Case Name: The MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY, a Colorado corporation, et al., Plaintiffs and Respondents, v. SALT LAKE COUNTY, a body corporate and politic, et al., Defendants and Appellants
Court: Utah Supreme Court
Jurisdiction: Utah
Decision Date: 1985-06-24
Citations: 702 P.2d 113
Docket Number: No. 20522
Parties: The MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY, a Colorado corporation, et al., Plaintiffs and Respondents, v. SALT LAKE COUNTY, a body corporate and politic, et al., Defendants and Appellants.
Judges: HALL, C.J., and HOWE, J., concur.
Reporter: Pacific Reporter 2d
Volume: 702
Pages: 113–121

Head Matter:
The MOUNTAIN STATES TELEPHONE AND TELEGRAPH COMPANY, a Colorado corporation, et al., Plaintiffs and Respondents, v. SALT LAKE COUNTY, a body corporate and politic, et al., Defendants and Appellants.
No. 20522.
Supreme Court of Utah.
June 24, 1985.
Ted Cannon, Salt Lake County Atty., Gavin J. Anderson, Deputy County Atty., Salt Lake City, for defendants and appellants.
Scott M. Matheson, Alan Sullivan, Sam Gaufin, Kent Winterholler, Floyd A. Jensen, Salt Lake City, for plaintiffs and respondents.

Opinion:
DURHAM, Justice:
The defendant Salt Lake County (the County) appeals from a summary judgment and permanent injunction declaring a portion of a county ordinance levying a utility tax null and void and permanently enjoining the County from enforcing the tax. We affirm.
On December 14, 1984, the Salt Lake County Board of County Commissioners enacted the Salt Lake County Utility License Tax Ordinance, which became effective January 1, 1985. That ordinance (1) grants a 50-year franchise for the use of public rights-of-way by utility service providers in the unincorporated areas of the County; (2) establishes certain regulations regarding the use and repair of the rights-of-way; and (8) imposes and provides for enforcement of a gross revenue tax of six percent of receipts from the sale of utility services in the unincorporated areas of Salt Lake County. (The term "utility services" is defined in the ordinance as the providing of natural gas, electrical energy, or basic telephone exchange services.) The funds derived under the ordinance are to be used as general operating revenues to provide municipal services to the unincorporated areas.
The plaintiffs Mountain States Telephone and Telegraph Co. (Mountain Bell) and Mountain Fuel Supply Co. (Mountain Fuel) are public utilities providing utility services to the unincorporated areas. They use public rights-of-way for telephone lines and natural gas lines. Neither utility has a current franchise with the County to use these rights-of-way.
Effective January 1, 1985, Mountain Bell and Mountain Fuel received authority from the Public Service Commission to include the amount of the utility license tax in the utility bills of their customers in the unincorporated areas. In addition to Mountain Bell and Mountain Fuel, the utility plaintiffs, there are six corporate plaintiffs and five individual plaintiffs. The corporate plaintiffs and the individual plaintiffs are customers of the utilities or represent the utilities' customers, and these customers would be liable for the utility tax as passed through to their utility bills. Several of the plaintiffs filed suit as individuals, seeking a declaration that the tax is unlawful and seeking an injunction against collection of the tax. The eases were consolidated, and other plaintiffs were joined as parties.
On February 16, 1985, the parties' cross-motions for summary judgment came before the district court. The court concluded:
(1) that defendant Salt Lake County lacks the lawful authority to levy and collect the Utility License Tax at issue in this ease; (2) that neither section 17-5-27 nor section 17-5-39, Utah Code Ann., (1973 Repl.Vol.), nor any other provision of Utah law entitles Salt Lake County to levy or collect the said tax; and (3) that defendant Salt Lake County may not lawfully levy or collect the said tax without explicit authority from the Utah legislature.
Accordingly, the district court entered summary judgment for the plaintiffs, declaring the tax to be "unlawful, invalid, void and of no effect," and enjoined the County from levying, collecting, or enforcing the tax. AH remaining and unresolved issues were dismissed by court order and by stipulation of the parties. Further, by stipulation, the parties agreed that tax collection would be postponed during the pendency of the appeal and that the effective date of the ordinance would be amended to July 1, 1985.
The County raises three issues on appeal. First, may a county levy a utility business license tax for both regulation and revenue? Second, may a county levy such a tax absent express power from the Legislature — i.e., by a county's "implied, necessary, and inherent powers"? Finally, may a county levy a utility tax for general revenue purposes as a condition to granting a franchise for the use of public rights-of-way?
Our recent decision in Consolidation Coal v. Emery County, Utah, 702 P.2d 121 (1985), is dispositive of the first and second issues. In Consolidation Coal, we rejected the argument that Emery County had inherent power to impose a revenue tax in connection with a business license ordinance. We said, "Whether a given licensing ordinance is an exercise of the municipality's police power or its taxing power, the state must have expressly authorized the exercise. 'In other words, a municipal corporation has no inherent licensing power.' " Consolida tion Coal, at 123 (quoting 9 E. McQuillin, The Law of Municipal Corporations § 26.22, at 41 (3d ed. rev. 1978)). We followed this Court's holding in Cache County v. Jensen, 21 Utah 207, 61 P. 303 (1900): "[A] right to license a business or occupation does not imply a right to exact a tax merely for revenue, and, where the object is revenue, the power to license for that purpose must be conferred in unequivocal terms." Id. at 218, 61 P. at 305 (quoted in Consolidation Coal, at 124). Salt Lake County has no inherent power to impose a revenue tax by means of its Utility License Tax Ordinance.
Consolidation Coal is also dispositive of the County's argument that the Legislature granted the County express authority to impose a business license tax to raise revenue equivalent to the power possessed by cities. The County asserts that U.C.A., 1953, § 17-5-27 (1973) expressly grants the County the power to tax for revenue. That section authorizes the commissioners to
license for purposes of regulation and revenue all and every kind of business not prohibited by law . carried on in the county outside the limits of incorporated cities; they may [also] fix the rates of license tax upon the same....
Id. (emphasis added).
The meaning of that language was directly addressed in Consolidation Coal, wherein we affirmed the holding of Cache County that the Legislature did not grant equivalent licensing tax powers to counties and cities. "[S]ection 17-5-27 does not permit the counties to raise revenue through licensing, except insofar as such revenue is necessary to (and therefore proportionate to the cost of) regulation of the licensed entities." Consolidation Coal, at 127.
The Legislature has substantially revised the licensing enabling statute since Cache County was decided over 85 years ago. Despite these revisions, the Legislature has never seen fit to disapprove, expressly or by implication, that case's construction of the phrase "license for purpose of regulation and revenue." Furthermore, on a number of occasions during this lengthy time period, the Legislature has granted specific taxing powers to the counties in response to specific needs. Neither this legislative approach nor any of that legislation supports the view that the County now urges us to adopt. On the contrary, the only logical inference is that the Legislature has been and continues to be satisfied with the holding in Cache County that express grants of authority are necessary before counties can impose a general revenue tax and that the respective statutes dealing with cities and counties confer different powers. Compare Cache County v. Jensen, 21 Utah 207, 61 P. 303 (1900), with Ogden City v. Crossman, 17 Utah 66, 53 P. 985 (1898) (construing a city's power to impose a general revenue tax under a licensing ordinance).
We note here, because of the County's argument respecting the powers of cities to tax for revenue, that there are inherent differences between cities and counties which justify, at least historically, a different legislative approach to taxing powers. Counties are subdivisions of the state and act only as arms of the state. See, e.g., Lund v. Salt Lake County, 58 Utah 546, 559, 200 P. 510, 515 (1921). County governments are imposed upon state citizens who do not have the choice to reject that form of government. In contrast, the residents of a city can choose not to be bound by a city government. See, e.g., 1 E. McQuillin, supra, § 2.46(a) at 190 ("counties are created without the consent of the inhabitants, whereas the existence of municipal corporations ordinarily depends on the consent of the inhabitants"). Consequently, it is arguable that the citizens of a county are entitled to expect that the taxing authority of a county government, imposed upon them by the state, will be limited by the state. That, in any event, was the result of the Cache County decision, and it is a result which has never been disavowed or abandoned by the Legislature, whose intent controls the meaning of the statutes in question.
The only issue in this case that is not fully resolved by our decision in Consolidation Coal is the County's assertion that it may levy a utility tax as a condition to the granting of a franchise for the use of public rights-of-way. The County argues that the imposition of a six percent gross revenue franchise tax is a reasonable and common condition to the granting of such a franchise and that this tax is well within the broad franchising discretion statutorily granted to counties, which is commonly used throughout the state by cities to impose utility taxes.
The County relies upon U.C.A., 1953, § 17-5-39 (1973) for authority to impose a gross revenue tax on utilities. This section provides in relevant part:
[Counties] may grant franchises along and over the public roads and highways for all lawful purposes, upon such terms, conditions and restrictions as in the judgment of the board may be necessary and proper, to be exercised in such manner as to present the least possible obstruction and inconvenience to the traveling public. .
There is no express language in this section that confers any kind of taxing authority. The remaining question, therefore, is whether the power to grant franchises for use of public roads necessarily implies a power to tax a potential franchisee and, if so, to what extent. The County argues that the phrase "upon such terms, conditions and restrictions as in the judgment of the board may be necessary and proper" implies a power to impose a revenue tax. This argument finds no support in the cases the County cites on the point. No decisions of this Court contain even the suggestion that the County's power to place conditions on a franchise carries with it the power to tax all potential franchisees in amounts wholly unrelated to the actual value of the franchise or the cost of regulating the franchised use of the public roads. The words "upon such terms, conditions and restrictions" in section 17-5-39 can, in our view, relate only to the regulation of use of the public roads. This interpretation is further supported by the language that a county's regulation is "to be in such manner as to permit the least possible obstruction and inconvenience to the traveling public." It is irrational and contrary to the Legislature's approach to county taxing powers to read a general taxing power into such language. Elsewhere, the Legislature has specifically delineated and limited the taxing authority of counties. E.g., U.C.A., 1953, § 59-9-6.2 to -6.3 (1974 & Supp.1983) (property tax); § 11-9-1 to -11 (1973 & Supp.1983) (sale and use taxes). Such delineation and limits would be superfluous and without meaning if, with a general statutory reference to "terms, conditions and restrictions," the Legislature were determined to have given counties a new and general source of power to tax for revenue purposes.
The County also contends that it has greater discretion than cities to impose conditions on franchisees and concludes that it should therefore have greater authority to tax. The County relies on U.C.A., 1953, § 10-8-14 (Supp.1983) and Mountain States Telephone and Telegraph Co. v. Ogden City, 26 Utah 2d 190, 487 P.2d 849 (1971), for this contention. The County ignores, however, the fact that the cities' authority to exact revenue is not derived from section 10-8-14, which authorizes the construction of city gas works and telephone systems, but rather from section 10-8-80, which explicitly authorizes the cities to raise revenue by taxing licensees. This same fact distinguishes another case upon which the County relies, Salt Lake City Lines v. Salt Lake City, 6 Utah 2d 428, 315 P.2d 859 (1957), in which the city looked to section 10-8-80 for its authority to tax a franchised bus company. Because the utilities have entered into franchise agreements with cities or cities impose license taxes on utilities cannot be a basis for inferring power in the County to impose franchises or franchise taxes. This Court recently said:
Title 17 of the Utah Code deals exclusively with counties: creation, officers, powers and so on. Chapter 8, Title 10 deals exclusively with the powers and duties of all cities.... Thus it can be seen that there is a legislative scheme to deal with each political subdivision and its powers and duties separately.
Utah County v. Orem City, Utah, 699 P.2d 707, 709, (1985). Thus, the statutory authority of cities is clearly different from that of counties.
Counties may, of course, reasonably regulate the use of public roads and may charge reasonable fees to defray the cost of regulation. But the County's power to regulate its rights-of-way does not imply a general taxing power, and local revenue measures are ultra vires where they are supported by nothing more than the power to regulate. Courts in other jurisdictions have reached similar conclusions. In City of Chicago Heights v. Public Service Co., 408 Ill. 604, 97 N.E.2d 807 (1951), the court struck down an ordinance which imposed license fees greatly in excess of the reasonable cost of regulating the use of city streets. See also, 12 E. McQuillin, supra, § 34.82 at 200 ("the fee is invalid if its amount is so much in excess of that necessary for supervision and inspection that it is clear the fee is one for revenue"). In Chesapeake & Potomac Telephone Co. v. City of Morgantown, 143 W.Va. 800, 105 S.E.2d 260 (1958), the city sought to impose both a "license tax" and a "use fee" on the utility, following expiration of a 40-year franchise, where the parties were unable to agree on a new franchise. As in the present case, the ordinance also contained provisions regulating the use of public streets. The court upheld the "license tax," which was essentially a schedule of modest charges for various types of excavation in the public streets, on the reasoning that the charges were reasonable and their use was specifically limited to defray the cost of supervision, inspection, and approval of the work. However, the court struck down the "use fee," which was a schedule of charges based on the type and amount of the telephone company's property in the public streets, on the ground that it was purely for revenue purposes, and the legislature had not expressly delegated authority to impose such a tax.
In the present case, the County has admitted that revenues from the utility license tax bear no relation to and will greatly exceed anticipated costs of regulation. Hence the tax is invalid because there is no express or implied authority to impose it.
Accordingly, we affirm the district court's summary judgment and injunction.
HALL, C.J., and HOWE, J., concur.