligen, City Manager FROM: Merrill Crawford, Cable Franchise Administrato~.-----~ SUBJECT: S. 150, 'q'he Internet Nondiscrimination Act" INTRODUCTION: The purpose of this memorandum is to recommend that the City Council authorize letters to Senator Grassley and Senator Harkin regarding concerns with S. 150, "The Intemet Nondiscrimination Act" BACKGROUND: On September 18, the U.S. House of Representatives passed H.R. 49, "The Intemet NonDiscrimination Act". Its counterpart, S.150 has been referred to the Senate Finance Committee, chaired by Senator Charles Grassley. The present federal prohibition of state and local taxes on Internet access will expire November 1. While the Congress intends to make this moratorium permanent via H.R. 49 and S.150, wording recently added by the Senate Commerce Committee would expand the scope of the prohibition to include state and local telecommunications taxes. Further, the language is broad enough that we can expect industry players to claim that it also prohibits cable and telecom franchise fees, rights-of-way fees, or other forms of compensation traditionally paid as rent to municipalities for the permanent occupancy and use of public property to generate private commercial profit. The attached information indicates the immediate and long term financial damage to municipalities that could result if this legislation is enacted without clarifying the limits of the "lnternet access" target to which the moratorium is to be applied. RECOMMENDED ACTION: The Recommended Action is that the City Council approve and authorize the Mayor to sign letters to Senator Charles Grassley and Senator Tom Harkin emphasizing our concern with the defects of this lanquage in S.150. cc: Pauline Joyce, Administrative Services Manager Barry Lindahl, Corporation Counsel ACTION ALERT I Internet Tax Non-Discrimination Act Bad News for Local Governments - Take Action Now to Alert Your Senator The House of Representatives passed their version of the Internet Tax Non-Discrimination Act H.R. 49 despite warnings of severe negative impact. The Senate is poised to vote on S. 150, and holds the only hope of protecting local government interests. Contact your LANGUAGE OF S. 150 WILL DEPRIVE MUNICIPALITIES OF BILLIONS OF DOLLARS IN TAX AND FEE REVENUE: · The Internet Tax Moratorium, originally intended to prevent the taxation of Intemet transactions, is set to expire on October 31, 2003, absent Congressional action. H.R. 49 and S. 150 are the result of the desire to extend and expand upon the existing moratoria. These pieces of legislation have been heavily influenced by cable and telecom industry lobbyists who have helped expand the definition -- now this legislation could exempt all telecommunications providers from local government taxes, including franchise fees for cable and telephone. · Specifically, H.R. 49 and S. 150 extend the moratorium on Intemet taxes permanently and expand the ban on Internet access taxes to include telecommunications services to the extent "such services are used to provide Internet access." · The language of H.R. 49 and the proposed language of S. 150 threatens two traditional, yet separate and distinct, municipal powers - o the ability to impose telecommunications taxes or to apply local utility taxes to the provision of telecommunications services and, o the ability of local governments to impose franchise fees as "rent" for use of public rights-of-way on companies, such as telecommunications and cable service providers that use public property for private profit. · The proposal to make the Internet sales tax moratoria permanent is premature. The stated need - to help e-commerce help the economy - can be equally served by simply extending the moratorium. · The result of the proposed legislation will be the loss of billions of dollars in telecommunications fees and taxes for local governments across the Senators today! Let them hear from local governments! country. With respect to H.R. 49, the Congressional Budget Office stated that the bill was an unfunded mandate and will cost state and local governments at least $80 to $120 million, and further that they "cannot estimate the magnitude of timing of any additional impact at this time." The Multi-State Tax Commission has indicated that losses may be as high as $4 to $8 billion. WHAT TO DO: Immediately draft a letter to both your Senators and to the members of the Senate Commerce Committee. Demand that your elected members make changes to the proposed language to clarify the following two items: · That in adopting S. 150 Congress does not intend to interfere with or in any way limit the imposition or collection of any municipal telecommunications taxes or utility taxes applicable to telecommunications, nor with any municipal rights-of-way fees nor gross percentage fees collected in lieu of rights-of- way fees. · That S. 150 does not preempt the imposition or collection of excise taxes of general applicability (including telecommunications and utility taxes) on services that employ telecommunications, cellular or cable television facilities, even if those services offer access to the Internet. WHERE DO I GET MORE INFORMATION?: · NATOA has collected a sample of letters sent from a variety of sources. You can access these letters on the NATOA Web site, on the Policy/Advocacy page. Be sure to use a sample that best fits your state's and/or local government's concerns, and be sure to modify them for your community's use. Visit www.natoa.or,q, Policy/Advocacy Page. ~S. 150, Intemet Tax Nondiscrimination Act Congressional Budget Office Cost Estimate Page 1 of 3 Retrieve in: ~~C~ September 9, 2003 S. 150 Internet Tax Nondiscrimination Act As ordered reported by the Senate Committee on Commeme, Science, and Transportation on July 31, 2003 SUMMARY S. 150 would permanently extend a moratorium on certain state and local taxation of online services and electronic commerce, and after October 1, 2006, would eliminate an exception to that prohibition for certain states. Under current law, the moratorium is set to expire on November 1, 2003. CBO estimates that enacting S. 150 would have no impact on the federal budget, but beginning in 2007, it would impose significant annual costs on some state and local governments. By extending and expanding the moratorium on certain types of state and local taxes, S. 150 would impose an intergovernmental mandate as defined in the Unfunded Mandates Reform Act (UMRA). CBO estimates that the mandate would cause state and local governments to lose revenue beginning in October 2006; those losses would exceed the threshold established in UMRA ($64 million in 2007, adjusted annually for inflation) by 2007. While there is some uncertainty about the number of states affected, CBO estimates that the direct costs to states and local governments would probably total between $80 million and $120 million annually, beginning in 2007. The bill contains no new private- sector mandates as defined in UMRA. ESTIMATED COST TO THE FEDERAL GOVERNMENT CBO estimates that enacting S. 150 would have no impact on the federal budget. INTERGOVERNMENTAL MANDATES CONTAINED IN THE BILL The Internet Tax Freedom Act (ITFA) currently prohibits state and local governments from imposing taxes on tntemet access until November 1, 2003. The ITFA, enacted as Public Law 105-277 on October 21, 1998, also contains an exception to this moratorium, sometimes referred to as the "grandfather clause," which allows certain state and local govemments to tax Intemet access if such tax was generally imposed and actually enforced prior to October 1, 1998. S. 150 would make the moratorium permanent and, after October 1, 2006, would eliminate the grandfather clause. The bill also would state that the term "lnternet access" or "lnternet access services" as defined in ITFA would not include telecommunications services except to the extent that such services are used to provide Intemet access (known as "aggregating" or "bundling" of services). These extensions and expansions of the moratorium constitute intergovernmental mandates as defined in UMRA because they would prohibit states from cellecting taxes that they otherwise could collect. ESTIMATED DIRECT COSTS OF MANDATES TO STATE AND LOCAL GOVERNMENTS CBO estimates that repealing the grandfather clause would result in revenue losses for as many as httm//www, cbo.aov/showdoc.cfm?index=4544&sequence=0 09/29/2003 150, Intemet Tax Nondiscrimination Act 10 states and for several local governments totaling between $80 million and $120 million annually, beginning in 2007. We also estimate that the change in the definition of Intemet access could affect tax revenues for many states and local governments, but we cannot estimate the magnitude or the timing of any such additional impacts at this time. UMRA includes in its definition of the direct.costs of a mandate the amounts that state and local governments would be prohibited from raising in revenues to comply with the mandate. The direct costs of eliminating the grandfather clause would be the tax revenues that state and local governments are currently collecting but would be precluded from collecting under S. 150. States also could lose revenues that they currently collect on certain services, if those services are redefined as Intemet access under the bill. Over the next five years there will likely be changes in the technology and the market for lnternet access. Such changes are likely to affect, at minimum, the price for access to the Intemet as well as the demand for and the methods of such access. How these technological and market changes will ultimately affect state and local tax revenues is unclear, but for the purposes of this estimate, CBC assumes that over the next five yearn, these effects will largely offset each other, keeping revenues from taxes on Intemet access within the current range. The Grandfather Clause The pdmary budget impact of this bill would be the revenue losses-starting in October 2006- resulting from eliminating the grandfather clause that currently allows some state and local governments to collect taxes on Intemet access. VVhile there is some uncertainty about the number of jurisdictions currently collecting such taxes--and the precise amount of those collections-CBC believes that as many as 10 states (Hawaii, New Hampshire, New Mexico, North Dakota, Ohio, South Dakota, Tennessee, Texas, Washington, Wisconsin) and several local jurisdictions in Colorado, Ohio, South Dakota, Texas, Washington, and Wisconsin are currently collecting such taxes and that these taxes total between $80 million and $120 million annually. This estimate is based on information from the states involved, from industry sources, and from the Department of Commerce. In ardving at this estimate, CBC took into account the fact that some companies are challenging the applicability of the tax to the service they provide and thus may not be collecting or remitting the taxes even though the states feel they are obligated to do so. Such potential liabilities are not included in the estimate. It is possible that if the moratorium were allowed to expire as scheduled under current law, some state and local governments would enact new taxes or decide to apply existing taxes to Internet access during the next five years. It is also possible that some governments would repeal existing taxes or preclude their application to these services. Because such changes are difficult to predict, for the purposes of estimating the direct costs of the mandate, CBC considered only the revenues from taxes that are currently in place and actually being collected. Definition of Internet Access Depending on how the language altering the definition of what telecommunications services are taxable is interpreted, that language also could result in substantial revenue losses for states and local governments. It is possible that states could lose revenue if services that are currently taxed are redefined as Intemet "access" under the definition in S. 150. Revenues could also be lost if Intemet access providers choose to bundle products and call the product Intemet access. Such changes would reduce state and local revenues from telecommunications taxes and possibly revenues from content currently subject to sales and use taxes. However, CBO cannot estimate the magnitude of these losses. Page 2 of 3 ESTIMATED IMPACT ON THE PRIVATE SECTOR This bill would impose no new private-sector mandates as defined in UMRA. PREVIOUS CBC ESTIMATE httn://www.cbo.eov/showdoc.cfin?index=4544&sequence=0 09/29/2003 S. 130, Internet Tax Nondiscrimination Act On July 2'1, 2003, CBO transmitted a cost estimate for H.R 49, the Interact Tax Nondiscrimination Act, as ordered reported by the House Committee on the Judiciary on July 'i6, 2003. Unlike H.R. 49, which would eliminate the grandfather clause upon passage, S. '150 would allow the grandfather clause to remain in effect until October 2006. Thus, while both bills contain an intergovernmental mandate with costs above the threshold, the enactment of S. '150 would not result in revenue losses to states until October 2006. Page 3 of 3 ESTIMATE PREPARED BY: Impact on State, Local, and Tdbal Governments: Sarah Puro Federal Costs: Melissa Zimmerman impact on the Pdvate Sector: Paige PipedBach ESTIMATE APPROVED BY: Peter H. Fontaine Deputy Assistant Director for Budget Analysis htm://www.cbo.gov/showdoc.cfm?indeX=4544&sequence=0 09/29/2003 Revenue Impact on State and Local Governments of Permanent Extension of the Internet Tax Freedom Act Dan Bucks, Elliott Dubin and Ken Beier~ Staff of the Multistate Tax Commission September 24, 2003 Short-Term Fiscal Impact of H.R. 49 as Approved by the House Judiciary Committee and Comparison with Impact If the Bill Were Amended to Reflect Congressional Intent Based on the best available information, H.R. 49~y preempting a variety of activities that go beyond access by customers to the Interact and by expanding the scope of the preemption (o income, property and other business taxes--will reduce revenues from current taxes levied by the 50 states, the District of Columbia and local governments a minimum of $4 billion and up to $8.75 billion annually by 2006. Whether the losses rise to the higher level depends on the outcome of anticipated litigation over the provisions of H.R. 49 if enacted. The estimates above are conservative because they do not include the full impact of services, information and content that can be exempted from tax by being bundled with Intemet access or offered as a service over the Intemet. In contrast, if the language of H.R. 49 were amended to conform to Congress' intent of preempting only sales taxes on solely Internet access to customers, including broadband, and extending the preemption to "grandfathered" sales taxes of certain states, the cost to state and local governments would be limited to approximately $500 million in 2006. This estimate is based on mending the language to reflect the original intent of the Intemet Tax Freedom Act, with modifications to reflect the objectives of technological neutrality and national uniformity expressed in the deliberations of the House Judiciary and Senate Commerce Committees. However, the current language of H.R. 49 has a much broader scope and impact than what appears to be Congress' intent. Long-Term Fiscal Impact of H.R. 49 as Approved by the House Judiciary Committee H.R. 49 will eventually exempt all or nearly all of the telecommunications industry from major state and local taxes: sales, excise, income, property and other taxes. The date when the virtual exemption from state and local taxes occurs depends on the speed at which the industry completes the conversion of its services to the Intemet--a technological change now dearly underway. The point of virtually complete exemption from state and local taxes will occur earlier in some states and localities than others. If the current language of H.R. 49 had been in effect in 2002 and if the industry had completed the transfer of its services to the Intemet, the revenue loss to state and local goverrmaents would have been $22 billion. A fundamental change is occurring in the telecommunications industry that will enable it to qualify its services as "Internet access" and thus eligible for a state and local tax exemption t The authors of this report are, respectively, the Executive Director, Director of Policy Research and Senior Policy Analyst with the Multistate Tax Commission. under the current terms of H.IL 49. The traditional telephone system is in the process of being replaced by the Interact operating at increasingly higher speeds. Business Week magazine reports that Verizon is basing its future business plan on the "conviction that telecom as we know it is history. In its place will emerge a 'broadband industry' that will use the new, superfast Net links and high capacity networks to deliver video and voice communications with all the extras.''2 The Wall Street Journal reports that MCI by year-end will have moved 25% of its voice traffic to the Intemet backbone and by 2005, plans to have 100% of the voice traffic therefi In this article, MCI Senior Vice President Vint Cerf (one of the original co-anthers of the TCP/IP formula) discusses the future of telecommunications in terms of how some day customers will buy all voice services for one flat rote when "voice will be just one more application traveling.. · across the Net? Under existing law, telecommunication services were excluded from the definition of Interact access and thus not within the scope of the preemption of state and local taxes. Under the current language of H.R. 49, telecommunications would benefit from the tax preemption to the extent that they provide Intemet access. As noted above, all telecommunications will eventually qualify as Interact access as they become a service offered over the Intemet. When that point is reached--and the transition is tmfolding mpidly--telecommunicatious will be exempt from all major state and local taxes. Functional Impact on State and Local Governments The revenues that would be preempted under this proposed legislation can also be thought of in terms of what public services could be affected. For example, the National Center for Education Statistics projects that it will cost state and local governments $8,557 for each pupil enrolled in public elementary and secondary schools in 2005.5 Every $1 billion that would be preempted by this proposed legislation, and not made up by other revenues, or reductions in other services could have been used to provide education for nearly 117,000 pupils. Similarly, at 2001 compensation rates, each $1 billion in state and local revenues preempted by this legislation translates to nearly 20,000 fewer policemen on "the beat" or nearly 20,000 fewer firefighters, or more than 27,000 hospital workers. Similarly, for each $1 billion preempted, there could be nearly 25,000 fewer instructional staffin public elementa~ and secondary schools or more than 17,000 fewer instructional personnel in college classrooms and laboratories (Summary Table 1).6 2 Steve Rosenbush with Tom Lowry, "Verizon's Gutsy Bet," Business Week Online, August 4, 2003. 3 Holman W. Jenkins, Jr., "Interact Pioneer Meets the Telecom Wars," The Wall Street Journal Online, August 6, 2003. 4 Ibid. s U.S. Department of Education, National Center for Education Statistics, Projections of Education Statistics to 2011, May 2001, Table 33., http://nces.ed.gov/pubs200 I/proj01/tablesJtable33 .asp 6 U.S. Bureau of the Census, Public Employment in 2001, ttp://www.cbo.gov/showdoc.c fm?index-~1434&s equenee=0 2 Summary Table 1 Full-time Equivalent Personnel Per $1 Billion of State and Local Revenue: 2001 Function Police With Arrest Power 19,895 Firefighters 19,922 Hospital Personnel 27,027 Instructional Staff Elementary and secondary Education 24,762 Higher Education 17,358 Source: U. S. Bureau of the Census, Public Employment, 2001, and Multistate Tax Commission calculations. Summary of Fiscal Estimate Data Short Term Fiscal Estimates The Summary Table below presents the data for the short-term fiscal estimates and the assumptions on which they are based. Row 1 row presents data for the estimate that the current language of H.R. 49 will cost state and local governments a minimum of $4 billion from current taxes. Row 2 presents data for the estimate that the current language could cost up to $8.75 billion in revenue, again, from current taxes. Row 3 presents the estimate for the slightly more than $500 million cost to state and local governments of a permanent preemption of only sales taxes on solely Intemet access~ the result if the language of H.R. 49 were amended to reflect Congress' intent. The footnotes in the table detail the types of taxes affected and the types of telecommunications services that would be exempted in the short-term. ~ummary Table 2 Short-Term Fiscal Impact in 2006 of Extension of Internet Tax Preemption under Three Assumptions~ (millions of dollars) Total Trans- Assumptions Preempted actions Business Taxes Taxes2 Taxes3 · - · sn $3,977 2,074 1,903 1. H.R. 49: Amblgulttes Interpreted Moderately by Court 2 H.R. 49 Ambiguities Interpreted More Broadly by $8,751 5,091 3,660 Courtss 3. Legislation Amended to Conform to Congressional $529 529 Intent to Preempt Sales Taxes on Only Interact Access6 1. These estimates do not include the full impact of services, information and content that can be bundled with Intemet access or offered as another service over the tntemet. They also do not include potential transactions taxes that state and local governments could impose if the current moratorium were allowed to expire because such estimates would not reflect any losses from cmrent taxes. 2. Includes gross receipts taxes, consumer sales taxes, 911 fees, and other transactions taxes. 3. Includes sales taxes on business inputs, property taxes, capital stock taxes, and business income taxes, 4. Interact access plus Voice over Interact Protocol (VolP) and wireless communications over the Intemet (WolP) +intemet backbone services. 5. Interact access, Vol]?, WolP, and other telecommunications services interpreted as an "other service offered over the Intemet" 6. Interact access clearly defined as a service that connects retail users to an initial point of presence on the Interact by any means, including DSL and wireless access. Preemption limited, as under current Iaw, to only sales and other transaction taxes, but extended to those states currently allowed to collect preexisting mmsactional taxes on Interact access. Lone-Term Fiscal Estimate. Because the date when the telecommunications industry converts its services to operate over the Intemet is not known at this time, this paper places in perspective the impact of a virtually complete exemption for the industry from state and local taxes by estimating the total mount of taxes paid by the industry in 2002. This amount was projected by adding to total state and local telecommunications taxes, other than corporate income taxes, in 1999 an estimate of · such income taxes and then projecting that amount fonvard to 2002. The estimated amount of total state and local telecommunications taxes in 2002 is $22.3 billion.7 7 Robert Cline, "Teleconwannications Taxes: 50-State Estimates of Excess State and Local Tax Burden," Tax Analysts, State Tax Notes. June 30, 2002, p. 932; and IRS Statistics of Inanme, Corporate Income Tax Returns, 1999. State corpomte taxes for telecommunications companies were assumed to be 20% of the federal tax liability of those companies. 4 Office of the Mayor ~nd City Council City EaU 50 West 13th Street Dubuque, Iowa 520014864 October 6, 2003 Senator Tom Harkin United States Senate 731 Hart Office Building Washington, D.C. 20510 Dear Senator Harkin: I am writing on behalf of the City of Dubuque to express our serious concerns with S.150 and H.R. 49, the "lnternet Tax Non-Discrimination Act". While we do not oppose a reasonable extension of the moratorium on state and local taxes on Internet access itself, we believe the present language of these bills goes far beyond such an extension. We believe the present language of S.F. 150 will alter and expand the definition of "lntemet access" such that even cable and telecommunications services, which are currently excluded from the scope of the Intemet tax ban, could become subject to the ban to the extent such technologies are used in any way to access the Intemet. The unintended result would be to deprive municipalities of billions of dollars in tax and fee revenues in the years ahead and, in the meantime, to generate needless confusion and litigation. State and local governments did not oppose the internet Tax Freedom Act in 1998 or its extension on 2001. We recognized the need at that time to foster the growth and development of the Intemet and its availability to citizens in urban, small town and rural areas. We've seen that growth occur across the country as in Dubuque, with new high- speed broadband technologies offered by phone companies, cable operators, wireless and satellite service providers. It makes sense to update the Act's original language defining "lnternet access", to treat all access technologies equitably, and to cladfy which products and services are included in the tax ban and which are not. Our concern is that the language of S.150 and H.B. 149, as proposed, is overly broad and poses a direct threat to two traditional, yet separate and distinct, municipal powers. The first is the ability of cities, where state law allows, to impose telecommunications taxes (or to apply utility taxes to telecommunications service providers). The second is our ability to collect franchise fees as "rent" from cable operators and other businesses that occupy and use public property to generate private profit. From Dubuque's 50 years of cable television experience, we expect that, if this language is not refined, some industry participants will quickly interpret S. 150 to avoid Service People Integrity Responsibility Irmovation Teamwork Senator Tom Harkin October 6, 2003 Page 2 paying local utility taxes as well as franchise fees or rights-of-way fees applied to extensive infrastructure they have deployed above and below our streets and alleys. Wording must be added to S. 150 stating that Congress does not intend to interfere with or limit the ability of local governments to impose or collect telecommunications taxes (or to apply utility taxes to telecommunications service providers), nor with any municipal rights-of-way fees. The bill should further clarify that it does not preempt the imposition of collection of excise taxes of general applicability on services that use telecommunications, cellular, or cable television facilities, even if those services offer access to the Internet. We respectfully request that the Congress delay further action on S. 150 and H.B. 49 until a precise definition of "lnternet access" is crafted by committee staff with the assistance of industry and local government representatives. Without such clarification, the collateral fiscal damage inflicted by S.150 on local governments will be significant. Federal preemption ofthese traditional rights, whether intended or not, will result in immediate financial loss to Dubuque and other Iowa cities, and the size of that loss will literally mushroom in the future as more forms of 'communication shift to broadband, Intemet-based technologies. We are confident this is not the legacy you intend or desire for Iowa in the decades ahead. Sincerely, Terrance M. Duggan Mayor, City of Dubuque Office of the Mayor and City Council City Flail 50 West 13ffi Sereet Dubuque, Iowa 520014864 October 6, 2003 Senator Charles Grassley United States Senate 135 Hart Office Building Washington, D.C. 20510-1501 Dear Senator Grassley: I am writing on behalf of the City of Dubuque to express our serious concerns with S.150 and H.R. 49, the "lnternet Tax Non-Discrimination Act". While we do not oppose a reasonable extension of the moratorium on state and local taxes on Intemet access itself, we believe the present language of these bills goes far beyond such an extension. We believe the present langdage of S.F. 150 will alter and expand the definition of "lntemet access" such that even cable and telecommunications services, which are currently excluded from the scope of the lnternet tax ban, could become subject to the ban to the extent such technologies are used in any way to access the Internet. The unintended result would be to depdve municipalities of billions of dollars in tax and fee revenues in the years ahead and, in the meantime, to generate needless confusion and litigation. State and local governments did not oppose the Intemet Tax Freedom Act in 1998 or its extension on 2001. We recognized the need at that time to foster the growth and development of the lntemet and its availability to citizens in urban, small town and rural areas. We've seen that growth occur across the country as in Dubuque, with new high-speed broadband technologies offered by phone companies, cable operators, wireless and satellite service providers. It makes sense tof update the Act's original language defining "lnternet access", to treat all access technologies equitably, and to cladfy which products and services are includediin the tax ban and which are not. Our concern is that the language of S.150 and H.B. 149, as proposed, is overly broad and poses a direct threat to two traditional, yet separate and distinct, municipal powers. The first is the ability of cities, which state law allows, to impose telecommunications taxes (or to apply utility taxes to telecommunications service providers). The second is our ability to collect franchise fees as "rent" from cable operators and other businesses that occupy and use public property to generate private profit. Service People Integrity Responsibility Innovation Teamwork From Dubuque's 50 years of cable television experience, we expect that, if this language is not refined, some industry participants will quickly interpret S. 150 to avoid paying local utility taxes as well as franchise fees or rights-of-way fees applied to extensive infrastructure they have deployed above and below our streets and alleys. Wording must be added to S. 150 stating that Congress does not intend to interfere with or limit the ability of local governments to impose or collect telecommunications taxes (or to apply utility taxes to telecommunications service providers), nor with any municipal rights-of-way fees. The bill should further clarify that it does not preempt the imposition of collection of excise taxes of general applicability on services that use telecommunications, cellular, or cable television facilities, even if those services offer access to the Intemet. We respectfully request that the Congress delay further action on S. 150 and H.B. 49 until a precise definition of "lnternet access" is crafted by committee staff with the assistance of industry and local government representatives. Without such clarification, the collateral fiscal damage inflicted by S.150 on local governments will be significant. Federal preemption ofthese traditional rights, whether intended or not, will result in immediate financial loss to Dubuque and other Iowa cities, and the size of that loss will literally mushroom in the future as more forms of communication shift to broadband, Intemet-based technologies. We are confident this is not the legacy you .intend or desire for Iowa in the decades ahead: Sincerely, Terrance M. Duggan Mayor, City of Dubuque