The settlement came last week after several years of negotiations. Cell phone providers cut off payments of the 5 percent business license tax four years ago, initially claiming cell phones were not telephones but two-way radios.
A court ruling determined cell phones were telephones. Monett joined several other cities using the Dan Vogel law firm to represent them in a class action suit to recover back taxes. A settlement had earlier been reached with U.S. Cellular, AT&T Wireless and Sprint.
Monett City Administrator Dennis Pyle had pushed for the Vogel firm to next pursue a settlement with Alltel, which had a significant presence in the Monett market. Other cities were focused on settling with T-Mobile, the other major provider that had not yet settled.
Alltel originally offered the city a settlement of $60,500.
"We did not think that was correct," Pyle said. "Their numbers didn't match ours for approximately four years of back taxes."
In seeking a separate deal, Pyle said tax numbers were tracked back to January of 2009. Numbers were exchanged back and forth until a few weeks ago, when the two sides began concurring.
Part of Monett's strength in the case, Pyle said, was the city's 1951 ordinance that called for a 5 percent tax on "all telephone and telephonic services." Unlike other cities, Monett's ordinance was specific and dated back to the beginning of the arrangement with modern providers.
Once mutual grounds for calculating a total were reached, the formula was applied to back taxes.
"I suspected [a large total] all along, though I wasn't sure," Pyle said. "They also agreed to pay the tax on a monthly basis going forward, which they have been doing since April."
By a conservative estimate the Alltel agreement will bring in around $80,000 a month, possibly more. The settlement total also included legal fees.
"Alltel cannot pass the settlement for back taxes on to the consumer, under the agreement we signed," Pyle said. "We cannot prevent the passing on of the 5 percent tax to customers going forward."
Action was taken on the settlement in a special city council meeting last week. Council members had been appraised of progress on the case and offered little comment in voting to accept the settlement.
"We weren't sure as we were negotiating when the settlement was going to occur," Pyle said. "We thought it might be next April. Now we will have this settlement plus the $126,000 that we will get from the AT&T landline case coming this month as well.
"When we prepared the budget [for the current fiscal year], I said we should not include those revenues [from the phone company settlements], because we did not know when they were coming in," Pyle said. "I think we were looking at a shortfall of $225,000 with sales taxes and other revenue not coming in. This settlement will cover the shortfall for at least this fiscal year."