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Audit shows nearly $300K in telecomm fees going astray

Thursday, August 27, 2009 by Laurel Chesky

Local telecommunication service providers owe the City of Austin more than $283,000, according to a city audit report. That may not be enough to stave off property taxes and fee hikes, but its money the city sure could use.


On Tuesday, the city auditor’s office presented to the City Council Audit and Finance Committee the second phase of an audit report examining telecommunications access line fees. The first phase of the audit report, presented in May, concluded that five of Austin’s 10 largest certified telecommunications providers (CTPs) – which provide telephone and Internet service to homes and businesses – have failed to pay the city an estimated $58,111 in fees since 2000. The second phase examined the remaining five in the Top 10 and found that they had neglected to pay an estimated $225,685 owed to the city since 2000.


CPTs in Texas must pay municipalities to access the transmission lines that lie within the public right of way. The rate is set by the Public Utility Commission of Texas (PUCT) and paid to cities. In Austin, the city’s Office of Telecommunications and Regulatory Affairs collects the line access fees. Currently 66 CPTs operate within Austin city limits, but the top 10 examined in the audit report account for about 98 percent of the access lines used in the city. The Top 10 include AT&T, Time Warner, Logix, Birch and Granite.


CPTs pay about $13.5 million in lines access fees to the city per year. The uncollected fees represent less than .05 percent of the revenue remitted to the city by CPTs over the time period examined, the audit report concludes.


The root cause of the failure to pay, the reports states, is the fact that an estimated 1,774 transmission lines that connect individual subscribers are improperly assigned to different municipalities, mostly due to annexation. For example, an access line fee that should be allocated to Austin may instead be going to Pflugerville. The city depends on the CPTs themselves to update the addresses of customers and to make sure that fees are paid to the proper municipality.


How much of the owed money can be recouped remains unclear. Clark Cornwell, senior attorney in the city’s Law Department, said the department has just begun to review its legal authority to collect the incorrectly allocated fees. “It’s fair to say that we’d probably be able to collect some of the fees,” he said.


However, a number of factors limit the city’s ability to collect, Cornwell warned the committee. Chief among them stands the city’s limited power to regulate telcos. The CPTs are heavily regulated by the Texas Public Utility Commission, he said, and the city would have to work through that agency to collect the fees.


The city auditor’s office concluded its presentation with recommendations it has made to TARA. The recommendations include contacting the audited CTPs to collect unpaid line access fees, verify that annexation notifications are posted on the PUC Web site in a timely fashion, and partnering with other Texas cities to seek changes to PUC rules to allow cities more regulatory authority.


The telecommunications access line fee audit is one in a series conducted by the city auditor to determine how well city management has optimized revenues. Prior audits studied sales and hotel occupancy taxes, and natural gas and cable TV franchise fees.

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