Attorneys for Appellant
Gilbert King, Jr.
Miller & Van Eaton, P.L.L.C.
Attorneys for Appellee
Stanley C. Fickle A. David Stippler James L. Wieser
Michael R. Fruehwald Ameritech Indiana Randy H. Wyllie
Daniel W. McGill Indianapolis, IN Wieser & Sterba
Nicholas K. Kile Schererville, IN
Barnes & Thornburg
INDIANA SUPREME COURT
CITY OF GARY, INDIANA,
Appellant (Defendant below),
INDIANA BELL TELEPHONE COMPANY, INCORPORATED, d/b/a AMERITECH INDIANA,
Appellee (Plaintiff below).
) Supreme Court No.
) Court of Appeals No.
APPEAL FROM THE LAKE COUNTY SUPERIOR COURT
The Honorable James J. Richards, Judge
Cause No. 45D05-9802-CP-224
ON PETITION TO TRANSFER
June 30, 2000
Ameritech Indiana sought declaratory and injunctive relief to prevent the City of Gary
from imposing a requirements-based fee on telecommunications providers using City rights-of-way. The
trial court declared the fee void as an improper tax issued beyond the
Citys powers. We reverse in part, finding that the City was initially
entitled to charge compensation for the private, commercial use of its real estate,
until the legislature affirmatively said otherwise.
On January 6, 1998, the City of Gary enacted Ordinance Nos. 6970 &
6971, which were signed by the Mayor two days later. Ordinance No.
6970 establishes a telecommunications policy for the City and creates the Gary Access,
Information, and Telecommunications Trust (GAITT) to, inter alia, [e]nsure that telecommunications is available
as a community resource for individuals, organizations, and businesses on an affordable basis.
The GAITT is charged with several responsibilities under Ordinance No. 6970, including
the development, implementation, and collection of fees comprising fair and reasonable compensation for
the commercial use of public rights-of-way.
Ordinance No. 6971 is a companion ordinance that imposes a requirements-based fee on
all telecommunications providers using the Citys rights-of-way. The total requir
ements-based fee for
1998 was to be $20,000,000. This initial aggregate fee represented approximately fifteen
percent of the telecommunications providers local revenues, based on the national average revenue
per capita reported by the U.S. census, with credits for public, educational, and
government access, as well as institutional access. Appellants Br. at 6.
Ameritech Indianas share of this total initial fee was $3.2 million and was
rmined by using what Ameritech characterizes as an intricate scheme for apportioning the
$20,000,000 charge among the various telecommunications providers in the rights-of-way, based on the
number of kinds of services provided by each. Appellants Br. at 7
(describing § 4 of Ord. No. 6971). Ordinance No. 6971 contemplates telecommunications
providers discharging some or all of their requirements-based fee by furnishing in-kind telecommunications
services. In future years, the total requirements-based fee would be calculated in
one of three ways: (1) based upon an assessment of the Citys
requirements, (2) based upon a percentage not to exceed 15% of the providers
gross revenues, or (3) based upon a growth factor calculated from the providers
telecommunications revenues multiplied by the previous years requirements-based fee.
On January 15, 1998, Arlene D. Colvin, the Citys Chief of Staff, sent
a letter to Ameritech Indiana along with copies of the two ordinances, informing
Ameritech that Gary intended to establish a process for telecommunications vendors affected by
nclosed Ordinances to meet their economic obligations. The letter also indicated
that a City representative would contact the company in February, 1998 to negotiate
Before any meeting was held, Ameritech Indiana filed a declaratory judgment a
that the ordinances be declared void as exceeding the scope of the Citys
municipal powers. After hearing oral argument on cross-motions for summary judgment, the
trial court granted summary judgment in favor of Ameritech Indiana, finding that City
of Gary Ordinances Nos. 6970 and 6971 are and have been from the
time of their enactment INVALID and VOID in their entireties. (R. at
292; Final Judgment of June 25, 1998) (emphasis in original). The City
The Court of Appeals affirmed in part and reversed in part, finding: (1)
that the r
equirements-based fee imposed under Ordinance No. 6971 was void as an
impermissible tax assessed in violation of the Citys authority under Ind. Code §
36-1-3-8(a)(4) (1993) (Home Rule Act); (2) that even if the requirements-based fee was
not an impermissible tax under the Home Rule Act, it was an impermissible
charge by the City as of March 13, 1998, when the Indiana Legislature
amended Ind. Code § 8-1-2-101(b), prohibiting municipalities from receiving any form of
payment other than the direct, actual, and reasonably incurred management costs for a
utilitys occupation of a public right-of-way; (3) that the remaining provisions of Ordinances
6970 & 6971 did not violate Ind. Code § 36-1-3-8(a)(7) as infringing on
the jurisdiction of Indiana Utility Regulatory Commission (IURC); and (4) that the remaining
policy provisions of Ordinances 6970 & 6971 would stand despite invalidation of
the revenue-producing, requirements-based fee provisions. City of Gary v. Indiana Bell Telephone Co.,
711 N.E.2d 79 (Ind. Ct. App. 1999).
In this case, the trial judge entered specific findings of fact and conclusions
of law, neither of which are required nor prohibited in the summary judgment
context. See Dible v. City of Lafayette, 713 N.E.2d 269, 272 n.2
(Ind. 1999). Although specific findings aid our review of a summary judgment
ruling, they are not binding on this Court. Id. Instead, when
reviewing an entry of summary judgment, we stand in the shoes of the
trial court. Id. Summary judgment is appropriate only when
there is no genuine issue of material fact and the moving party is
entitled to judgment as a matter of law. Ind. Trial Rule 56(C).
We do not reweigh the evidence, but will consider the facts in
the light most favorable to the nonmoving party. See Perry v.
Stitzer Buick GMC, Inc., 637 N.E.2d 1282, 1286 (Ind. 1994), rehg denied.
We begin our analysis by looking to Indianas Home Rule Act. Pub.
L. No. 211, 1980 Ind. Acts 1657 (codified as amended at Ind. Code
§§ 36-1-3-1 to -9 (1993)). The Home Rule Act abrogated the traditional
rule that local governments possessed only those powers expressly authorized by statute and
declared that a local government possesses [a]ll other powers necessary or desirable in
the conduct of its affairs. Ind. Code § 36-1-3-4(b)(2); see also City
of Crown Point v. Lake County, 510 N.E.2d 684, 685-86 (1987) (construing the
Home Rule Act). This broad grant of authority notwithstanding, the Home Rule
Act also specifically withheld certain powers from local governments and reserved them to
See Ind. Code § 36-1-3-8.
Here, we are faced with deciding whether the requirements-based fee was within Garys
broad grant of powers co
nferred on it by the Home Rule Act or
whether the fee impermissibly impinged upon those powers reserved to the State.
The reserved powers implicated in this case are: first, the power to impose
a tax, id. § 36-1-3-8(a)(4); second, the power to impose a service charge
or user fee greater than that reasonably related to reasonable and just rates
and charges for services, id. § 36-1-3-8(a)(6); and third, the power to regulate
conduct that is regulated by a state agency, except as expressly granted by
statute, id. § 36-1-3-8(a)(7).
Among the various powers need[ed] for the effective operation of government as to
[its] local affairs, Ind. Code § 36-1-3-2, are those labeled proprietary whereby local
governments act in a private or proprietary capacity for the peculiar and special
advantage of its inhabitants, rather than for the good of the State at
large, Taylor v. State, 663 N.E.2d 213, 216-17 (Ind. Ct. App. 1996)
(analyzing Department of Treasury v. City of Evansville, 223 Ind. 435, 440, 60
N.E.2d 952, 954 (1945)).
A local governments specified power to manage the public grounds falling within its
see Ind. Code § 36-1-3-9(a), includes the unspecified power to operate in
a proprietary capacity to charge fair and reasonable compensation for the private, commercial
use of these public grounds, irrespective of the label placed on the compensation.
See, e.g., City of St. Louis v. Western Union Tel. Co., 148
U.S. 92, 99 (1893) (recognizing the general right of a city to seek
rental-like compensation from a user of the citys land/right-of-way);
Cities of Dallas &
Laredo, Texas v. Federal Communications Commn, 118 F.3d 393, 397 (1997) (A fee
imposed on a telecommunications provider was not a tax . . . but
essentially a form of rent: the price paid to rent use of public
right-of-ways [sic].); TCG Detroit v. City of Dearborn, 16 F. Supp. 2d 785,
789 (E.D. Mich. 1998) (construing the Federal Telecommunications Act, 47 U.S.C. § 253(a),
(c), and approving the imposition of a franchise fee, requiring, inter alia, a
percentage fee on gross revenue, costs, and conduit space for the city) (There
is nothing inappropriate with the [City of Dearborn] charging compensation, or rent, for
the City owned property that the [plaintiff telecommunications provider] seeks to
appropriate for its private use.),
affd, 206 F.3d 618 (6th Cir. 2000); BellSouth
Telecommunications, Inc. v. City of Orangeburg, 522 S.E.2d 804, 806 (S.C. 1999) (authorizing
the City of Orangeburg to charge a franchise fee in exchange for granting
BellSouth the special privilege of using public streets to place its equipment in
order to serve [the] Citys residents and generate private profit), rehg denied; cf.
Federal Telecommunications Act, 47 U.S.C. § 253(a), (c) (Supp. II 1996) (This section
does not affect the authority of a city to require fair and reasonable
compensation from telecommunications providers . . . for use of the public rights-of-way.).
In determining that the fee was an improper tax, the trial court found
it significant that Gary has offered no authority for the proposition that a
municipality may charge rent for use of public rights of way by public
utilities operating under certificates of territorial authority issued by the IURC. (R.
at 289; Concl. of Law No. 4.) As we just explained, however,
the Home Rule Act abrogated the traditional rule that local governments possessed only
those powers expressly authorized by statute. See Ind. Code § 36-1-3-4(a)(1)
(3) (The rule of law that a unit has only powers expressly granted
by statute; powers necessarily or fairly implied in or incident to powers expressly
granted; and powers indispensable to the declared purposes of the unit is abrogated.).
Simply put, the City of Gary need not have the specific statutory authorization
to charge companies compensation for comme
rcial use of its real estate to generate
private profit. See id. § 36-1-3-4(b)(2) (A governmental unit has all powers
necessary or desirable in the conduct of its affairs, even though not granted
by statute.); id. § 36-1-3-4(c) ([T]he omission of a power from [a statutory]
list does not imply that unit lacks that power.); cf. Department of Treasury,
223 Ind. at 442, 60 N.E.2d at 955 (When a municipal corporation engages
in an activity of a business nature . . . which is generally
engaged in by individuals or private corporations, it acts as such corporation and
not in its sovereign capacity . . . .) (omissions added) (quoting City
of Logansport v. Public Service Commission, 202 Ind. 523, 177 N.E. 249 (1931)).
Therefore, we proceed to analyze this requirements-based fee to determine if it
is valid under the Home Rule Act.
The Court of Appeals invalidated the requirements-based fee as an improper tax on
two independent bases with respect to the Home Rule Act. See City
of Gary, 711 N.E.2d at 83; see also Conclusions of Law Nos. 3
& 4 (R. at 288-89).
First, the Court of Appeals cites to a 50-year-old Illinois Supreme Court case
for the proposition that a charge or fee assessed by the governing entity
and based upon a percentage of the payors gross revenues is a tax
and not a rental charge. City of Gary, 711 N.E.2d at 83
(citing Village of Lombard v. Illinois Bell Telephone Co., 405 Ill. 209, 90
N.E.2d 105 (1950)). We disagree and cite to the Court of Appealss
own decision in Ace Rent-A-Car, Inc. v. Indianapolis Airport Authority, 612 N.E.2d 1104
(1993), transfer denied, for the proposition that the revenue-based aspect of a municipal
charge or fee does not ipso facto transform it into a tax.
In Ace Rent-A-Car, the governing entity was the Indianapolis Airport Authority (IAA), a
municipal corporation empowered with the specific
See footnote authority to adopt a sche
dule of reasonable
charges and to collect them from all users of facilities and services within
the district. Id. at 1106 (quoting Ind. Code § 8-22-3-1 (1993)).
As such, the IAA imposed a fee upon all off-airport car rental companies,
along with all off-site hotels, motels and parking lots for the privilege of
using airport roadways to operate their shuttle services. Id. As the
fee pertained to off-airport car rental companies, they would be assessed a fee
of 7% of all sales for the rental of automobiles to customers originating
at the airport. Id. (internal
Ace Rent-A-Car first challenged the validity of the percentage-based fee as being generally
inconsistent with the type of user fee approved by this Court in Evansville-Vanderburgh
Airport Auth. Dist. v. Delta Air Lines, Inc., 259 Ind. 464, 288 N.E.2d
136, enforcing 405 U.S. 707 (1972).
See footnote Ace co
ntended that the seven percent
fee imposed by IAA is based solely on revenue the companies generate and
is totally unrelated to their use of airport roadways and facilities. Ace
Rent-A-Car, 612 N.E.2d at 1107. The Court of Appeals disagreed with this
reasoning, cited several decisions from foreign jurisdictions, and upheld fees based on the
overall benefit a user derives from the existence of [an] airport. Id.
Ultimately, the court concluded that the airports very existence provides a marketplace from
which Ace Rent-A-Car derives an economic benefit, so that a user fee based
on a percent of the rental sales of automobiles made to customers originating
at the airport represents at least one fair, although imperfect, method of measuring
use. Id. at 1107-08 (relying in part on Alamo Rent-a-Car v. Sarasota-Manatee
Airport Auth., 906 F.2d 516, 519, 521-22 (11th Cir. 1990), cert. denied, 498
U.S. 1120 (1991) (deeming a broad construction of the term use as appropriate
where the benefit derived by the user depended on the existence of the
entire airport facility)).
Here, Gary rights-of-way provide a marketplace from which Ameritech derives an economic benefit,
so that Garys fee, based in part on a percentage of the companys
gross revenues, is at least one fair, if imperfect, method of measuring Ameritechs
use of Gary rights-of-way. The revenue-based aspect of the fee does not
ipso facto transform it into a tax. See id. at 1108 (We
disagree with Ace Rent-A-Car that because the fee is based on revenue it
is therefore transformed into a tax.)
Furthermore, as the Court of Appeals in Ace Rent-A-Car noted,
A tax is compulsory and not optional; it entitles the taxpayer to receive
nothing in return, other than the rights of government which are enjoyed by
all citizens. Ennis v. State Highway Commission (1952), 231 Ind. 311, 108
N.E.2d 687, 693. On the other hand, a user fee is
optional and represents a specific charge for the use of publicly-owned or publicly-provided
facilities or services. Commonwealth Edison Co. v. Montana (1981), 453 U.S. 609,
621-22, 101 S.Ct. 2946, 2955, 69 L.Ed.2d 884, 896-97, rehg denied, 453 U.S.
927, 102 S.Ct. 889, 69 L.Ed.2d 1023.
Id.; see also City of Orangeburg, 522 S.E.2d at 806 (Generally, a tax
is an enforced contribution to provide for the support of government, whereas a
fee is a charge for a particular benefit to the payer.); Blacks Law
Dictionary 1470 (7th ed. 1999) ([A] general tax . . . returns no
special benefit to the taxpayer other than the support of governmental programs that
benefit all. . . .).
Ameritech receives considerably more than the rights of government which are enjoyed by
all citizens, Ace Rent-A-Car, 612 N.E.2d at 1108, when it conducts business in
Gary rights-of-way. The requirements-based fee is not a tax but instead is
compensation, representing a specific charge assessed against Ameritech for its commercial use of
Gary-owned rights-of-way to generate private profit. B-2
Next, the Court of Appeals invalidated Garys requirements-based fee as an improper tax
based on the Citys avowed purpose to use the fee revenues to finance
improvements to communications networks in the Citys schools and government buildings the
type of improvements normally funded by tax revenues. City of Gary, 711
N.E.2d at 83 (relying on City of Portage v. Harrington, 598 N.E.2d 634
(Ind. Ct. App. 1992)).
Having found that the requirements-based fee is not an impermissible tax but is
nstead valid compensation charged by Gary for the private, commercial use of its
real estate, we find it unnecessary to consider the purpose for which the
fee revenues will be used.
Cf. City of Orangeburg, 522 S.E.2d at
806 (Where a municipality seeks to justify a charge as a fee because
the revenue generated by the charge is used for the payers benefit, we
will consider the fact that the revenue is placed in the municipalitys general
fund in deciding whether or not the payer specifically benefits from the imposition
of the charge. This factor is irrelevant, however, where the benefit to
the payer derives not from the municipalitys use of the revenue but is
a benefit given directly and solely to the payor in exchange for the
fee.) (emphasis added).
Having determined that the requirements-based fee is not a tax, we now address
what type of fee it is. III
Both parties to this appeal, as well as the trial court and Court
of Appeals, were in agreement that that the City of Garys requirements-based fee
is neither of the types of fees
contemplated by the Home Rule Act.
City of Gary, 711 N.E.2d at
82 n.3. While we agree that the City of Gary is not
charging a licensing fee while exercising a regulatory power, Ind. Code § 36-1-3-8(a)(5),
we disagree with the view that the requirements-based fee is not the type
of service charge or user fee contemplated by the legislature in Indiana Code
This Court previously considered the concept of a valid user fee in
Airport Auth. Dist. v. Delta Air Lines, Inc., 259 Ind. 464, 288 N.E.2d
136 (analyzing $1.00 airport user fee assessed by the Airport Authority against enplaning
commercial airline passengers), enforcing 405 U.S. 707 (1972). After acknowledging the Airport
Authoritys statutory power [t]o adopt a schedule of reasonable charges and to collect
the same from all users of facilities and services within the jurisdiction of
the district, id. at 466, 288 N.E.2d at 137, Justice DeBruler, writing for
the Court, offered the following rationale in upholding the validity of the user
fees assessed only on enplaning commercial airline passengers and not on all users
of the facilities:
Users of the airport facilities differ widely in the extent of their use
and reasonable charges for use, as required by the statute, would of necessity
reflect those differences. It is meaningless to say that all users must
pay the same amount of user fees, e.g., would the lessor of space
for a barber shop pay the same fee as the lessor of space
for an airplane? Would the lessor of space for a restaurant pay
the same user fee as a visitor to the airport? The very
concept of a user fee implies that there are different uses that can
be identified and the amount of the fee relates to that use.
Id. at 467, 288 N.E.2d at 137 (emphases added).
We find this reasoning equally applicable in this case: providers of telecommunic
services and consumers of those same services differ substantially in both their method
and extent of use of city-owned right-of-ways
and reasonable and just rates for
charges for services, as required by Indiana Code § 36-1-3-8(a)(6), would of necessity
reflect those differences. So while we offer no opinion as to whether
the amount of Garys requirements-
based fee assessed against Ameritech is reasonable and just given the extent of
itechs use of Garys rights-of-way,
we do find that the requirements-based fee is
the type of service charge or user fee contemplated by the legislature under
Indiana Code § 36-1-3-8(a)(6).
Ameritech Indiana lastly contends that Garys ordinances are invalid because they impermissibly tread
upon the exclusive domain of the [Indiana Utility Regulatory Commi
ssion (IURC)], which is
vested with jurisdiction to regulate all facets of service, rates and charges, and
competition concerning public utilities. Appellees Br. at 27 (emphasis added).
As set forth in Part I,
supra, the Home Rule Act does withhold
from Gary the power to regulate conduct that is regulated by a state
agency, except as expressly granted by statute. Ind. Code § 36-1-3-8(a)(7). However,
an earlier version of Indiana Code § 8-1-2-101(a) effective when the ordinances
were first enacted provided Gary with an express grant of power[ t]o
determine by . . . ordinance . . . [the] terms and conditions
. . . upon which such public utility may be permitted to occupy
the streets, highways, or other public
property within such municipality.
As such, Garys ordinances did not
impermissibly impinge upon those powers reserved to the IURC in violation of Indiana
Code § 36-1-3-8(a)(7) (1993).
Finally, if Ameritech Indiana finds the amount of Garys requirements-based fee to be
unreasonable, it has the complaint process before the IURC as contemplated by the
nder of Indiana Code § 8-1-2-101(a) (1993).
In our view, the IURC
is better qualified to make this type of reasonableness determination,
and therefore, has
primary jurisdiction in this regard. See Austin Lakes Joint Venture v. Avon
Utilities, Inc., 648 N.E.2d 641, 645 (Ind. 1995) (No fixed formula exists for
applying the doctrine of primary jurisdiction, but appropriate administrative agencies should not be
passed over in cases raising issues of fact not within the conventional experience
of judges or cases requiring the exercise of administrative discretion.) (quoting Hansen v.
Norfolk & Western Ry. Co., 689 F.2d 707, 710 (7th Cir. 1982) (quoting
in turn Far East Conference v. United States, 342 U.S. 570, 574 (1952))).
These determinations notwithstanding,
See footnote we nevertheless agree with the Court of A
ppeals that Gary
was without authority to charge the fee as of March 13, 1998.
On this date, the Indiana Legislature amended Indiana Code § 8-1-2-101(P.L. 127-1998) by
adding new subsection (b) to prohibit municipalities from receiving any form of payment
other than the direct, actual, and reasonably incurred management costs for a utilitys
occupation of a
public right-of-way. See City of Gary, 711 N.E.2d at 84-85 (A municipality
cannot continue to enforce an ordinance that has been superseded by subsequent legislation
of the General Assembly.).
The City of Gary emphatically argued both in its briefs and at oral
argument that the 1998 amendment to Indiana Code § 8-1-2-101, adding subsection (b),
only addressed occupancy of rights-of-way by utilities, thereby not preempting Garys Home Rule
powers to collect compensation for the use of rights-of-way.
However, in looking to the plain language of the statute always our
first line of inquiry we cannot ignore the legislatures clear mandate that
direct, actual, and reasonably incurred management costs do not include rents, franchise fees,
or any other payment by a public utility . . . .
Ind. Code § 8-1-2-101(b) (emphases added). See Poehlman v. Feferman, 717 N.E.2d
578, 581 (Ind. 1999) (When a statute is clear and unambiguous, we need
not apply any rules of construction other than to require that words and
phrases be taken in their plain, ordinary, and usual sense.).
In addition to this clear legislative prohibition against charging public utilities any
form of payment, we also highlight the fact that both traditional and legal
nvariably include the concept of use when providing multiple definitions for occupy
or variations thereof. See Websters Third New International Dictionary 1560 (1976) (defining
occupation as the actual possession and use of real estate); Blacks Law Dictionary
1106 (7th ed. 1999) (defining occupancy as [t]he use to which property is
put) (emphasis added); id. (defining occupation as [t]he possession, control, or use of
real property) (emphasis added). As such, we decline Garys invitation to
distinguish between Ameritechs using rights-of-way and occupying them for purposes of avoiding a
clear legislative mandate. See Poehlman, 717 N.E.2d at 581(Clear and unambiguous statutory
meaning leaves no room for judicial construction.).
We therefore (1) grant transfer; (2) adopt and incorporate by reference that part
of the Court of Appealss opinion finding that (a) the requirements-based fee was
an impermissible charge by the City as of March 13, 1998, when the
Indiana Legislature amended Ind. Code § 8-1-2-101(b); (b) the remaining provisions of Ordinances
6970 and 6971 did not violate Ind. Code § 36-1-3-8(a)(7) as infringing on
the jurisdiction of the IURC; and (c) the remaining policy provisions of Ordinances
6970 and 6971 would stand; (3) vacate the remainder of the
opinion of the Court of Appeals; and (4) remand to the trial court
with instructions to modify its order of June 25, 1998, in accordance with
this opinion. Our decision is without prejudice to any rights Ameritech Indiana
has preserved under Indiana Code § 8-1-2-101(a) (1993).
SHEPARD, C.J., and RUCKER, J., concur.
BOEHM, J., concurring in part and dissenting in part with opinion in which
DICKSON, J., concurs.
ATTORNEYS FOR APPELLANT
Gilbert King, Jr.
ATTORNEYS FOR APPELLEE
Stanley C. Fickle
Michael R. Fruehwald
Daniel W. McGill
Nicholas K. Kile
A. David Stippler
James L. Wieser
Randy H. Wyllie
SUPREME COURT OF INDIANA
CITY OF GARY, INDIANA,
Appellant (Defendant Below), )
v. ) Indiana Supreme Court
) Cause No. 45S03-0006-CV-393
INDIANA BELL TELEPHONE )
COMPANY, INCORPORATED, ) Indiana Court of Appeals
d/b/a AMERITECH INDIANA, ) Cause No. 45A03-9808-CV-333
Appellee (Plaintiff Below). )
APPEAL FROM THE LAKE SUPERIOR COURT
The Honorable James J. Richards, Judge
Cause No. 45D05-9802-CP-224
ON DIRECT APPEAL
June 30, 2000
BOEHM, Justice, concurring in part and dissenting in part.
I agree that the 1998 legislation discussed by the majority in Part IV
of its opinion made clear that the revenue measures the City of Gary
sought to impose were beyond the powers of the City. I respectfully
dissent, however, from Parts II and III of the opinion insofar as they
found these measures lawful before 1998.
The majority begins its opinion by describing the revenue raised by the ord
as a requirements-based fee on all telecommunications providers using the Citys rights-of-way.
From this premise it concludes that: (1) the fee is a charge
for use of the Citys facilities (Part II.A); (2) the fee may be
measured by revenue derived by the user, similar to a revenue-based fee paid
by a car rental company to an airport for use of the airports
facilities (Part II.B); and (3) the fee is a service charge or user
fee permitted by the Home Rule Act (Part III).
All of these conclusions hinge on the premise that the fee is in
exchange for som
ething, namely the use of the Citys rights-of-way. But, as
the Court of Appeals pointed out, the ordinance imposes a fee on all
telecommunications providers for access to the market or use of the public right-of-way.
City of Gary v. Indiana Bell Tel. Co., 711 N.E.2d 79, 82
(Ind. Ct. App. 1999). Presumably because failure to impose the
fee on increasingly available wireless means of telecommunication via land and satellite-based systems
would create an intolerable competitive situation, the City chose to impose the fee
on all providers, irrespective of whether they make any use of a city
right-of-way or not. We have a commonly understood word for a fee
for access to the market within a given governmental unit. It is
called a tax. See Diginet, Inc. v. Western Union ATS, Inc., 958
F.2d 1388, 1399 (7th Cir. 1992) (Under Illinois law, [i]f the fee is
a reasonable estimate of the cost imposed by the person required to pay
the fee, then it is a user fee and is within the municipalitys
regulatory power. If it is calculated not just to recover a cost
imposed on the municipality or its residents but to generate revenues that the
municipality can use to offset unrelated costs or confer unrelated benefits, it is
a tax, whatever its nominal designation.).
The majority relies on
Ace Rent-A-Car, Inc. v. Indianapolis Airport Authority, 612 N.E.2d
1104 (Ind. Ct. App. 1993), for the proposition that a tax entitles the
taxpayer to receive nothing in return, other than the rights of government which
are enjoyed by all citizens while a user fee is optional and represents
a specific charge for the use of publicly-owned or publicly-provided facilities or services.
Id. at 1108 (citations omitted). The majority then observes that Ameritech
receives considerably more than the rights of government which are enjoyed by
all citizens, when it conducts business in Gary rights-of-way. __ N.E.2d at
__ (citations omitted). This may be true of Ameritech, which operates a
traditional telephone system over wires and poles in public rights-of-way. But it
ignores the point that the tax is imposed on all telecommunications providers who
pay for access to the market, including those who receive no benefit that
is not shared with the general public. I believe the Court of
Appeals correctly held this fee beyond the power of the City under the
Home Rule Act, and that the 1998 legislation, plainly a response to this
measure, confirms that reading.
This ordinance reflects the City of Garys efforts to find a
creative means of enhancing its ability to further its stated goal of economic
revitalization of the City by bringing its residents into the information age through
extension of Internet access and other computer-based services to all economic strata in
the community. The wisdom of requiring such efforts to be approved at
the state level is obviously debatable. The problems of financing municipal government
are enormous, and undoubtedly are not uniform throughout this diverse state. Having
said that, whether a city may impose such a tax is a call
for the legislature, and the General Assembly has spoken on it, in my
view not only in 1998, but also beginning with the Home Rule Act
DICKSON, J., concurs.
As the United States Supreme Court observed:
[W]hen there is a permanent and exclusive appropriation of a part of the
highway, is there in the nature of things anything to inhibit the public
from exacting rental for the space thus occupied? Obviously not. Suppose
a municipality permits one to occupy space in a public park, for the
erection of a booth in which to sell fruit and other articles; who
would question the right of the city to charge for the use of
the ground thus occupied, or call such a charge a tax, or anything
else except rental? So, in like manner, while permission to a telegraph
company to occupy the streets is not technically a lease, and does not
in terms create the relation of landlord and tenant, yet it is the
giving of the exclusive use of real estate, for which the giver has
a right to exact compensation, which is in the nature of rental.
City of St. Louis, 148 U.S. at 99 (emphasis added).
Moreover, [a]ny doubt as to the existence of a power of a
unit shall be resolved in favor of its exi
stence. Id. § 36-1-3-3(b).
In contrast to the City of Garys numerous u
nspecified powers as a
local governing unit under the Home Rule Act, the Indianapolis Airport Authoritys powers
as a municipal corporation are limited to those expressly identified in its enabling
statute. See Ind. Code § 8-22-3-11(1) (29) (1993).
Delta Air Lines, this Court addressed the validity of a $1.00
airport user fee assessed by the Airport Authority against enplaning commercial airline passengers.
The Court approved the charge as a valid user fee and observed
the enabling statute granted the Airport Authority the power to make the amount
of a service charge or user fee depend on the extent of the
use made of the facilities. 259 Ind. at 466, 288 N.E.2d at 137.
Ace Rent-A-Car argued that this quoted language from Delta Air Lines limited
the IAAs fees to expenses associated with general upkeep of the airport roadways.
infra, in Part I.C, we agree that the City of
Gary is not charging a licensing fee while exercising a regulatory power.
Ind. Code § 36-1-3-8(a)(5). As such, we find the reasoning contained in
City of Portage v. Harrington, 598 N.E.2d 634 (Ind. Ct. App. 1992), and
relied on by the Court of Appeals, to be inapplicable to this case.
As set forth under
Background, supra, Ameritech apparently can avoid the payment
of fees altogether given that the Ordinance contemplates telecommunications providers discharging some or
all of their requirements-based fee by furnishing in-kind telecommunications services. (Ordinance No.
6971; R. at 21-22.) See also Letter from Arlene D. Colvin, City of
Gary Chief of Staff, to Stephen E. Powell, Director of Local Government Relations,
Ameritech Indiana 1 (Should excess capacity [or in-kind services] be limited or unavailable,
but assistance with hard wiring buildings is available through your companys resources, either
would be an alternative to strictly a cash payment.)
We previously addressed the scope and extent of regulatory license fees as
defined by Indiana Code § 36-1-3-8(5) in
Schloss v. City of Indianapolis, 553
N.E.2d 1204 (Ind. 1990), rehg denied:
Indianapolis grants licenses and exacts regulation-related fees for a wide variety of business
activities: it licenses the right to run massage parlors, operate taxicabs, deal
in secondhand goods, and sell beverages, flowers, and foods from carts. Each
type of license is granted to a number of people in anticipation of
competition among them. Every person wishing to engage in a licensed business
must follow certain procedures set by ordinance and pay a fee. Indiana
Code § 36-1-3-8(5) applies to this type of a set fee, one assessed
against numerous people in exchange for the opportunity to compete in the marketplace.
Id. at 1207 (footnote omitted) (emphasis added). The City of Gary is
without authority to charge Ameritech a fee in exchange for the opportunity to
compete in the marketplace this would violate the Federal Telecommunications Act of
1996, 47 U.S.C. § 253(a) (Supp. II 1996) (invalidating state or local regulations
that prohibit or have the effect of prohibiting the ability of any entity
to provide telecommunications services). So while we agree with Ameritechs first contention
that the requirements-based fee is not related to the administrative cost of exercising
any regulatory powers, Appellees Br. in Opposition to Petition to Transfer at 4
(emphasis added), we disagree with the companys seemingly contradictory contention that Gary is
not seeking to collect the requirements-based fee in its proprietary capacity or through
any contractual powers, but instead through its regulatory powers exercised by the ordinance,
id. at 6 (emphasis added).
Subsection (6) reads that a unit does not have . . .
[t]he power to impose a service charge or user fee greater than that
reasonably related to reaso
nable and just rates and charges for services. Ind. Code
Both Ameritech and the citizens of Gary literally use the Citys right-of-way
while engaging in the act of either providing or consuming tel
See infra Part IV.
The statute provided in relevant part as follows:
Every municipal council shall have
power[ t]o determine by contract, ordinance, or otherwise,
the quality and character of each kind of product or service to be
furnished or rendered by any public utility furnishing any product or service within
said municipality and all other terms and conditions, not inconsistent with this chapter,
upon which such public utility may be permitted to occupy the streets, highways,
or other public property within such municipality, and such contract, ordinance, or other
determination of such municipality or county executive shall be in force and prima
facie reasonable. . . .
Ind. Code § 8-1-2-101(a) (1993) (emphasis added).
This express authority to determine by ordinance the terms and conditions upon which
utilities may utilize municipality property does not include the express authority to charge
utilities compensation for their utilization of this property. But see supra Parts
I & II (discussing the City of Garys unspecified authority to charge compensation
under the Home Rule Act).
Indiana Code § 8-1-2-101(a) (1993), continued as follows:
Upon complaint made by such public utility, or by any qualified complainant, as
provided in section 54 of this chapter, the commission shall set a hearing,
as provided in sections 54 to 67 of this chapter, and if it
shall find such contract, ordinance, or other determination to be unreasonable, such contract,
ordinance, or other determination shall be void.
Id. (emphasis added).
For other situations where the IURC makes similar determinations, see, for example,
Indiana Code § 8-1-2-68 (1998) (Whenever, upon an investigation, the commission shall find
any rates, tolls,
charges, schedules, or joint rate or rates to be unjust,
unreasonable, insufficient, or unjustly discriminatory, or to be preferential or otherwise in violation
of any of the provisions of this chapter, the commission shall determine and
by order fix just and reasonable rates, tolls, charges, schedules, or joint rates
to be imposed, observed, and followed in the future in lieu of those
found to be unjust, unreasonable, insufficient, or unjustly discriminatory or preferential or otherwise
in violation of any of the provisions of this chapter.) (emphases added), and
Indiana Code § 8-1-2-88.6(b) (1998) (Access charges paid by an interexchange carrier for
interconnection to local exchange facilities [(i.e., Ameritech)] must be reasonable as determined by
the commission.) (emphasis added).
As set forth under
Background, supra, City of Gary Ordinance No. 6971
implemented the requirements-based fee, effective January 8, 1998. ( R. at 22.)
We disagree with Garys claim that the pro
perty management powers it exercises
over its rights-of-way as per Ind. Code § 36-1-3-9(a) (1993), see Appellants Reply
Br. at 3, are unaffected by the legislatures clear declaration that any property
management costs Gary seeks to recoup will not include rents, franchise fees, or
any other payment by a public utility. Ind. Code § 8-1-2-101(b) (emphases
We also note that the legislature chose not to specifically define either
use or occupy as those terms are used in Chapter 2.
Ind. Code § 8-1-2-1 (1998).