Franchise Agreements 2011 Florida Home Rule Green Book Reprinted with permission by Robert L. Nabors Brian P. Armstrong William C. Garner Florida Association of County Attorneys June 18, 2014
14.07 Evolution of Home Rule Power to Execute a Franchise Agreement Historically, utilities voluntarily bargained for and entered into franchise agreements with municipalities. Subsequent to the 1968 constitutional revision, franchise agreements were also routinely entered into by utilities with charter counties under the assumption that charter counties possessed the same home rule power as municipalities. However, a distinction was made by the utilities as to non-charter counties based on the erroneous assumption that non-charter counties did not have sufficient home rule power to bargain for fees and execute franchise agreements. As a consequence, the utilities generally required a special act granting to a non-charter county the power to enter into a franchise agreement as a condition of entering into a franchise agreement. See Ch. 77-506, Special Acts of Fla. (authorizing Brevard County to enter into a franchise agreement for the use of its rights-of-way and other public areas for the distribution or sale of electricity). The home rule authority of a non-charter county to enter into a franchise agreement with a utility and to impose a fee that is bargained for in exchange for the governmental property rights relinquished is now settled. An evolving issue is the power of a county or municipality to unilaterally impose a fee for a privileged use of its right-of- way whether such charge is characterized as a rental fee, a regulatory fee, or both. One of the issues in Santa Rosa County v. Gulf Power Co., 635 So. 2d 96 (Fla. 1st DCA 1994), review denied, 645 So. 2d 452 (Fla. 1994), was whether non-charter counties require specific authority from the legislature to impose franchise fees upon utilities for the use of their rights-of-way. At issue were ordinances adopted by two non- charter counties granting a non-exclusive franchise to certain utilities and imposing a franchise fee equal to 5 percent of gross sales. While the trial court held that the non-charter counties had the power to impose franchise fees for the use of the utility’s rights-of-way, it held that the franchise fees were impermissible taxes because the amount charged bore no discernible relationship to the cost to the counties for the use of their right-of-ways and the counties did not provide sufficient evidence to show that the amount charged was reasonable. Additionally, the trial court held that the counties were estopped from imposing the franchise fee upon one of the utilities as a consequence of the resolution passed in the 1920s granting such utility the right to occupy the county’s roads for the purpose of constructing and maintaining electric transmission and distribution lines holding that such resolutions constituted a grant of a franchise with no fee. As to the home rule power of a non-charter county to grant a franchise, the Court reversed the trial court and held: Thus, the specific powers enumerated under section 125.01 are not all-inclusive, and a non-charter county’s authority comprises that which is reasonably implied or incidental to carrying out its enumerated powers. The only limitation on a county’s implied power to act occurs if there is a general or
special law clearly inconsistent with the powers delegated. As discussed later in this opinion, the only statutes which we find inconsistent with the authority of the counties to grant franchises and to impose fees thereon are those pertaining to the PSC’s regulation of telephone utilities, which, we consider, have preempted the counties from so acting. 635 So. 2d at 99-100. As to the issue that a franchise fee was a impermissible tax, the Courts relied on City of Plant City v. Mayo, 337 So. 2d 966 (Fla. 1976), and held that the charges were fees bargained for in exchange for specific property rights relinquished by the counties and constituted consideration for the contractual grant of the right to use rights-of-way of the counties. Comment 49: Legislative Preemption Relating to Telephone Companies The holding in Santa Rosa County v. Gulf Power Co., 635 So. 2d 96 (Fla. 1st DCA 1994), review denied, 645 So. 2d 457 (Fla. 1994), that the authority to grant a franchise and impose a fee on telephone utilities was preempted was based upon the provisions of sections 364.32 through 364.37, Florida Statutes, which granted the Florida Public Service Commission the exclusive jurisdiction to grant certificates to telephone companies. The Court held that such authority preempted counties from enacting ordinances requiring the payment of franchise fees by telephone providers.This reference is of historical interest only. A communications services tax enacted in 2001 consolidated the local taxation of telecommunication companies. Section 202.19(3)(a), Florida Statutes, provides that the communication service tax replaces fees on telecommunications and cable service providers and dealers in communication services. 14.08 Analysis of Decision in Alachua County v. State Principle 32: A bargained for reasonable fee in a franchise agreement is not a tax. Additionally, a unilaterally imposed fee related to the cost of the regulation and constituting a reasonable rental charge for the use of public property is a valid user fee. In Alachua County v. State, 737 So. 2d 1065 (Fla. 1999), because the electric utilities would not consent to a franchise agreement, the county unilaterally imposed a fee for the privileged use of its rights-of-way. The fee imposed was 3 percent of the gross revenues generated by the electric utilities and the utilities were allowed to separately state the fee on the electric bill. The record in the validation proceedings did not, in the words of the Court, establish any "nexus between its alleged ‘reasonable rental charge’ and the rental value of the rights-of-way." 737 So. 2d at 1067-68 (citation omitted). As a consequence, the Court held that the unilaterally imposed privilege fee was a tax not authorized by general law.
The Alachua County v. State case was distinguished by the Court in Florida Power Corp. v. City of Winter Park, 887 So. 2d 1237 (Fla. 2004). There, the electric utility refused to renegotiate a franchise agreement which had previously provided for the payment of a franchise fee of 6 percent of the gross revenues received from the sale of electricity within the municipality. The Court likened the electric utility to a holdover tenant in the public rights-of-way and held that the electric utility would be subject to the 6 percent fee until the parties reached a new agreement or the municipality exercised its rights to acquire granted under the franchise agreement. The Court distinguished its prior holding in Alachua County v. State as follows: Moreover, we reiterate that Alachua validates fees that are reasonably related to the government’s cost of regulation or the rental value of the occupied land, as well as those that are the result of a bargained-for exchange. In the instant case, the trial court specifically found that the City had "offer[ed] sufficient evidence that the six percent fee was reasonably related" to the costs of regulation, and had "also presented strong evidence that the six percent fee is a fair ‘market rate’ for such use, occupation, or rental." [citations omitted] 887 So. 2d at 124; see also Town of Belleair v. Florida Power Corp., 897 So. 2d 1261 (Fla. 2005) (summarizing the decision in Florida Power Corp. v. City of Winter Park). In summary, a bargained for fee in a franchise agreement is not a tax. The fact that the franchise agreement has expired does not render the charge a tax and it remains a valid fee until a new agreement is reached or any contractually granted acquisition rights are exercised. Additionally, a unilaterally imposed fee reasonably related to the cost of regulation and constituting a reasonable rental charge for the use of public property is a valid fee.
Franchise Agreements Brian Armstrong Bill Garner Florida Association of County Attorneys June 18, 2014
• A franchise is simply a contract. • Florida counties possess the right and power to enter a franchise agreement with utilities: o Electric o Natural gas o Water and wastewater (if located in counties not subject to regulation by the Florida Public Service Commission) 2
• A county’s right to issue a franchise exists regardless of whether a county is a charter county • A county possesses the right and power to establish reasonable terms for use of rights of way and to receive compensation when allowing the use of rights of way by third parties 3
• A county can establish terms regulating use of rights of way and compensation for such use by ordinance, franchise or a hybrid franchise/ordinance • The form of franchise presented by utilities does not have to be accepted o The Florida Public Service Commission does not mandate terms of an electric or natural gas franchise nor limit what terms can be included in them 4
• Franchise fees paid by utilities to local governments typically equal up to 6% of the revenue received by the utility from customers located within the local government’s political boundaries o Sometimes 6% less property taxes paid o Sometimes lower than 6% o Sometimes 5.9% of such revenue (with no deduction for property taxes paid) 5
Recommend
More recommend
