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1995-080E: \WPDOCS \ORD\GTE. ORD AN ORDINANCE OF THE CITY OF DENTON, TEXAS RETAINING A LAW FIRM TO REPRESENT THE CITY IN NEGOTIATIONS OR LITIGATION WITH GENERAL TELEPHONE COMPANY OF THE SOUTHWEST ("GTE") OVER ITS FAILURE TO PRODUCE RECORDS REQUIRED BY A CITY AUDIT AND FAILURE TO REMIT DELINQUENT FRANCHISE FEES; AUTHORIZING THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, Southwestern Bell Telephone Company ("Bell") and 57 Texas cities ("Cities") have been in litigation for number of years regarding whether or not a local telephone exchange company must include in its gross receipts for franchise fee purposes revenues received from long distance carriers for access to local telephone lines; and WHEREAS, Bell and the Cities have reached a proposed settle- ment to their litigation worth over 25 million dollars to the Cities; and WHEREAS, on February 10, 1994 the City Manager requested of GTE certain records needed by Reed-Stowe & Co., Inc. to determine, in accordance with auditing principles, the gross receipts of GTE (with long distance and access charges included) from the beginning. of the present franchise (1983) through 1992, for business con- ducted in the City of Denton; and WHEREAS, GTE's response to the City's request consisted of only limited records from 1988 through 1993 and no information directly related to ~he long distance and access charges issue; and WHEREAS, GTE's failure to comply with lawful requests of the City Council set forth in Resolutions No. R94-071 and R95-002, and its failure to pay delinquent franchise fees constitute breaches of its franchise with the City, and violations of the City Charter adopted by the voters in 1959; and WHEREAS, preliminary audit findings reflect that GTE owes the City of Denton in the range of $4,000,000 to $5,000,000 for de- linquent franchise fees for the period from 1983-1994; and WHEREAS, the failure of GTE to pay franchise fees owed re- quires taxpayers of the City to pay higher taxes to fund budgetary items which should be paid by franchise fees properly collected; and WHEREAS, the Constitution of the State of Texas and the City Council's fiduciary duty to its citizens do not allow the City to subsidize a public utility by failing to collect fees for the use and rental of public rights-of-way and easements which such utility has contracted to pay; and WHEREAS, the City can not allow any business or individual within its corporate limits to operate above the law; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION I. That the City Council hereby adopts the findings listed above. SECTION II. That the law firm of ~s hereby retained to represent the City in negotiations with GTE for the purpose of obtaining, on or before noon on April 25, 1995, the records requested from GTE by reason of the audit by Reed-Stowe, & Co., Inc., and collecting the amount of delinquent franchise fees owed the City by such date. SECTION III. That should GTE fail to provide the needed records and remit the amount of delinquent franchise fees owed the City by noon on April 25, 1995,~~~-~ is authorized, with the City Attorney serving as local counsel, to file such pleadings as are necessary as soon as possible in an appropriate State District Court, to effectuate access to the needed records and to obtain collection of or judgment for the de- linquent franchise fees. SECTION IV. ~~~-~,~~ shall, if neces-' sary, take action before the Publi~ Utility Commission ("PUC") to (1) require a judgment for delinquent.~fees owed to the City by GTE, under §13.03 of the City Charter and §7 of the franchise agreement, relating to long distance and access charges, to be assessed directly against GTE or its long ~istance carriers, rather than City of Denton basic local exchange telephone ratepayers; ~nd (2) prevent a judgment for delinquent fees from being passed through to basic local exchange ratepayers without regard to: * excess profits received by GTE, * legal prohibitions against retroactive ratemaking, and * proper allocation of costs among classes of customers pursuant to an illegal automatic passthrough tariff. Additional legal assistance and expert witnesses required to pursue these matters must be approved by the City Attorney. CSECTION V. That the City hereby accepts the offer of ~j~~ to represent the City as set forth in such firm's response to the City's Request for Proposal and its letter of April ~-- , 1995, subject to Sections II, III, and IV above. PAGE 2 SECTION VI. That this ordinance shall become effective immediately upon its passage and approval. JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: MICHAEL A. BUCEK, ACTING CITY ATTORNEY PAGE