Title: Florida Power Corporation v. City Of Winter Park, Florida
Citation: N/A
Docket Number: SC02-2272
State: Florida
Issuer: Florida Supreme Court
Date: October 28, 2004

Supreme 
Court 
of 
Florida 
____________ 
No. SC02-2272 
____________ 
FLORIDA POWER CORPORATION, 
Petitioner, 
vs. 
CITY OF WINTER PARK, 
Respondent. 
 
[October 28, 2004] 
CORRECTED OPINION 
 
LEWIS, J. 
We have for review the decision in Florida Power Corp. v. City of Winter 
Park, 827 So. 2d 322 (Fla. 5th DCA 2002), which certified conflict with the 
decision in Florida Power Corp. v. Town of Belleair, 830 So. 2d 852 (Fla. 2d DCA 
2002), review granted, 852 So. 2d 862 (Fla. 2003).  We have jurisdiction.  See art. 
V, § 3(b)(4), Fla. Const.  For the reasons stated below, we approve the Fifth 
District Court of Appeal’s decision in Winter Park, and disapprove the decision in 
Belleair to the extent described herein. 
 
 
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The instant action arises from the Fifth District’s affirmance of the trial 
court’s decision requiring Florida Power Corporation (FPC) to continue paying a 
franchise fee that had been due under a now-expired franchise agreement.1  See 
Winter Park, 827 So. 2d at 323.  FPC’s electrical system was originally built by the 
City of Winter Park, (hereinafter City) and sold to FPC’s predecessor along with 
the franchise to serve as the sole provider of electricity in the area.  The original 
franchise agreement, and each subsequent iteration thereof, contained a buy-back 
provision, granting the City the right to purchase the electrical system at the end of 
the franchise term.  Each franchise agreement also contained a franchise fee.  The 
franchise agreement underlying the instant action assessed a fee of six percent of 
gross receipts based on the sale of electricity within the territorial limits of the 
City.2 
When the most recent franchise agreement expired by its terms, the parties’ 
negotiations reached an impasse.  FPC retained possession of the 
                                        
1.  In 1913, Winter Park built and operated the City’s electric system.  In 
1927, the City sold the system to FPC’s predecessor.  FPC acquired the electrical 
system in 1944, and renewed the franchise agreement twice with Winter Park, once 
in 1947 and again in 1971.  The agreement signed in 1971 expired on January 12, 
2001, but was extended by mutual agreement of the parties until June 12, 2001. 
 
2.  Although for the sake of brevity we refer to the fee as six percent of gross 
revenues, the franchise agreement provides that the fee, when “added to the 
amount of all taxes, licenses, and other impositions levied or imposed by the 
grantor upon the Grantee’s electric property, . . . will equal 6% of Grantee’s 
revenues” from the sale of electricity. 
 
 
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City’s rights-of-way, and continued to operate as the sole provider of electricity, 
but refused to remit the franchise fee.  The City filed an action for declaratory 
judgment, seeking to have the trial court confirm its right to continue receiving the 
franchise fee for as long as FPC occupies and utilizes the public rights-of-way.  
After a non-jury trial, the circuit court determined that the City indeed had the right 
to charge a franchise fee reasonably related to the costs of regulating and 
maintaining FPC’s use of the public rights-of-way, and the value of that use to 
FPC.  The trial court further determined that the six percent fee bore a reasonable 
relation to such expenses and value.  The trial court likened FPC to a holdover 
tenant in the public-rights-of-way, and determined that the company would be 
subject to the six percent fee until the parties execute the buy-back provision or 
reach a new agreement. 
The district court affirmed the trial court’s determination.  The district court 
adopted the trial court’s analogy to principles of landlord/tenant law, and endorsed 
the notion that FPC was a holdover tenant subject to the terms of the original 
“rental” agreement.  The Fifth District also noted the inequity and public harm that 
would result from relieving FPC of its obligation to pay the franchise fee while the 
City’s responsibilities in regulating and maintaining the rights-of-way would 
continue unabated.  In rendering this decision, the district court certified a conflict 
with the decision reached by the Second District Court of Appeal in Florida Power 
 
 
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Corp. v. Town of Belleair, 830 So. 2d 852 (Fla. 2d DCA 2002).  There, upon 
review of a substantially similar set of facts, the district court determined that the 
trial court erred in granting a temporary injunction requiring FPC to continue to 
pay the six percent fee after expiration of the franchise agreement.  See id. at 854. 
Throughout the proceedings below and before this Court, FPC has 
maintained that continued assessment of the six percent fee amounts to 
unconstitutional taxation under this Court’s decision in Alachua County v. State, 
737 So. 2d 1065 (Fla. 1999).  According to FPC, expiration of the franchise 
agreement and the concomitant termination of its franchise right to operate as the 
city’s sole electric service provider have eliminated the bargained-for exchange 
that previously supported the franchise fee.  Now, FPC would have this Court 
believe that requiring FPC to pay the six percent fee constitutes the unilateral 
imposition of an impermissible tax, and is prohibited by our decision in Alachua. 
The reality, however, is that Alachua does not support FPC’s position.  FPC 
misinterprets judicial precedent because it divorces the principles of law 
established in Alachua from the underlying facts as it attempts to invoke the 
decision to serve its own ends.  The trial court deflated FPC’s argument by 
distinguishing the instant matter from Alachua.  The district court echoed that 
refrain.  We now add our voice to the chorus. 
 
 
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The distinctions between the instant matter and the scenario in Alachua are 
as clear as they are numerous.  In Alachua, this Court reviewed a trial court order 
declaring a proposed bond issue invalid.  See Alachua, 737 So. 2d at 1066.  A 
central issue in the bond validation proceeding was whether a privilege fee 
imposed by Alachua County on electric utilities using the public rights-of-way 
constituted an illegal tax.  See id. at 1067.  The ordinance at issue imposed a fee of 
three percent of the gross revenues generated by electric utilities within the county, 
and permitted the utilities to pass the expense through to their customers.  See id. at 
1066.  To avoid having the fee declared an unconstitutional tax, the county argued 
that the fee was justifiable as a reasonable rental fee, user fee, or franchise fee.  See 
Alachua, 737 So. 2d at 1067. 
This Court disagreed, determining that there was no nexus between the 
privilege fee and the reasonable rental value of the land occupied by the utilities or 
the county’s expenses in regulating its rights-of-way.  See Alachua, 737 So. 2d at 
1065.  In rejecting the county’s franchise fee argument, we noted that the fee was 
not bargained for, but unilaterally imposed, and did not require Alachua County to 
relinquish a property right or bestow anything upon the utilities in exchange for the 
fee.  See id. at 1068.  We also recognized that the privilege fee was imposed on 
utilities that were already occupying the rights-of-way and providing services, see 
Alachua, 737 So. 2d at 1068, and that the stated purpose of the fee was to relieve 
 
 
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what had been perceived as a disproportional ad valorem tax burden on taxable 
property owners.  See id. at 1066.  For these reasons, we determined that the 
privilege fee imposed by Alachua County was in actuality an unconstitutional tax.  
See id. at 1069. 
While it is true that the instant matter also involves the assessment of a 
percent-of-revenue fee against an electric utility, that is where the similarities 
between this action and Alachua end.  Importantly, the fee at issue here is not a 
novel attempt by a local government to exact revenue from a right-of-way user, but 
arose from a decades-old electric utility franchise granted by Winter Park to FPC.  
The franchise gave FPC the “right, privilege and franchise to construct, operate 
and maintain in the said City of Winter Park, all electric power facilities” for the 
purpose of supplying electricity to the City’s inhabitants.  Thus, during its effective 
period, the franchise agreement constituted a permissible bargained-for exchange 
pursuant to which FPC ceded six percent of revenues in exchange for access to the 
City’s rights-of-way, the monopoly electricity franchise, and the City’s 
corresponding relinquishment of its power to provide electric service in the 
community.  See City of Plant City v. Mayo, 337 So. 2d 966, 973 (Fla. 1976). 
We flatly reject the implication, propounded by FPC, that when the clock 
struck midnight on the final day of the franchise agreement, the six percent fee was 
 
 
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transformed from a proper franchise fee into an unconstitutional tax.  To the 
contrary, we endorse the district court’s view that 
if a franchisee and a governing body agree to a reasonable fee for 
access to the city’s residents and the use of the public property to 
provide services during the term of the franchise then such a fee has 
not been ‘unilaterally imposed’ and will be enforced during a 
holdover period in which renegotiation occurs. 
Winter Park, 827 So. 2d at 324.  Our decision in Alachua does not permit a utility 
subject to a maturing franchise agreement to wait out the contract term so that it 
may withhold fees upon its expiration.  Such an interpretation would gravely 
impact the renegotiation process by vitiating any motive the utility would have for 
entering into contractual arrangements beyond the initial franchise agreement. 
Moreover, we reiterate that Alachua validates fees that are reasonably 
related to the government’s cost of regulation or the rental value of the occupied 
land, as well as those that are the result of a bargained-for exchange.  See Alachua, 
737 So. 2d at 1067.  In the instant case, the trial court specifically found that the 
City had “offer[ed] sufficient evidence that the six percent fee was reasonably 
related” to the costs of regulation, and had “also presented strong evidence that the 
six percent fee is a fair ‘market rate’ for such use, occupation, or rental.”3  FPC 
attacks these findings, arguing that the data provided at trial was not directly tied to 
                                        
3.  Evidence adduced at trial included the total acreage occupied by FPC in 
the area, the total cost to the City of maintaining all of its rights-of-way, and the 
frequency with which City services responded to downed power lines. 
 
 
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FPC’s occupation and use of the rights-of-way.  The trial court recognized this 
point, but determined that the City had established the required nexus between 
expenses and fees.  The petitioner provides no basis upon which this Court should 
divert from the usual deference accorded such findings of fact. 
Neither are we persuaded by FPC’s assertion, seemingly subscribed to by 
the Second District in Belleair, that the courts cannot extend the terms of otherwise 
expired franchise agreements.  See Belleair, 830 So. 2d at 854.  As a threshold 
matter, the decision reached today does not force either party to perform under the 
terms of the expired agreement.  To the contrary, each has maintained performance 
from the onset of the instant action.  The City has maintained the rights-of-way, 
and has kept them safe and presentable for the public, and will continue to do so, 
regardless of whether FPC pays the franchise fee.  Likewise, FPC has continued to 
accept and enjoy the benefits of access to the City’s rights-of-way, and its status as 
the area’s sole electricity provider. 
Under this scenario, it is perfectly proper to imply a contract at law.  See 
Incorporated Town of Pittsburgh v. Cochrane, 159 P.2d 534, 538 (Okla. 1945) 
(determining that upon expiration of a franchise agreement, if the company 
“continues to furnish and the town accepts the service, an implied contract of 
indefinite duration arises”); see also B-C Cable Co. v. City and Borough of Juneau, 
613 P.2d 616, 619 n.5 (Alaska 1980); Village of Lapwai v. Alligier, 207 P.2d 
 
 
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1025, 1027 (Idaho 1949).  By specifically enforcing the payment provision of the 
implied contract, we satisfy the City’s clear legal right to receive compensation 
reasonably related to FPC’s use and occupation of the rights-of-way, and the 
regulatory and maintenance expenses incurred by the City as a result of that use. 
In the absence of an implied contract, on the other hand, FPC would be 
unjustly enriched.4  FPC continues to collect fees from consumers for electric 
service which include a pass-through component earmarked for payment of the six 
percent franchise fee.  To the extent FPC discontinues its payments to Winter Park, 
it would receive a windfall in the form of a corresponding increase in revenue.  It 
would be wholly inequitable to allow FPC to profit in this manner while the city’s 
maintenance and public safety responsibilities continue unabated.  See City of Las 
Cruces v. El Paso Electric Co., No. Civ-95-385-LCS/JHG, 1997 WL 1089567, at 
*3 (D.N.M. 1997), aff’d, 166 F.3d 1220 (10th Cir. 1999). 
Moreover, any argument that franchise fee payments should cease during the 
pendency of protracted contract negotiations and follow-on litigation ignores the 
economic realities of utility service.  By virtue of natural attrition and replacement, 
FPC’s customer base in the City of Winter Park is constantly changing.  
                                        
4.  The elements of an unjust enrichment claim are “a benefit conferred upon 
a defendant by the plaintiff, the defendant’s appreciation of the benefit, and the 
defendant’s acceptance and retention of the benefit under circumstances that make 
it inequitable for him to retain it without paying the value thereof.”  Ruck Bros. 
Brick, Inc. v. Kellogg & Kimsey, Inc., 668 So. 2d 205, 207 (Fla. 2d DCA 1995). 
 
 
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Retroactive application of a pass-through fee would, therefore, unfairly benefit 
some customers and penalize others.  The district court applied a far more 
appropriate remedy by maintaining the parties’ status quo, likening FPC to a 
holdover tenant, and subjecting the utility to the six percent franchise fee until the 
current impasse is broken through either execution of the contractual buy-back 
provision or a new franchise agreement. 
The conclusion we reach today requires that we disapprove the Second 
District’s decision in Belleair, which we deem to be in error in two respects.  First, 
the district court in that case determined that “without the franchise agreement to 
support the negotiated franchise fee, a 6% flat fee constitutes an illegal tax 
pursuant to Alachua because it bears no relationship to the actual cost of regulation 
or maintenance of Belleair’s rights-of-way.”  Belleair, 830 So. 2d at 854.  If by this 
the court meant that percent-of-revenue fees, by definition, do not bear the required 
nexus to the actual costs of regulation, the decision has no foundation in 
controlling precedent.  This Court has never determined that percent-of-revenue 
fees are per se unreasonable.  Indeed, our effort to address the reasonableness of 
the fee in Alachua as an inquiry distinct from determining whether it was the 
product of a bargained-for exchange indicates that such is not the state of the law. 
Second, we disapprove Belleair to the extent it provides that courts cannot 
extend the terms of expired franchise agreements to cover an interim period during 
 
 
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which a holdover utility and the local government resolve the status of their 
relationship going forward.  As explained above, the conduct and interaction of the 
parties, and balance of equities involved, may render such action necessary and 
proper.  To exclude such a remedy from the reach of the courts would upset the 
balance of franchise negotiations and renegotiations, and threaten to disrupt 
sustainable electric service to the citizens of this state. 
Conclusion 
Based on the foregoing, we approve the decision of the district court below 
and disapprove the Second District’s decision in Belleair as described herein. 
It is so ordered. 
 
PARIENTE, C.J., and WELLS, ANSTEAD, QUINCE, CANTERO, and BELL, 
JJ., concur. 
 
 
NOT FINAL UNTIL TIME EXPIRES TO FILE REHEARING MOTION, AND 
IF FILED, DETERMINED. 
 
 
 
Application for Review of the Decision of the District Court of Appeal - Certified 
Direct Conflict of Decisions 
 
 
Fifth District - Case No. 5D01-2470 and 5D02-87 
 
 
(Orange County) 
 
Sylvia H. Walbolt, Joseph H. Lang, Jr., and Hunter W. Carroll, St. Petersburg, 
Florida, and Gary L. Sasso, Tampa, Florida, of Carlton Fields, P.A., and R. 
 
 
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Alexander Glenn, Associate General Counsel of Progress Energy Service 
Company, LLC, St. Petersburg, Florida, 
 
 
for Petitioner 
 
Thomas A. Cloud, Tracy A. Marshall, and George N. Meros, Jr., of Gray, Harris 
and Robinson, P.A., Orlando, Florida, 
 
Gordon H. Harris, Orlando, Florida, 
 
 
for Respondent 
 
Kenneth R. Hart and J. Jeffry Wahlen of Ausley and McMullen, Tallahassee, 
Florida, on behalf of Tampa Electric Company; William B. Willingham and 
Michelle Hershel, Tallahassee, Florida, on behalf of Florida Electric Cooperatives 
Association, Inc.; Ron A. Adams of Steel Hector and Davis, LLP and Jean G. 
Howard, Office of General Counsel, Miami, Florida, on behalf of Florida Power 
and Light Company; and Harry Morrison, Jr., and Rebecca A. O’Hara, 
Tallahassee, Florida, on behalf of Florida League of Cities, Inc., 
 
 
as Amici Curiae