Opinion ID: 2498867
Heading Depth: 1
Heading Rank: 10

Heading: Did the Kansas Legislature Take One-Call's Private Property by Establishing the Tier System for Referral Fees?

Text: Kansas statutes require that all utilities in Kansas become a member of the notification center. K.S.A. 2011 Supp. 66-1805(a). And the notification center is required to notify its member utilities of any proposed excavation, assuming the member utility has underground facilities near the excavation site. K.S.A. 2011 Supp. 66-1805(b), (c); K.A.R. 82-14-4. While an excavator is not explicitly required to call the notification center to ascertain the location of underground utilities, no excavation near underground facilities may proceed in Kansas unless the excavator has ascertained the location of all underground facilities in the proposed area of the excavation. K.S.A. 66-1803; K.A.R. 82-14-2. But see K.S.A. 2011 Supp. 66-1804 (making an exception for emergency excavations). The parties agree that the notification center is the linchpin to the notification program as it handles most of the notification center requests in the State. As previously discussed, One-Call, a private company, operates the notification center and is required to notify utilities of proposed excavations. So long as One-Call operates the notification center, the government appears to be requiring a private company (One-Call) to engage in the production of services. Traditionally, in utility rate regulation takings cases, there is a statute that requires the utilities to provide efficient and sufficient service to the public. See K.S.A. 66-101b. But in stark contrast to the traditional cases, there is no statute that requires One-Call to run the notification center. There is no taking because no private property is being used for a public purpose. This case, therefore, is analogous to Yee v. Escondido, 503 U.S. 519, 112 S.Ct. 1522, 118 L.Ed.2d 153 (1992). In Yee, the City of Escondido in 1988 enacted rent control ordinances that set mobile home rents back to their 1986 levels and prohibited rent increases without the approval of the city board. The petitioners, mobile home park owners, sued arguing that the rent control law deprived them of all use and occupancy of [their] real property to the extent it constituted a taking. 503 U.S. at 525, 112 S.Ct. 1522. The Supreme Court disagreed. The rent control ordinances regulated the relationship between the landlord and the tenant, but they did not require the petitioners to rent their mobile homes. The petitioners voluntarily rented their land to mobile home owners and were not required to continue to do so. As a result, the rent control ordinances did not authorize an unwanted physical occupation of the petitioners' land and was not a per se taking. Yee, 503 U.S. at 531, 112 S.Ct. 1522; see also Bowles v. Willingham, 321 U.S. 503, 517, 64 S.Ct. 641, 88 L.Ed. 892 (1944) (rent control ordinance not a taking because it did not require that the property owners to rent their property); Garelick v. Sullivan, 987 F.2d 913, 916 (2d Cir.1993) (By contrast, where a service provider voluntarily participates in a price-regulated program or activity, there is no legal compulsion to provide service and thus there can be no taking.). Likewise, One-Call has voluntarily agreed to participate in a price-regulated program or activity, and there is no legal requirement that it must operate the notification center. Thus, there is no taking. One-Call's takings claim is also foreclosed by the fact that the fee structure attacked by One-Call does not prohibit the operator of the state's notification center from recovering the costs of providing notification services. The legislation places no cap on fees imposed on Tier 1 utility members while limiting fees on water and wastewater utility operators. As applied to One-Call, this limitation imposes no increased costs on One-Call because it is undisputed that One-Call must raise member fees to cover those increased expenses. Under these circumstances, One-Call has not suffered a taking. The ability to pass along all expenses to members of the notification center ensures that One-Call will always be able to recoup its costs. Even assuming that the new fee structure deprives One-Call of any money in the short-term while it adjusts its fees, One-Call retains the ability to cover its expenses, which means that just compensation is available to it. Where an entity can pass along costs to others, such as customers or members, just compensation is available for any taking that may have occurred, negating any Fifth Amendment claim. See Kansas City Power & Light Co. v. Kansas Corporation Comm'n, 238 Kan. 842, 715 P.2d 19 (1986). In Kansas City Power & Light Co., the KCC had entered an order implementing a portion of a federal statute concerning the encouragement of entities to cogenerate electricity, and the order required electric utility companies to allow cogenerators of electricity to connect to the utilities' systems, to purchase electricity from cogenerators, and to pay cogenerators the avoided energy cost saved by the utility by not producing the energy received. 238 Kan. at 843, 846, 715 P.2d 19. Kansas City Power & Light Company (KCP & L) challenged the KCC order on several grounds, including that the requirement to pay cogenerators the avoided energy cost was an unconstitutional taking. The court noted that the function of requiring compensation for a taking is to put the owner in as good a position pecuniarily as he would have occupied if his property has not been taken. 238 Kan. at 848, 715 P.2d 19 (quoting Olson v. United States, 292 U.S. 246, 54 S.Ct. 704, 78 L.Ed. 1236 [1927]). Accordingly, the court rejected the takings claim because KCP & L is allowed to charge its ratepayers its avoided cost paid to the cogenerators, plus a profit. 238 Kan. at 848, 715 P.2d 19. Because the utility company was made whole through recouping any additional costs, it received just compensation. One-Call's situation is analogous to KCP & L. Whenever One-Call's expenses exceed revenues, it can increase fees to cover those increased costs. Under the amendments, any increased costs may be passed along to Tier 1 utilities and, in part, to Tier 2 utilities, whose rates are capped at 50% of Tier 1 utilities. Thus, One-Call retains the ability to pass through costs and has not been deprived of any money. For that reason, no taking has occurred as a result of the amendments. Consequently, One-Call's takings argument fails. Affirmed. MORITZ, J., not participating. GREEN, J., assigned.