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
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