Public RightofWay: LegalPolicy Issues

1
Public Right-of-Way Legal/Policy Issues
Maryland Municipal League June, 2005 Ocean City,
MD
Matthew Schettenhelm Miller Van Eaton, P.L.L.C.
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.

3
What are Rights-of-Way

• Public rights-of-way (PROW) are real, tangible,
  limited, and valuable real estate.

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
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
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
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
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
Fundamental PROW Dispute

• Is franchise a regulatory relationship?
• Is franchise a property interest?

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 govt action prohibits, OK if
  related to property interests

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 rehg, 149 U.S. 465 (1893).
  
• City of Dallas v. FCC, 118 F.3d 393, 397 (5th
  Cir. 1997).

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
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
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
  industrys access argument, ignoring property
  rights

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
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
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

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
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
Limited to Costs

• Some state laws limit local governments to cost
  recovery
• Iowa management costs caused by utilitys
  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
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.