4.1. SR 09-23-2002 - Laserfiche WebLink

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SEP-12-2002 16:16 LEAGUE OF MN CITIES P.03×19 BACKGROUND The following model franchise ordinances are the result of a cooperative effort between James Strommen of the Kennedy & Graven Law Firm, attorney for the Suburban Rate Authority ("SPA"), and Thomas Grundhoefer, General Counsel of the League of Minnesota Cities. The ordinances modify previous models published in March 1996. The SRA is a joint powers organization consisting of 36 Twin City suburban municipalities. The SRA has actively intervened in electric, gas and telecommunications matters before the Minnesota Public Utilities Commission (MPUC). Prior to the Commission's creation in 1974, the SRA. acted as a regulatory body governing gas and electric utilities on behalf of member municipalities. The purpose of the two franchise ordinances is to provide uniform provisions that incorporate the broad municipal statutory franchise fights that exist under Minnesota Statutes Chapters 216B and 300. The franchises also incorporate many of the MPUC's right-of-way management rules adopted in April 1999. (To take full advantage of the rules and to fully implement the fight-of- way management authority granted to cities by Minnesota Statute Sections 237.161 -. 163, a city should consider adopting a comprehensive right-of-way management ordinance by exercising its option under Section 237.163 subd. 2(b).) In Minnesota, franchises are negotiated and take the form ora contract set forth in an ordinance. Yet cities have the right to require franchises and to include certain terms, e, g., franchise fees. There is no case law guidance on what specific franchise terms may be required by the city. Accordingly, a franchise can incorporate all reasonable terms within the limits of a city's statutory franchise and police power authority. These rights are extensive and can be found in Minnesota Statutes, Sections 216B.36, 300.03, 222.37, 237.162 and 236.163 and in case law. NOTES The city's legal right to include a particular franchise provision and the practical realities facing a city when the utility refuses to agree, are two quite different matters however. For example, though a city may have the right to insist on a franchise fee, potentially as high as 8% of the utility's gross revenues, it is unlikely that the utility would readily agree to such a percentage even though the utility passes the fee through to its customers within the city. Utilities are very concerned in today's increasingly deregulated environment that franchise fees will harm their competitive position relative to perceived competitors. This fee pass-through also becomes an issue to the residential and business customers who truly pay it. Thus, cities must be careful to gauge the level of local acceptance or resistance to the exercise of their full franchise fights under the law. As a result of the realities of the franchise negotiation and community acceptance process, a "take it or leave it" franchise ordinance that includes the imposition of franchise fees and strict right-of-way management provisions may be difficult to enact without compromise.