Case Information
*1 The Attorney General of Texas March lg. 1983
JIM MAlTOX
Attorney General Honorable Warren New Opinion No. JM-16 Supreme Court Building Yoakum County Attorney P. 0. BOX 12548 P. 0. Box 359 Re: Whether charge imposed on Austin. TX. 78711. 2548 Plains, Te*gs 79355 telephone company by city may 5121475-2501 be passed on to county as a Telex 9101874.1357 Telecopier 512/4750268 customer of telephone company Dear Mr. New: 1607 Main St., Suite 1400 Dallas. TX. 75201.4709
You have been notified by telephone utility which serves your 2141742.6944 county that it is imposing an extra charge on the bills of Its P 4824 Alberta Ave.. Suite 160 [9156333484] Et Paso. TX. 79905.2793 but was subsequently referred to in later correspondence as a customers extra charge was initially denominated a "city gross receipts tax," receiving fee.” "franchise This "franchise fee" $8 equivalent to a charge that service within the city limits of Plains. The the city imposed upon the telephone utility and which the telephone 1220 Dallas Ave.. Suite 202 utility seeks to pass through to its customers. You have refused to Hpuston. TX. 770026986 pay the extra charge and have asked whether such pass-through charge 713/650-0666 can permissibly be imposed upon the county. You claim that the charge
Is. in reality, a tax and cannot be levied against the county lest 806 Broadway. Suite 312 article XI. section 9 of the Texas Constitution, which exempts from Lubbock, TX. 79401.3479 taxation the property of counties devoted exclusively to the use and 8061747.5238 benefit of the public, be violated. We reject your contention and
conclude: that the telephone utility Is not prohibited from passing through to the county the extra fee imposed by the city. '~ 4309 N. Tenth. Suite B McAllen. TX. 78501.1685 512,682-4547 This office addressed a similar issue fin an earlier opinion and
concluded,that state agencies may pay a so-called "municipal franchise charge" imposed by the telephone company upon all of Its customers, 2W Main Plaza. Suite 400 including state agencies. As noted in Attorney General Opinion H-1265 San Antonio, TX. 78205-2797 5121225~4191 (1978). utility companies frequently enter into franchise agreements
with cities authorizing them to use the city's streets~in exchange for a franchise fee. uhlch is-usually calculated as a percentage of the An Equal Opportunity/ gross receipts received on services locally rendered. The Public Affirmative Action Employef Utility ~Cosauission requires .regulated utilities to file with the
commission tariffs which provide that any municipal franchise charge will be passed on to the utility customers within the affected municipality.
Article 1175, section 12. V.T.C.S.. requires telephone companies, before using the grounds or streets of a home rule city, to first *2 Honorable Warren New - Page 2 (JM-16)
obtain the consent of the governing authorities and pay prescribed compensation. Article 1181. V.T.C.S.. sets forth other conditions which relate to the grant by a home rule city of a "franchise to use or occupy the public streets, avenues, alleys or grounds" of the city. Pursuant to these provisions, home rule cities may grant utility franchises to use the public streets in exchange for compensation measured by a percentage of gross receipts. See City of Tyler v. Television Cable Service, Inc., 493 S.W.2d 322 (% Civ. App. - Tyler 1973, writ of Weslaco v. General Telephone Company of the Southwest, 359 S.W.2d 260 (Tex. Civ. App. - San Antonio 1961, writ ref'd n.r.e.). General law cities have authority under article 1016. V.T.C.S.. to arant franchises to telenhone companies conducting a local business. Fleming v. Houston Lighting and Power Company, 138 S.W.2d 520. 522 (Tex. : 1940).~ cert. denied, 313 U.S. 560 (1941); Southwestern Telegraph and Tele phone Company v. City ,of Dallas, 174 S.W. 636 (Tex. Civ.' ADD. - Dallas 1915. writ ref d). See also V.T.C.S. art. 1446~. §21;-Tax Code 1182.064.
Relying on language in Fleming v. Houston Lighting and Power Company. s, which characterized such franchise charges collected by utilities as rentals for the use of city streets rather than as and cases in accord from other jurisdictions, this office G&es, concluded that such a franchise charge is no'c a tax. Attorney General -, Opinion H-1265 (1978). Despite dicta .in Payne v. Massey, 196 S.W.2d 493 (Tex. 1946) and City of Alvin v. Southwestern Bell Telephone Company, 517 S.W.2d 689. 692 (Tex. Civ. App. - Houston (1st Dist.) 1975. writ ref'd n.r.e.). which appear to characterize such franchise charges as gross receipt taxes. the great weight of authority supports the conclusion set forth in Attorney General Opinion H-1265, and we reaffirm it here. The franchise charges imposed by the city and measured as a percentage of the gross receipts of the utility are not a tax, but rather a rental charge paid in compensation for use of the streets. You claim. however, that the charge is a tax and that the imposition of the charge violates article XI,, section 9 of the Texas Constitution which provides, inter alia. that the property of counties devoted exclusively to the use and benefit of the public shall be exempt front taxation.
Assuming. arguendo. that such charge could fairly be denominated a tax, it is clear that article XI, section 9 has no relevence in this instance. Article XI, section 9 prohibits, inter alia. any political subdivision from imposing ad valorem taxation on the property of any county, city, or town which is devoted exclusively to the use and benefit of the public. NO property of the county is even conceivably beinn taxed in this instance: no county property is involved. See, *t Wichita County Water Improvement District No. 2 v. City of Wichita Falls, 323 S.W.2d 298 (Tex. Civ. App. - Fort Worth 1959. writ refmn.r.e.); City of Fort Worth,v. Reynolds, 190 S.W. 501 (Tex. Civ.
APP. - Fort Worth 1916. writ dism d).
p. 63
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Honorable Warren New - Page 3 (JM-16)
We find no statutory or constitutional prohibition against the payment of properly established telephone rates by counties. We conclude that the charge imposed by the telephone utility is not a tax; rather it is a rental imposed for the use of the streets. Were we to conclude, however , that such charge were a tax, we also conclude that such charge does not violate any constitutional or statutory provision which we have found or to which we have been directed.
SUMMARY A charge imposed by a municipality upon a telephone utility denominated a franchise fee and measured by a percentage of the gross receipts of the utility Is not a tax; rather such charge is a rental imposed for the use of the streets. A telephone utility may pass through such charge to its customers. including the county, without violating statutory or constitutiofal provision+ JIM MATTOX
Attorney General of Texas TOM GREEN
First Assistant Attorney General
DAVID R. RICHARDS
Executive Assistant Attorney General
Prepared by Jim Moellinger
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Susan L. Garrison, Chairman
Rick Gilpin
Jim Moellinger
Bruce Youngblood