Opinion ID: 1908239
Heading Depth: 1
Heading Rank: 3

Heading: fair competition act

Text: Louisiana's Fair Competition Act contains a number of statutes that govern various matters related to the development, financing, implementation, construction, and operations of a telecommunications system by a local government. Particularly pertinent to the issues presented by this case are the following statutory provisions: La.Rev.Stat. 45:844.52. Bonding authority A. The local governing authority may by resolution determine to issue one or more bonds to finance the capital costs for facilities necessary to provide to subscribers one or more covered services. B. The resolution shall: (1) Describe the purpose for which the indebtedness is to be created. (2) Specify the dollar amount of the one or more bonds proposed to be issued. C. (1) A bond issued under this Section shall be secured and paid for solely from the revenues generated by the local government from providing the covered services.      (3) Nothing in this Chapter shall preclude a local government that owns and operates electric, water, gas, sewer and other utilities from pledging the resources of such utilities to obtain the best available interest rates, terms and conditions for the bonds necessary to finance the facilities used to provide the proposed covered services.      La.Rev.Stat. 844.53. General operating limitations (1) A local government that provides a covered service under this Chapter is subject to all applicable provisions of local, state and federal law, including applicable rules of the Louisiana Public Service Commission. (2) A local government may not cross-subsidize its covered services with tax dollars, income from other local government or utility services, below-market rate loans from the local government or any other means. (Emphasis added.) The two statutes quoted above address two separate and distinct phases related to the implementation and ownership of telecommunications systems by local governments. La.Rev.Stat. 45:844.52 governs Bonding authority, while La.Rev. Stat. 45:844.53 governs General operating limitations. Relative to bonding authority, La.Rev.Stat. 45:844.52(A) allows a local government to issue bonds to finance capital costs for facilities that are to be put in place before the telecommunications system can provide covered services to subscribers. In that regard, La.Rev.Stat. 45:844.52(B) requires that the resolution or ordinance describe the purpose of the indebtedness and specify the amount of the proposed bonds. The statute then provides that the bonds issued shall be secured and paid for solely from the revenues generated by the local government from providing the covered services, but also specifies that the local government is not precluded, if it owns a utilities system, from pledging the resources of its utilities system to secure the bonds. La.Rev.Stat. 45:844.52(C)(1) & (3). An independent section of the Fair Competition Act, La.Rev.Stat. 45:844.53, describes general limitations relative to operation of the telecommunications system after it goes on line and starts providing covered services to subscribers. That statute provides that a local government operating a telecommunications system is subject to applicable local, state, and federal laws, including Louisiana Public Service Commission rules. La.Rev.Stat. 45:844.53(1). La.Rev.Stat. 45:844.53(2) then provides that a local governing authority operating a telecommunication systems is not at liberty to use tax dollars or income from other local utility services to cross subsidize their operation of covered services. Further, money may not be borrowed from other divisions of a local governing authority operating a telecommunications system in the form of below market-rate loans. Id. Inferentially, a local government operating a telecommunications system may borrow money to pay for covered services from other divisions of the local governing authority, including the utilities system, so long as the loans include market-rate interest. Id. The fact that the two statutes are designed to govern two entirely separate and distinct phases is apparent, not just from the title of the two statutes and the summary of their contents set forth above, but also from the types of costs that the two statutes are designed to govern. La.Rev. Stat. 45:844.52, relative to bonding authority, governs the issuance of bonds, the proceeds from which are expressly to be used to pay capital costs for facilities. On the other hand, La.Rev.Stat. 45:844.53, relative to limitations on general operations, makes no mention of capital costs, but instead provides that the local governing authority cannot cross subsidize its covered services with income from utility services. The word cross subsidize is defined in La.Rev.Stat. 45:844.43, the definitions section of the Fair Competition Act, as follows: to pay a cost included in the direct costs or indirect costs of providing a covered service. Thus, the bonding authority provision, La.Rev.Stat. 45:844.52, concerns itself only with capital costs, while the prohibition against cross-subsidization in La.Rev.Stat. 45:844.53 concerns itself with direct costs and indirect costs. The three types of costs associated with telecommunications systems are defined by La.Rev.Stat. 45:844.43 as follows: (3) Capital costs means all costs of providing a service that are capitalized in accordance with generally accepted accounting principles.      (8) Direct costs means those expenses of a local government that: (a) Are directly attributable to providing a covered service. (b) Would be eliminated if the service described in Subparagraph (8)(a) was not provided by the local government.      (14)(a) Indirect costs means any costs: (i) Identified with two or more services or other functions (ii) That are not directly identified with a single service or function. (b) Indirect costs may include cost factors for administration, accounting, personnel, purchasing, legal support, and other staff or departmental support. These definitions further demonstrate that La.Rev.Stat. 45:844.52, relative to bonding authority to cover capital costs, governs a completely separate phase from La.Rev. Stat. 45:844.53, which regulates only general operations and addresses the payment of direct and indirect costs. The above distinction between the two statutes must be clearly understood before assessing whether Bond Ordinance No. 0-053-2006, challenged by the plaintiffs herein, violates Louisiana's Fair Competition Act. As we have found, the two statutes govern separate and distinct financial needs related to a local government's ownership of a telecommunications system. Clearly, the only statute relevant to interpretation of the bond ordinance at issue here is the provision governing bonding authority to finance capital costs for facilities, La.Rev.Stat. 45:844.52. It follows that the other provision, La.Rev.Stat. 45:844.53, which expressly establishes general limitations on operations, and does not mention either bonds or capital costs, has no application to the bond ordinance plaintiffs challenge. La.Rev.Stat. 45:844.53 is an important part of the statutory scheme; however, it does not become applicable until a local government has its telecommunications system up and running, providing covered services to subscribers, and finding need to pay direct and indirect costs for the system. And, that is where the court of appeal erred in this case: by applying the statute relative to general operating limitations to an ordinance regarding bonding authority. When the court of appeal considered whether Bond Ordinance No. 0-053-2006 violated the Fair Competition Act, it looked at both La.Rev.Stat. 45:844.52, the statute governing bonding authority, and La.Rev.Stat. 45:844.53, the statute governing general operating limitations. In fact, the court of appeal considered whether the bond ordinance violated either of the two statutes, when in fact only one applies to the bonding phase of a telecommunications project, without recognizing that they expressly govern separate and distinct phases related to a local government's ownership of a telecommunications system. Relevantly, a careful review of the court of appeal decision reveals that it contains separate conclusions about whether the bond ordinance complied with each of the two statutes. The court of appeal found that Bond Ordinance No. 0-053-2006 complies with the requirements of La.Rev.Stat. 45:844.52, the bonding authority statute, stating as follows: We find, initially, that Section 4.1 [of Bond Ordinance 0-053-2006] complies with the Fair Competition Act's mandate that bonds issued are to be paid for with funds generated from the communications system enterprise. See La. R.S. 45:844.52(C)(1). [Lafayette's] pledge of revenues from its existing Utilities System as security for the bonds is also permissible under the Fair Competition Act. See id. As we have found, La.Rev.Stat. 45:844.52 is the only statute pertinent to the validity of the bond ordinance, because it is the only statute in the Fair Competition Act pertinent to bonding authority to finance capital costs for facilities. Thus, the court of appeal had no reason to go further and assess whether the bond ordinance complies with La.Rev.Stat. 45:844.53, because La.Rev.Stat. 45:844.53 has no application to the bonding phase of the telecommunications project. Furthermore, plaintiffs have not challenged the court of appeal's holding that the bond ordinance complies with La.Rev.Stat. 45:844.52, the only applicable statute. However, the court of appeal went on to its second conclusion and found that the bond ordinance violated the prohibition against cross subsidization set forth in La. Rev.Stat. 45:844.53, which is the inapplicable provision governing general operations and cross subsidization to pay direct and indirect costs. It is on the basis of its improper finding that certain provisions of the ordinance violate the prohibition against cross subsidization set forth in La. Rev.Stat. 45:844.53 that the court of appeal granted the plaintiffs' motion for judgment and enjoined the issuance of the bonds. Because it is based on the court of appeal's improper consideration of the requirements of an inapplicable statute, we reverse the decision of the court of appeal enjoining the issuance of the bonds. In closing, we note that this opinion does not address the issue that was the subject of the majority of the briefs of the parties and the amici in this court, i.e., whether the provisions of Bond Ordinance No. 0-053-2006 governing the pledge of the revenues of Lafayette's utilities system constitute a true pledge under Louisiana law. There are actually two reasons that it is unnecessary, and in fact inappropriate, for this court to rule on that issue. First, as we have already held, this issue and the plaintiffs' arguments in that regard are perempted because they were not set forth in their timely-filed motion for judgment, but rather were raised for the first time in plaintiffs' supplemental memorandum filed after the expiration of the 30-day constitutional peremption period for challenging provisions of a bond ordinance. La. Const. art. 6, § 35(B). Second, even if those issues had not been perempted, plaintiffs' arguments relative to the true character of the pledge of the utility system revenues no longer have any relevance in light of the court of appeal's finding that the bond ordinance complies with the only applicable statute in the Fair Competition Act. Because plaintiffs have not challenged that finding in this court, the merits of the plaintiffs' arguments concerning whether the pledge provisions constitute a true pledge are not before us and need not be addressed.