Public Right-of-Way: Legal

1. Public Right-of-Way: Legal/Policy Issues

2. 2 Myth Buster Federal Law does not limit the fee charged a telecommunications company for access to public rights-of-way to recovery of costs. Federal law permits up to a 5% gross revenue fee for PROW use by cable. CAVEAT: Your state may have passed limitations on fees and charges that may be assessed a public right of way occupant. Some state laws limit local governments to cost recovery Iowa: management costs caused by utility�s occupation of the ROW Missouri: limitations established by SB 369 � scope unclear � some cities grandfathered others: e.g., Alaska, Indiana, Minnesota Some state laws limit local governments to cost recovery Iowa: management costs caused by utility�s occupation of the ROW Missouri: limitations established by SB 369 � scope unclear � some cities grandfathered others: e.g., Alaska, Indiana, Minnesota

3. 3 What are Rights-of-Way Public rights-of-way (PROW) are real, tangible, limited, and valuable real estate. 

4. 4 Guiding Principle Sound economics and political equity require that private entities using public property for private profit should pay fair and reasonable rents. Failure to capture the fair value for the use of these assets transfers real estate costs from company stockholders to taxpayers.

5. 5 What is a Franchise? A Grant of a Special Privilege A License to Use PROW Revocable Personal (does not travel with estate) �Burdens� the real estate Not a Privilege to Offer a Service Broad Confusion Between These Two

6. 6 Federal Law -- Yields to State Law 5th Amendment US Constitution: Federal Law May NOT Preempt State Property Law Cities have same rights as citizens 47 USC Sec. 253(c) 47 USC Sec. 332(c)(7)

7. 7 Federal Law Reserves for Local Government: Property Rights Right to Charge Rent Right to Manage Behavior in ROW Right to zone and site antennas and towers

8. 8 State Property Law Controls Same Principles as other Property Rights Must Hold a Right to Burden the Property (Right to �Use�) from the Owner �Estate in Fee�/Lease/Easement/ Franchise/or License (Explicit or Implicit) Required

9. 9 Fundamental PROW Dispute Is �franchise� a regulatory relationship? Is �franchise� a property interest?

10. 10 Leading Cases were Determined by Answer Dearborn; Cablevision of Boston: right to occupy PROW is property interest, subject to state property law. Auburn; Prince Georges II; Chattanooga: PROW occupancy is a regulatory interest, subject to state and federal regulatory exclusion. Coral Springs: If gov�t action prohibits, OK if related to property interests

11. 11 History The Supreme Court, as early as 1893, in City of St. Louis v. Western Union Tel., recognized that local governments have a property right in controlling all elements and benefits of rights-of-way property and that the payment of a franchise fee is not a tax but a rental fee. City of St. Louis v. Western Union Tel., 148 U.S. 92 (1893), opinion on reh�g, 149 U.S. 465 (1893). City of Dallas v. FCC, 118 F.3d 393, 397 (5th Cir. 1997).

12. 12 Rights transferred to a PROW franchisee ROW franchisees gain 3 types of rights: option to place facilities in ROW � burden of potential use construction and maintenance rights for facilities actually installed � actual burden Ongoing use or occupation of ROW to do business In a free market, property owner has a right to charge a fair market price

13. 13 Valuing Public Rights-of-Way Three kinds of compensation correspond to the three valuable rights: annual option payment � possibly fixed sum payment for facilities actually installed � possibly linear or cubic measure fair market value for value derived by private user from public property � possibly measured by gross revenue

14. 14 Cost vs. Value Industry argues that under 47 U.S.C. � 253 compensation is limited to costs There is no reference to costs in � 253 The legislative history of � 253 refers to gross revenues; does not imply costs Nonetheless, some courts have succumbed to industry�s �access� argument, ignoring property rights

15. 15 Section 253 (c) STATE AND LOCAL GOVERNMENT AUTHORITY. -- Nothing in this section affects the authority of a State or local government to manage the public rights-of-way or to require fair and reasonable compensation from telecommunications providers, on a competitively neutral and nondiscriminatory basis, for use of public rights-of-way on a nondiscriminatory basis, if the compensation required is publicly disclosed by such government.

16. 16 Measures of ROW Value Where compensation is permitted, different ways of determining amount may be used (subject to state law): Linear foot fee Gross revenues-based fee Throughput-based fee Access line fee 253: Are local franchise requirements to provide in-kind facilities �prohibitions?� -- pending, but probably OK

17. 17 Section 253 in the States Legislatures 21 States have acted 10 permit gross revenue charges PUCs Challenging local government as 3rd tier of regulations. eg: Minn/Md/Mich/Oreg There is a copy of the state-by-state summary in the handout. Also remind folks that it is up on the website.There is a copy of the state-by-state summary in the handout. Also remind folks that it is up on the website.

18. 18 Has Your State Chosen? The Maryland legislature has not acted in this context. At least some Maryland cities retain full authority to charge for use of ROWs.

19. 19 Has Your Municipality Chosen? General ordinances: St. Louis: linear foot charge starting at $1.50 in 1991 with inflation adj., now $1.88 (2004-05) Little Rock, AR: 5% of gross revenues Particular agreements: Los Angeles (through 2002): $5 per linear foot of 6� conduit; $1.25 per linear foot overhead Eugene, OR: $4-5 per linear foot, or in kind

20. 20 Limited to Costs Some state laws limit local governments to cost recovery Iowa: management costs caused by utility�s occupation of the ROW Missouri: limitations established by SB 369 � scope unclear � some cities grandfathered others: e.g., Alaska, Indiana, Minnesota But the game is not over�

21. 21 Identifying Costs Not all state laws limited categories of costs. Acquisition fees for obtaining rights-of-way Administrative or processing costs Inspection costs Costs of safety precautions for ROW work Costs of locates and conflict resolution Cost of repairing & maintaining the ROW Construction costs for ROW improvements Costs to community from delays, etc.