*1 Livonia Kowalski CITY OF LIVONIA KOWALSKIv July 12, 2005, Lansing. July Decided at Submitted Docket No. 255623. sought. appeal 26, 2005, 9:20 a.m. Leave to at Wayne brought action in the Kathy an Kowalski and others Livonia, challenging city against Circuit Court city’s percent fee on local cable legality franchise five through passed companies, to the cus- which fee is television companies, the fee is a tax on the basis that of the cable tomers approval under the Headlee voter that is unlawful without court, Amendment, § Tho- art 31. Edward Const defendants, ruling summary mas, J., granted disposition for the standing, plaintiffs that the federal Cable lacked Policy Act, seq., preempted 521 et 47 USC Communications Amendment, fee does not that the cable franchise Headlee and purpose the Headlee Amendment. The a tax for the constitute appealed. Appeals separate opinions, the Court of held: court decision must be affirmed. The circuit Affirmed. O’Connell, EJ., court correct that stated that the circuit was tax, approval a so voter is not franchise fee does not constitute fee, tax, imposition a required of the fee. A contrast to for the revenue-raising purpose, purpose regulatory a rather than serves service, necessary and is proportionate costs of the is voluntary fee involved in this case in nature. The franchise Therefore, is not a tax for which the all three criteria. satisfies requires approval. Headlee Amendment voter only.

Borrello, J., concurred in the result only, J., concurring in the result stated 600.308a(3) applies to the one-year period of MCL of limitations dispositive case. plaintiffs’ of this cause of action and Parker), Christensen, (by David R. & P.C. Charfoos plaintiff. for the 267 Opinion O’Connell,

Sean P. Kavanagh, City Attorney, and K. Cathryn White, Chief Assistant Attorney, and Cummings, Acho, McClorey, Davis & PLC T. Joseph Seward), (by for the defendant. *2 O’CONNELL, P.J.,

Before: and SCHUETTE and BORRELLO, JJ. P.J. Flaintiffs1 appeal as of right the trial

O’Connell, court’s order granting defendant summary disposition based on holdings its that plaintiffs lacked standing, the federal Cable Act, Folicy Communications 47 USC 521 et seq., preempted the Headlee Amendment, and that the cable “franchise did not constitute a fees” “tax” for purposes § 31 of the Headlee Amend- ment. Because we find the third issue dispositive, we do not reach the others. In case, this we conclude that “franchise fees” do not constitute a and, therefore, tax we affirm the lower court decision.

This case arose part as of a challenge statewide against several municipalities that impose percent five “franchise fees” on local cable carriers as a condition to opera- their See, e.g., Morgan v City tion. Rapids, Grand Mich 267 (2005). 705 NW2d 387 The source of the chal- lenge was not the providers paid who percent five charge directly, however, but the cable subscribers who sought to strike down the charge as a new local tax that was unlawful without voter approval. 1963, Const art § 31. Unlike in the cases, other defendant immediately filed a motion for summary disposition, rather than an answer with defenses, affirmative and did not assert the issue of the statute of limitations. 1 granted The named below, were never class certification so “plaintiffs” exclusively, and, term refers to them because there is no class, holding our disposes affects all the claims and of the entire suit. Kowalski v Livonia O’Connell, argue erred that the trial court when

Plaintiffs charge rather than a was a “fee” determined that Although catego- § purposes we would for of 31. “tax” municipally charge price for a as the contract rize commodity, agree the trial court we with owned charge a “tax” in fit the definition of

does not within court’s decision to de novo trial this case. We review summary disposition. grant Rozwood, Maiden (1999). 109, 118; 597 NW2d only proscribes Amendment the Headlee Because imposition “taxes,” defendant did not of new if it can establish that the the amendment violate type charge here a “user fee” or some other qualify Bolt v that does not as a “tax.” exaction Lansing, 158-159; (1998). only types recognized in Bolt of exactions Although assessments, taxes, and user fees. we were price, recognize type, a fourth contract we need would *3 any legal in this case not construct new framework plaintiffs failed to demonstrate that because have year charged than a “fee” in the defendant more preceding their lawsuit. following Supreme provided Bolt, the our Court evaluating charge qualified whether a

three criteria for First, “a serve a as a “fee” or a “tax.” user-fee must revenue-raising pur- regulatory purpose than a rather propor- pose.” Second, the fee “must Id. at 161. user be necessary of the service.” Id. at tionate to the costs voluntary generally Third, fee is in 161-162. a user Id. at nature. 162.

Addressing order, the criteria in reverse accurately unreservedly admit that the cable “fran- and voluntary. are This is true whether viewed chise fees” supplier, perspective of the subscriber or the from the exchange charge pays in for a service: each the because 520 267 Mich by Opinion O’Connell, provider city the the pays for its valuable franchise and subscriber, turn, in pays supplier for the privilege receiving of cable programming. Therefore, the “franchise fee” a voluntary payment is and con- exchange sideration in for a commodity.2 Next, the budget information for defendant reflected that the franchise fees were insufficient from 2001 to support 2003 to its cable expenditures, and that defen- dant ran the cable fund at an Nevertheless, annual loss. plaintiffs argued that the surplus in the cable fund of more than million in 2001 $1 demonstrated that defen- illegally dant collected an “disguised excess tax” at point some in the history. However, fund’s given the fact a plaintiff may that only claim a Headlee violation year within one after occurrence, its 600.308a(3), MCL price governmentally We would hold that such a contract for a commodity qualify govern owned could never as a “tax” if even price high enough glean ment sets the profit contract to a substantial generate replenish general and money revenue to its fund or refund to citizenry. apply its exception We would the contract in those cases commodity generally where the open market, is on obtainable government acting proprietary role, is its the benefit received government part bargained exchange, price imposed of a and the has government’s jurisdiction. de minimis effect on commerce outside the (1876) Comm’rs, 273, Jones v Detroit (holding Water 34 Mich that paid by taxes, “water rates consumers are in nothing no sense but are price paid commodity,just more than the for water as a as similar rates payable gas companies, private are works, or to water for their supply gas water”); Kootsillas, of 615, or see also Coleman v (1998) (holding operation by city 575 NW2d 527 that of a landfill was city’s intended to raise proprietary revenue and fit within the func tion); compare City also Comm, Dallas v Federal Communications (CA 393, 5, 1997), 118 F3d 397-398 and St Louis v Western Telegraph Co, 92, 97-100; Union 148 US 13 S Ct 37 L Ed 380 (1893) (each holding rights-of-way rent), use was a kind of with Communications, Inc, Hawarden v US (Iowa, West 1999), Arlington Hts, and & 407-408; AT T v 156 Ill2d 620 NE2d *4 (1993) (holding charged intermunicipal that “rent” wire-service providers municipality’s rights-of-way for their use of a were cost prohibitive). Kowalski v Livonia Schuette, J. distort the of the limitations if purpose period would the entire life of the fund searching we scanned cable Besides, a failed surplus year. for have to present any surplus evidence that the resulted from the that, of in light collection franchise fees or deficits, eventually current those fees will not fund Therefore, plaintiffs cable services. failed to demon- strate that “franchise fee” revenue was disproportion- ately high compared expense to the associated with during one-year cable services period they before filed suit.

Finally, although plaintiffs also claim that the fran- $30,416 generated general fund, chise fees for Livonia’s budget summary, budgets, annual and balance they sheets submitted not appear support do Furthermore, in light claim. of the cable fund’s other $700,000 expenses exceeding and “franchise fee” rev- $600,000, more $30,416 enue of than the transfer of into the fund general tip does little to the scales in favor of finding percent charge the five constitutes Bolt, “tax.” See at 167 n 16 supra (stating three criteria should be considered in together rather than isolation).

Affirmed. I in only. J. concur the result

BORRELLO, J. in I (concurring only). the result would affirm the decision of the trial court. contrast to the analysis my of distinguished colleague Judge Peter D. I believe this Court’s in Morgan decision O’Connell, Rapids, Grand (2005), dispositive case. this one-year limitations, statute MCL 600.308a(3), explained as Allied Taxpayers Con for *5 J. Co, 119, 124-125 Wayne

stitutional Taxation v (1995), plaintiffs’ n to the applies cause of action this matter.