Lori Hudson Flanery in Her Official Capacity as Secretary of the Finance and Administration Cabinet, Commonwealth of Kentucky v. City of Florence, Kentucky
520 S.W.3d 355
| Ky. | 2017Background
- In 2006 Kentucky enacted the Multichannel Video Programming and Communications Services Tax (Telecom Tax), taxing multichannel video programming (MVP) and communications service providers and depositing revenues to the General Fund.
- The Telecom Tax includes a Prohibition Provision (KRS 136.660(1)(a)-(c)) forbidding “every political subdivision” from collecting franchise fees or taxes on franchises subject to the Telecom Tax; the Act also provides municipalities monthly "hold-harmless" payments capped at $36,408,000 annually.
- Cities (Florence, Winchester, Greensburg, Mayfield, Kentucky League of Cities) sued for declaratory relief in 2011 claiming the Prohibition Provision violates Sections 163 and 164 of the Kentucky Constitution (local control of streets/rights-of-way and franchise-granting powers).
- The Franklin Circuit Court granted defendants’ motions; the Court of Appeals reversed, holding the Prohibition Provision unconstitutional as applied to the Cities.
- The Kentucky Supreme Court granted review, affirmed the Court of Appeals, held the Prohibition Provision unconstitutional as applied to the Cities, vacated the circuit court judgment, and remanded with instruction to enter summary judgment for the Cities.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Ky. Const. §§163 and 164 implicitly or explicitly grant municipalities the power to collect franchise fees as part of their franchise-granting authority | Cities: Sections 163 & 164 not only give municipalities the power to grant franchises but also the right to receive consideration (franchise fees) for use of rights-of-way | Cabinet/KYCATV: Sections 163 & 164 address consent to occupy rights-of-way and franchise terms but do not grant a power to levy franchise fees | Held: Framers’ Debates and precedent show municipalities possess both control and the right to receive the financial benefit of franchises; prohibition on collecting franchise fees violates §§163 & 164 as applied to the Cities. |
| Whether Ky. Const. §181 authorizes the General Assembly to prohibit municipalities from collecting franchise fees (i.e., whether §181’s delegation was withdrawn by statute) | KYCATV: Section 181 allows the General Assembly to provide for license fees on franchises and to delegate that authority to municipalities; the Legislature can withdraw delegation and enact the Telecom Tax prohibition | Cities: §181 governs license fees distinct from constitutionally granted franchise fees under §164; the constitutional grant of franchise-fee power cannot be withdrawn by the General Assembly | Held: §181 concerns state license fees and delegation; it does not displace the constitutionally granted municipal power under §§163 and 164. The General Assembly could not constitutionally prohibit municipalities from collecting franchise fees. |
| Whether the Telecom Tax’s Prohibition Provision is severable from the remainder of the statute | Cities: Only the Prohibition Provision is unconstitutional and should be severed; remaining tax provisions can function independently | Defendants: (implicit) invalidating the prohibition might undermine the Act’s purposes (prevent double payment, parity among providers) | Held: The Prohibition Provision is severable under KRS 446.090; remaining tax provisions (including franchise fee tax credit) remain operable and the Act’s objectives can still be achieved. |
Key Cases Cited
- Stites v. Norton, 125 Ky. 672, 101 S.W. 1189 (Ky. 1907) (explaining §164’s purpose to prevent municipalities from giving away franchise value and to secure public benefit)
- Kentucky Utils. Co. v. Bd. of Com’rs of City of Paris, 254 Ky. 527, 71 S.W.2d 1024 (Ky. 1933) (discussing that franchise power inheres in state sovereignty but may be delegated by constitutionally reserved means to municipalities)
- Grantz v. Grauman, 302 S.W.2d 364 (Ky. 1957) (principle that constitutional construction seeks framers’ intent from letter and spirit of document)
- Jefferson Cnty. Bd. of Educ. v. Fell, 391 S.W.3d 713 (Ky. 2012) (court may consult legislative history when statute ambiguous; guidance on constitutional/statutory interpretation)