Judges: MIKE BEEBE, Attorney General
Filed Date: 7/31/2003
Status: Precedential
Modified Date: 7/5/2016
The Honorable Stephen Bright State Representative 127 Southshore Drive Maumelle, AR 72113-5810
Dear Representative Bright:
You have presented the following questions for my opinion:
(1) Under ACA
14-200-101 (a)(1)(E) is the Maumelle Water Management District (the "District") a public utility by reason of its activities in providing water and sewer services to the residential, commercial and industrial consumers located within the corporate limits of the City of Maumelle ("City")?(2) Pursuant to ACA
14-200-101 (a)(1)(A), does the City possess the lawful right and power to impose a franchise fee upon the District based upon the gross revenues collected by the District for water consumption and sewer services provided to the water consumers located within the corporate limits of the City?(3) If the City imposes a franchise fee upon the District based upon the gross revenues collected by the District for water consumption and sewer services provided to residential, commercial and industrial consumers located within the corporate limits of the City, does the District possess the lawful right and power to pass on to its residential, commercial and industrial customers the amount of such franchise fee together with the cost of billing, collecting and remitting same to the City?
You have provided the following background information: The Maumelle Suburban Improvement District No. 500 operates under the name Maumelle Water Management (the "District"). The District and its predecessor Maumelle New Town Water Sewer Suburban Improvement District No. 306 are both Arkansas suburban improvement districts organized pursuant to
Recently, proposed Ordinance Number 475 has been filed with the Maumelle City Clerk for consideration by the Maumelle City Council to impose a franchise tax upon the revenues derived by the District from the sale of water and sewer services. You have enclosed a copy of Ordinance 475 for my review. It purports to impose a fee upon the District for the privilege of doing business within the city. The fee is to be calculated on the basis of the District's monthly revenues.
RESPONSE
Question 1 — Under ACA
It is my opinion that the Maumelle Water Management District, as you have described it, is a "public utility" within the meaning of A.C.A. §
That statute defines the term "public utility" as follows:
(E) The term "public utility", for the purposes of this section, shall mean any electric, gas, sewer, or telephone company, and any company providing similar services, except those currently excluded pursuant to §
23-1-101 (9)(B)(ii); and provided further that, when franchise fees assessed for basic local exchange services are based on revenues, such revenues shall consist of revenues from basic local service, excluding, among other things, extension, terminal equipment, toll, access, yellow pages, and other miscellaneous equipment revenues.
A.C.A. §
In my opinion, a water improvement district falls within the meaning of the phrase emphasized above: "any company providing similar services." Water service, in common parlance, is similar to the various public services listed in the previous phrase (electric, gas, sewer, and telephone service) and is commonly grouped with such services in ordinary discourse. Moreover, water improvement districts do not fall within the exception language (i.e., it is not one of the entities that are excluded from the definition of "public utility" under A.C.A. §
For the foregoing reasons, I conclude that the Maumelle Water Management District is a "public utility" within the meaning of A.C.A. §
Question 2 — Pursuant to ACA
It is my opinion, as explained more fully below, that the answer to the question of whether the city is authorized to impose the fee at all under the authority of A.C.A. §
I will begin by setting forth the statutory section at issue. It states:
(a)(1) Acting by ordinance or resolution of its council, board of directors, or commission, every city and town shall have jurisdiction to:
(A) Except as provided in §
23-4-201 , determine the quality and character of each kind of, and rates for, product or service to be furnished or rendered by any public utility within the city or town and all other terms and conditions, including a reasonable franchise fee, upon which the public utility may be permitted to occupy the streets, highways, or other public places within the municipality, and the ordinance or resolution shall be deemed prima facie reasonable, provided that no franchise fee shall exceed the higher of the amount in effect as to that entity on January 1, 1997, or four and one-quarter percent (4 1/4%), unless agreed to by the affected utility or approved by the voters of the municipality[.]
A.C.A. §
In City of Little Rock v. ATT Comm., S.W.,
The court's characterization of the franchise fees as "rental payments" indicates that such fees are appropriate only when the utility is utilizing space owned by the city. Thus, if the City of Maumelle owns the space utilized by the District in providing water service, a franchise fee for the use of that space is authorized under A.C.A. §
I note that the holding of ATT, supra, appears to resolve any doubt as to whether a franchise fee that is duly imposed under the authority of A.C.A. §
[T]he fee imposed by the City of Little Rock here against ATT is called a "franchise" fee, and is wholly different from those fees discussed and dealt with in [City of Marion v. Baioni,
312 Ark. 423 ,850 S.W.2d 1 (1993) (fee proceeds must be strictly segregated from general revenues in order to avoid being classified as a "tax.")]. By statutory law, a municipality may by ordinance assess and determine a rate/fee for service rendered by any public utility occupying streets (rights-of-way) within the municipality, and such an ordinance is deemed prima facie reasonable. Ark. Code Ann.14-200-101 —14-200-104 . In common parlance, such franchise fees are, in form, rental payments for a public utility's use of the municipality's right-of-way[.]
City of Little Rock v. ATT Comm., S.W.,
Thus, it appears that a franchise fee that is duly imposed under the authority of A.C.A. §
The fact that the fee that would be imposed under Ordinance No. 475 is to be calculated on the basis of revenues does not present a problem under A.C.A. §
A revenue-based calculation does, however, bring to mind another issue that could arise concerning Ordinance No. 475. A question could be raised as to whether the fee imposed under the ordinance actually constitutes a license to do business in the city, such as is authorized under A.C.A. §
Question 3 — If the City imposes a franchise fee upon the District basedupon the gross revenues collected by the District for water consumptionand sewer services provided to residential, commercial and industrialconsumers located within the corporate limits of the City, does theDistrict possess the lawful right and power to pass on to itsresidential, commercial and industrial customers the amount of suchfranchise fee together with the cost of billing, collecting and remittingsame to the City?
It is my opinion that the provisions of A.C.A. §
(D) Nothing herein shall limit the authority of the public utility to collect from its customers residing in each municipality an amount which equals the franchise fee assessed by the municipality on the public utility[.]
A.C.A. §
On the basis of this plain language, I conclude that the District may pass on to its customers an amount equal to the franchise fee, but it may not pass on to its customers the cost of billing, collecting, and remitting the franchise fee to the City.
As a final matter, I point out that under the provisions of A.C.A. §
Assistant Attorney General Suzanne Antley prepared the foregoing opinion, which I hereby approve.
Sincerely,
MIKE BEEBE Attorney General
(B) The term "public utility", as used for rate-making purposes only:
* * *
(ii) Shall not include persons or corporations providing cellular telecommunications service and not providing any other public utility service in this state, unless the commission finds by order, after notice and hearing and upon substantial evidence, and which shall not take effect pending appeal therefrom, that the public interest requires the application of some or all of the provisions of subdivision (9) of this section to such persons or corporations.