Verizon asks cities for $2 million in refunds

Published 10:43 pm Wednesday, March 3, 2010

Verizon Northwest wants its money back.

The telecommunications company is asking at least 10 Snohomish County cities to refund a total of more than $2 million in utility taxes.

The request couldn’t come at a worse time for area cities, which are already cinching belts to deal with the recession.

Verizon Northwest requested refunds from Arlington, Bothell, Everett, Lake Stevens, Marysville, Mountlake Terrace, Mukilteo, Snohomish, Monroe and Stanwood.

“It’s another $150,000 we don’t have,” said Kristin Banfield, Arlington assistant city administrator. “Budgets are very tight for cities right now.”

Verizon asked the city of Everett for the largest refund in the county: $769,000.

Jonathan Davies, a Verizon spokesman, declined to provide details, such as all the cities being asked to give refunds, the total amount the company is seeking statewide or how the company calculated the amounts.

He did read a two-sentence statement prepared by attorneys that cited two rulings by the Washington State Supreme Court that found cities can only tax telecommunication services that stay within the state.

What Verizon’s digital service offers “is an interstate service and, according to Supreme Court’s rulings, should never have been subject to the cities’ local user utility taxes,” he said.

In a Dec. 31 letter sent to cities, a Seattle attorney representing Verizon argued that the company shouldn’t have paid taxes on sales of its digital subscriber line service from Jan. 1, 2005 to June 30, 2008.

The letter sent to the cities doesn’t explain how Verizon arrived at the refund amounts.

“How did they come up with that amount?” said Mukilteo finance director Scott James. Verizon wants $150,000 from Mukilteo. “My first response was show me the proof.”

Verizon won’t get the money without a fight.

City leaders around the county are banding together to hire the Seattle legal firm Ogden Murphy Wallace to mount a joint defense.

No lawsuit has been filed. So far, city leaders have asked the law firm to research the issue and report back, Everett spokeswoman Kate Reardon said.

If forced to pay, leaders in some cities may be forced to lay off staff or cut back on services.

In Arlington, a city of 17,500, officials already had to cut 12 city jobs to fill a $1 million dollar shortfall in this year’s budget, said Banfield, assistant city administrator. Paying a $150,000 refund could mean cutting three more jobs.

“We cut everything else,” she said.

Budgets are just as tight in Monroe and Snohomish, which would have to pay $112,000 and $238,000, respectively.

“We’re so tightly budgeted, that we’re watching expenditures of less than $1,000 closely,” Snohomish city manager Larry Bauman said.

Verizon, based in New York City, is in the process of selling its land-lines in the Northwest. It continues to offer digital Internet, television and phone service.

Debra Smith: 425-339-3197, dsmith@heraldnet.com

Refund requests

Here are the amounts Verizon requested from local cities:

Arlington $149,459

Bothell $91,239

Everett $769,618

Lake Stevens $94,782

Marysville $244,282

Monroe $112,298

Mountlake Terrace $132,262

Mukilteo $149,904

Snohomish $238,088

Stanwood $59,500

Total $2,041,432