The Attorney General of Texas 

March lg. 1983 

JIM MAlTOX 

Attorney General 

Supreme Court Building 

P. 0. BOX 12548 

Austin. TX. 78711. 2548 

5121475-2501 

Telex 9101874.1357 

Telecopier 512/4750268 

1607 Main St., Suite 1400 

Dallas. TX. 75201.4709 

2141742.6944 

4824 Alberta Ave.. Suite 160 

Et Paso. TX. 79905.2793 

9156333484 

P 

1220 Dallas Ave.. Suite 202 

Hpuston. TX. 770026986 

713/650-0666 

806 Broadway. Suite 312 

Lubbock, TX. 79401.3479 

8061747.5238 

4309 N. Tenth. Suite B 

McAllen. TX. 78501.1685 

512,682-4547 

2W Main Plaza. Suite 400 

San Antonio, TX. 78205-2797 

5121225~4191 

An Equal Opportunity/ 

Affirmative Action Employef 

Honorable Warren New 

Yoakum County Attorney 

P. 0. Box 359 

Plains, Te*gs 79355 

Opinion No. JM-16 

Re: Whether charge imposed on 

telephone company by city may 

be passed on to county as a 

customer of telephone company 

Dear Mr. New: 

You have been notified by the telephone utility which serves your 

county that it is imposing an extra charge on the bills of Its 

customers receiving service within the city limits of Plains. The 

extra charge was initially denominated a "city gross receipts tax," 

but was subsequently referred to in later correspondence as a 

"franchise fee.” This "franchise fee" $8 equivalent to a charge that 

the city imposed upon the telephone utility and which the telephone 

utility seeks to pass through to its customers. You have refused to 

pay the extra charge and have asked whether such pass-through charge 

can permissibly be imposed upon the county. You claim that the charge 

Is. in reality, a tax and cannot be levied against the county lest 

article XI. section 9 of the Texas Constitution, which exempts from 

taxation the property of counties devoted exclusively to the use and 

benefit of the public, be violated. We reject your contention and 

conclude: that the telephone utility Is not prohibited from passing 

through to the county the extra fee imposed by the city. '~ 

This office addressed a similar issue fin an earlier opinion and 

concluded,that state agencies may pay a so-called "municipal franchise 

charge" imposed by the telephone company upon all of Its customers, 

including state agencies. As noted in Attorney General Opinion H-1265 

(1978). utility companies frequently enter into franchise agreements 

with cities authorizing them to use the city's streets~in exchange for 

a franchise fee. uhlch is-usually calculated as a percentage of the 

gross receipts received on services locally rendered. The Public 

Utility ~Cosauission requires .regulated utilities to file with the 

commission tariffs which provide that any municipal franchise charge 

will be passed on to the utility customers within the affected 

municipality. 

Article 1175, section 12. V.T.C.S.. requires telephone companies, 

before using the grounds or streets of a home rule city, to first 

p. 62 
Honorable Warren New - Page 2 (JM-16) 

obtain the consent of the governing authorities and pay prescribed 

compensation. Article 1181. V.T.C.S.. sets forth other conditions 

which relate to the grant by a home rule city of a "franchise to use 

or occupy the public streets, avenues, alleys or grounds" of the city. 

Pursuant to these provisions, home rule cities may grant utility 

franchises to use the public streets in exchange for compensation 

measured by a percentage of gross receipts. See City of Tyler v. 

Television Cable Service, Inc., 493 S.W.2d 322 (% Civ. App. - Tyler 

1973, writ of Weslaco v. General Telephone Company 

of the Southwest, 359 S.W.2d 260 (Tex. Civ. App. - San Antonio 1961, 

writ ref'd n.r.e.). General law cities have authority under article 

1016. V.T.C.S.. to arant franchises to telenhone companies conducting 

a local business. Fleming v. Houston Lighting and Power Company, 138 

S.W.2d 520. 522 (Tex. : 1940).~ cert. denied, 313 U.S. 560 (1941); 

S.W. 

phone Company v. City ,of Dallas, 174 

636 (Tex. Civ.' ADD. - Dallas 1915. writ ref d). See also 

Southwestern Telegraph and Tele 

V.T.C.S. art. 1446~. §21;-Tax Code 1182.064. 

Relying on language in Fleming v. Houston Lighting and Power 

Company. s, which characterized such franchise charges collected 

by utilities as rentals for the use of city streets rather than as 

G&es, and cases in accord from other jurisdictions, this office 

concluded that such a franchise charge is no'c a tax. Attorney General -, 

Opinion H-1265 (1978). Despite dicta .in Payne v. Massey, 196 S.W.2d 

493 (Tex. 1946) and City of Alvin v. Southwestern Bell Telephone 

Company, 517 S.W.2d 689. 692 (Tex. Civ. App. - Houston (1st Dist.) 

1975. writ ref'd n.r.e.). which appear to characterize such franchise 

charges as gross receipt taxes. the great weight of authority supports 

the conclusion set forth in Attorney General Opinion H-1265, and we 

reaffirm it here. The franchise charges imposed by the city and 

measured as a percentage of the gross receipts of the utility are not 

a tax, but rather a rental charge paid in compensation for the use of 

the streets. You claim. however, that the charge is a tax and that 

the imposition of the charge violates article XI,, section 9 of the 

Texas Constitution which provides, inter alia. that the property of 

counties devoted exclusively to the use and benefit of the public 

shall be exempt front taxation. 

Assuming. arguendo. that such charge could fairly be denominated 

a tax, it is clear that article XI, section 9 has no relevence in this 

instance. Article XI, section 9 prohibits, inter alia. any political 

subdivision from imposing ad valorem taxation on the property of any 

county, city, or town which is devoted exclusively to the use and 

benefit of the public. NO property of the county is even conceivably 

beinn taxed in this instance: no county property is involved. See, 

*t Wichita County Water Improvement District No. 2 v. City of 

Wichita Falls, 323 S.W.2d 298 (Tex. Civ. App. - Fort Worth 1959. writ 

refmn.r.e.); City of Fort Worth,v. Reynolds, 190 S.W. 501 (Tex. Civ. 

APP. - Fort Worth 1916. writ dism d). 

p. 63 
. 

,- 

Honorable Warren New - Page 3 (JM-16) 

We find no statutory or constitutional prohibition against the 

payment of properly established telephone rates by counties. We 

conclude that the charge imposed by the telephone utility is not a 

tax; rather it is a rental imposed for the use of the streets. Were 

we to conclude, however , that such charge were a tax, we also conclude 

that such charge does not violate any constitutional or statutory 

provision which we have found or to which we have been directed. 

SUMMARY 

A charge imposed by a municipality upon a 

telephone utility denominated a franchise fee and 

measured by a percentage of the gross receipts of 

the utility Is not a tax; rather such charge is a 

rental imposed for the use of the streets. A 

telephone utility may pass through such charge to 

its customers. including the county, without 

violating statutory or constitutiofal provision+ 

JIM MATTOX 

Attorney General of Texas 

TOM GREEN 

First Assistant Attorney General 

DAVID R. RICHARDS 

Executive Assistant Attorney General 

Prepared by Jim Moellinger 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Susan L. Garrison, Chairman 

Rick Gilpin 

Jim Moellinger 

Bruce Youngblood 

p. 64