Opinion ID: 1140706
Heading Depth: 1
Heading Rank: 6

Heading: vimunicipal franchise tax

Text: One of the exhibits is a list of 92 towns and cities in Colorado to which Mountain Bell paid franchise, license or occupational taxes in 1967. Some of these municipalities charged flat payments and a few collected license fees. The great bulk of the municipalities charged a percentage of subscriber revenue accounts. Most of the towns and cities had a tax of 2% of the accounts. A few had 1%. Four cities, including the City and County of Denver, had a tax of 3% of the accounts, but none had a tax greater than 3%. Mountain Bell's Colorado vice president and general manager urged that Mountain Bell be permitted to add the taxes of a particular municipality to the bills of the customers in that town or city and thereby eliminate discrimination against customers not residing within the limits of a taxing unit. The Commission found that such taxes are common and are normally designed to compensate the municipality for the use of its streets and alleys by the utility. Implied in its findings is the conclusion that if the tax is reasonable it is not discriminatory. The Commission stated: A problem arises when such taxes exceed the bounds of reasonableness and become solely a method for raising revenue for general municipal purposes.    We have, therefore, concluded that a franchise and license tax of not more than three percent is a reasonable charge for the use of municipal streets and alleys, but we feel that any part of a franchise or tax in excess of three percent of revenue should be properly surcharged to the customers located within such municipality and upon whose revenues such tax is levied. Without citing any cases counsel for the protestants object to the surcharge of municipal franchise taxes in excess of 3% of revenues. They urge that under no circumstances should these taxes be surcharged. In any event, they say, a limitation upon such taxes charged to the general expense should not be made until a hearing in depth is held and detailed evidence is taken. We are puzzled slightly by the arguments of the protestants on this issue. Denver and the other members of the Colorado Municipal Leagueand the customers living within their boundariesare not affected as no municipality is over the 3% limitation. It occurs to us that the objection to this order much more properly should come from those customers residing in non-taxing areas. However, we do not in any manner indicate that the order is discriminatory against them. We elect not to rule on this issue in the posture presented. Its determination must await another day when either a city levies taxes exceeding the limitation or until objection is made by customers not in a taxing municipality. Nevertheless, in passing we note that the Utah Supreme Court has upheld surtaxing the municipal tax to customers without limitation (Ogden City v. Public Service Commission, 123 Utah 437, 260 P.2d 751); that the Supreme Court of Appeals of Virginia has held that such an order is valid but that a limitation substantially lower than the one here involved is unreasonable, unjust and penalizing to political subdivisions (City of Newport News v. Chesapeake & Potomac Telephone Co., 198 Va. 645, 96 S.E.2d 145); and that a number of courts, to say nothing of commissions, have approved such surtaxing. Village of Maywood v. Illinois Commerce Commission, 23 lll.2d 447, 178 N.E.2d 345; City of Elmhurst v. Western United Gas and Electric Co., 363 Ill. 144, 1 N.E.2d 489; City of Scottsbluff v. United Telephone of the West, 171 Neb. 229, 106 N.W.2d 12; and State ex rel. City of Seattle v. Department of Public Utilities, 33 Wash.2d 896, 207 P.2d 712. In the brief of plaintiffs in error it was stated that the additional revenue of $1,207,757 was over and above the 7.5% rate of return. This statement was not controverted in the briefs of the defendants in error. We were unable to satisfy ourselves from the record as to whether the amount was included, or was in addition to, the 7.5% rate of return. In the event that it is included, then the Commission must make an appropriate reduction of the 7.5% rate of return to exclude the figure of $1,207,757.