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franchise fees

Lawsuit planned over cable franchise fee bill

I sure hope Houston gets involved in this.

Fort Worth and cities across Texas stand to lose millions of dollars due to a new law that slashes fees telecom providers pay to them. But before the savings go into effect next year, it’s likely cities will challenge the legislation in the courts.

The bill, signed by Gov. Greg Abbott earlier this month, would slash right-of-way fees telecom providers pay cities to supply cable and phone service. For years, companies paid cities two separate fees to run phone and cable TV lines in right-of-ways — even when delivered over the same line. The bill changes that practice, and allows providers to only pay the higher of the two fees.

Supporters of the bill, like Walt Baum, the president of the Texas Cable Association, said it’s necessary to end an “outdated double tax” on companies. But Bennett Sandlin, executive director of the Texas Municipal League, said he thinks the legislation violates sections of the Texas Constitution.

“The use of public land is a privilege, not a right,” Sandlin said. “They could certainly decide to run those wires through people’s backyards, but they would pay a lot more. They have to pay for that rental of public space.“

Fort Worth estimates a little over $4 million will be lost in revenue due to the law, according to a presentation given to the Fort Worth City Council outlining the legislative session’s impact. And in some cities, those losses are more than six times that, with Houston pinning its potential losses at up to $27 million.

Sen. Kelly Hancock, R-North Richland Hills, authored Senate Bill 1152 and chairs the Senate Business and Commerce committee. Since 2006, telecom providers — some who stand to potentially cut costs due to Hancock’s bill — have contributed over $150,000 to Hancock’s campaign, according to the National Institute on Money in Politics.

“I don’t know who saves millions more than the constituents that I work for,” Hancock said about providers paying less.

This wouldn’t be the first time one of Hancock’s bills spurred a lawsuit.

In 2017, a group of over 30 cities filed a lawsuit against the state alleging that a bill authored by Hancock violated articles of the Texas Constitution that prohibit the legislature from directing local municipalities to make gifts or grants to a corporation. The lawsuit, filed in Travis County District Court, is ongoing, and Kevin Pagan, McAllen’s city attorney, said he believes the newly signed legislation violates the same tenets.

Pagan said the new bill wrongly requires cities to make a gift to private companies by allowing providers to use the right-of-way at a lesser charge.

The telecom providers are, “already in the right-of-way. You’re already using our facilities. You’ve already agreed to pay us a franchise fee. And now under this law, you’re just going to stop paying,” Pagan said. “It’s a gift from the state legislature back to those companies.”

See here for the background. I have no idea what the odds of success are for this lawsuit, but as I said up front I sure hope the city of Houston signs on as a co-plaintiff, because we’re definitely taking it in the shorts from this bill. As for the claims from the cable lobbyist that this bill will lead to lower costs for cable subscribers, well, if you think that will happen I’ve got a nice beach house in Abilene to sell you.

A tale of screwed cities

That’s my unofficial title for this legislative session.

The interest group representing Texas cities used to be one of the most powerful legislative forces at the Capitol. This session, it has become the GOP’s most prominent adversary.

Its members have been harangued at hearings. Targeted by a proposed ban on “taxpayer-funded lobbying.” And seen multiple proposals sail ahead over its protests.

When, around March, one mayor inquired about the reasoning for a controversial provision in a property tax bill, he said an advisor to Gov. Greg Abbott suggested, “you reap what you sow.”

The message was clear, said McKinney Mayor George Fuller: Local officials had been obstructionists in the past.

Though the antagonistic relationship between Texas cities and the state has been building for years, this session has reached the fever pitch of all out legislative assault, said Austin Mayor Steve Adler, in April. Typically, the Texas Municipal League tracks bills it opposes that are gaining momentum in the Legislature. This session, the group had amassed more than 150.

Among them, was a cable franchise fees bill authored by state Rep. Dade Phelan, a Beaumont Republican and chair of the powerful State Affairs Committee. After the Texas Municipal League warned its members the proposal could cut into cities’ revenue, Phelan had a concise response for the group, which represents 1,156 of Texas’ roughly 1,200 cities.

“When you are in a hole — you should stop digging,” Phelan recommended, in an email obtained by The Texas Tribune.

In an interview, Phelan said he harbored no animus toward the organization, but took umbrage with its opposition to legislation his constituents want. The sentiment is widely-shared in the Legislature, Phelan said, as evidenced by the support the bills on taxpayer-funded lobbying and franchise fees have garnered.

“Those bills have never gotten out of committee before,” he said. The Texas Municipal League represents “their own interests and we are representing the taxpayers.”

“I think there’s a disconnect sometimes,” he added.

The group’s leaders see a different trend. They say model legislation with an anti-city bent has been exported from conservative think tanks and taken root at statehouses across the country. At the same time, Republican strongholds have shifted to the suburbs, making progressive city leaders convenient whipping boys for politicians from the president on down.

There’s more, so go read the rest. It really does boil down to two things. One is the Republicans’ refusal to address our tax system in a meaningful way. There are things we could do to make the property tax system more equitable. There are things we could do with sales taxes to bring in more revenue in a way that wouldn’t be so regressive. Our whole tax system is a byzantine mess, but the only thing that we’re allowed to talk about is cutting property taxes. This session that means putting the screws to cities, even though local property taxes aren’t driving the growth of property tax collections. The Republicans are looking for a political solution, and cities are a convenient target.

Which leads to point two: Cities are liberal and Democratic, so it’s a twofer for state Republicans to stick it to them. And don’t think that having a Republican mayor would change anything:

“I understand the political atmosphere to reduce taxes; there’s no one that would be more aligned with that than I am,” said El Paso Mayor Dee Margo, a former Republican state lawmaker. “But I’m also trying to deal with basics. I say I’m the mayor of public safety, potholes, and parks.”

El Paso’s property values — and so its tax base — is growing at a slower clip than other parts of the state, he said. Though the factors differ from city to city, each municipality has different needs and budgets, and local leaders say they are unaccounted for under a blanket property tax reform policy.

“The frustration is that we are grouped, coupled with across-the-board perceptions,” Margo said.

That’s because your Republican former colleagues don’t care about any of that, Mayor Margo. The only way forward here is to vote them out.

Cable franchise fees

Hey, remember how the city of Houston had to lay off a bunch of workers to to close a $179 million budget deficit? Well, there’s more where that came from.

The Texas House on Thursday approved legislation that would limit fees telecommunication and cable companies pay cities to use their rights of way, likely opening up a new spending gap of at least $12 million two days after Mayor Sylvester Turner laid out his proposed budget for the upcoming fiscal year.

Senate Bill 1152, authored by state Sen. Kelly Hancock, R-North Richland Hills, passed the House on a 92-50 vote on the third and final reading Thursday. The legislation, which had received Senate approval early last month, heads back to the upper chamber, where lawmakers will decide whether to approve the House version.

The measure would eliminate what cable companies and some lawmakers say is an outdated double tax levied on companies that transmit cable and phone services over the same lines. The bill would eliminate the lesser of the two charges, starting next January.

Opponents say the bill amounts to a gift for large telecom firms, which would not be required to pass the savings on to consumers because the state is barred from regulating cable rates. Turner had urged lawmakers to oppose the measure, saying it would deliver a financial hit to Houston.

Those who back the bill say companies still would pay millions for the remaining charge, arguing that cities would lose only a small portion of their revenue. The House companion bill’s author, state Rep. Dade Phelan, noted Wednesday that only one other state — Oregon — still charges both fees.

Turner blasted lawmakers in a statement Thursday, accusing them of attempting to “unconstitutionally take the value of Houston’s right-of-way” through the bill. He also lauded state Rep. Harold Dutton, D-Houston, for attempting to stop the legislation through a procedural maneuver.

[…]

A Legislative Budget Board analysis determined that Houston would take in $17.1 million to $27.5 million less revenue under the bill. Estimates for other cities include $9.2 million in Dallas, $7.9 million in San Antonio and $6.3 million in Austin.

An updated estimate provided by the city Thursday projected it would receive $12.6 million to $24.4 million less revenue during the 2020 fiscal year, which begins July 1.

It sure has been a great session for cities, hasn’t it? Here’s that earlier story, which I confess I never got around to blogging about. You know who else has had nothing to say about it? Bill King and Tony Buzbee. Way to be looking out for the city’s financial interests, y’all.

As for the fee itself, I can see the argument for getting rid of it, but let’s be clear about two things. One, if you believe this will result in a reduction in your cable or internet bill, I have some oceanfront property in Lubbock you might be interested in. And two, given the financial hit this will impose on cities, would it have killed anyone to phase this in after a year or two, so cities – all of which are required to have balanced budgets – could have had some time to adjust? What exactly was the rush here? Look at the roll call vote, and if you’re in one of those cities – especially Houston – and your Rep supported this, please call their office and ask them that question.