A pair of law firms filed a class-action lawsuit in San Diego Superior Court today against the city of Chula Vista over a controversial tax that the city has for years been charging on cell phone users.
The lawsuit claims that the city has been illegally charging the tax and should pay back cell phone users in the city all the taxes it has collected, plus interest.
Thomas Penfield, one of the attorneys bringing the lawsuit, said it’s unclear yet just how much money could be at question in the case. He said the city of Chula Vista has claimed it’s only liable for a maximum of a year’s worth of taxes, around $5.6 million, but that his firm will be asking for a refund of several years’ worth of the fees.
That could be a big blow to Chula Vista, which has slashed city services and laid off more than 100 employees in the face of a significant decrease in property taxes. The city used the threat of litigation over the tax as justification for further cutting back services late last year. It stopped spending the revenues in November and has been stashing it away in case it was ordered to pay it back.
The small utility tax, which I first wrote about back in February, was introduced in 1970 and is levied on users of telephones, electricity and other utilities.
Here’s a snippet from my previous post:
Because the law introducing the tax was passed well before the invention of cell phones, there’s been some controversy over whether the city can legally tax cell phone calls made in the city. The city says it thinks it can, so it does. Annually, Chula Vista collects around $5.6 million in taxes on cell phone users.
The city tried to modernize what’s formally known as the utility user tax last November with a ballot proposition, Proposition H. The measure would have cemented the city’s right to collect fees on cell phone calls, but since it didn’t pass, there’s still some confusion as to whether the city’s legally entitled to collect that money.
Chula Vista has therefore decided to play it safe. The city’s accountants told me they’re collecting the taxes, but are stashing that money away in case they’re sued one day. That’s a tactic I analyzed in this story. I pointed out that no one had actually sued the city, or even threatened to sue, yet the city’s refusal to spend the money meant it had to cut viciously into its services.
So much for that.
I’ve put in a call to Chula Vista City Attorney Glen Googins and left him a message, but I haven’t heard back yet.
Please contact Will Carless directly at will.carless@voiceofsandiego.org or at 619.550.5670 and follow him on Twitter: twitter.com/willcarless.