Kentucky Catv Association, Inc. D/B/A Kentucky Cable Telecommunications Association, Inc. v. City of Florence, Kentucky
2015 SC 000178
Ky.Jul 10, 2017Background
- In 2005 Kentucky enacted the Multichannel Video Programming and Communications Services Tax (Telecom Tax), which imposed excise and gross-receipts taxes on multichannel video programming (MVP) and communications services and deposited revenue into the General Fund.
- KRS 136.660(1)(a)-(c) (the Prohibition Provision) bars "every political subdivision" from levying or collecting franchise fees or taxes on franchises subject to the Telecom Tax; the statute provides capped "hold-harmless" payments to municipalities to compensate for lost franchise revenue.
- Several Kentucky cities and the Kentucky League of Cities sued, alleging the Prohibition Provision violates Sections 163 and 164 of the Kentucky Constitution (municipal control over use of rights-of-way and franchise-granting with a 20-year limit).
- The Franklin Circuit Court granted summary judgment to the Cabinet and KYCATV; the Court of Appeals reversed, holding the Prohibition Provision unconstitutional and granting summary judgment to the Cities.
- The Kentucky Supreme Court granted review and affirmed the Court of Appeals: it held Sections 163 and 164 implicitly (via debates and precedent) protect municipalities’ power to collect franchise fees as consideration for use of municipal rights-of-way, and Section 181 does not permit the General Assembly to revoke that constitutional municipal power.
- The Court severed the unconstitutional Prohibition Provision from the remainder of the Telecom Tax, leaving the rest of the statute in effect and allowing municipalities to either collect franchise fees or participate in the Telecom Tax scheme.
Issues
| Issue | Plaintiff's Argument (Cities) | Defendant's Argument (Cabinet/KYCATV) | Held |
|---|---|---|---|
| Whether Sections 163 and 164 implicitly grant municipalities the power to collect franchise fees as consideration for use of rights-of-way | Sections 163 and 164 vest municipal control over rights-of-way and franchise grantings, which necessarily includes the right to charge franchise fees (consideration) | The constitutional text does not mention fee collection; those taxing/fee powers remain with the General Assembly unless expressly delegated | Held for Cities: framers’ intent and precedent show municipalities have the power to collect franchise fees under §§163–164; Prohibition Provision violates those sections |
| Whether Section 181 allows the General Assembly to prohibit municipalities from collecting franchise fees by statute | N/A (Cities argue §181 does not reach constitutionally granted municipal franchise-fee power) | The General Assembly may, by general laws, confer or withdraw authority to assess license fees on franchises (thus could enact Telecom Tax prohibition) | Held for Cities: §181 delegates license-fee authority but does not revoke the constitutionally conferred franchise-fee power in §§163–164; Legislature cannot prohibit constitutionally granted municipal franchise fees |
| Severability: whether the Prohibition Provision can be severed from the rest of the Telecom Tax | Prohibition is the only unconstitutional part; remainder is operable and serves legislative intent | Appellants argued structure/purpose required the prohibition | Held for Cities: Prohibition Provision severable under KRS 446.090; remainder of Telecom Tax remains valid and enforceable |
| Remedy: whether summary judgment for Cities is appropriate | Cities sought declaratory relief and summary judgment invalidating the Prohibition Provision as applied to them | Cabinet sought judgment upholding statute | Held: Court affirmed Court of Appeals and remanded to enter summary judgment for the Cities consistent with opinion |
Key Cases Cited
- Greene v. Commonwealth, 349 S.W.3d 892 (Ky. 2011) (standard: de novo review for constitutional interpretation)
- Grantz v. Grauman, 302 S.W.2d 364 (Ky. 1957) (constitutional construction guided by framers’ intent)
- Jefferson Cnty. Bd. of Educ. v. Fell, 391 S.W.3d 713 (Ky. 2012) (legislative history may inform statutory construction)
- Stites v. Norton, 101 S.W. 1189 (Ky. 1907) (Section 164’s purpose to protect public benefit from franchises)
- Kentucky Utils. Co. v. Bd. of Com'rs of City of Paris, 71 S.W. 1024 (Ky. 1933) (franchise inheres in sovereignty but limited by constitution; municipalities entitled to benefits of franchise)
- City of Bowling Green v. T & E Elec. Contractors, 602 S.W.2d 434 (Ky. 1980) (municipal powers are limited to those expressly granted or necessarily implied)