Court Opinion

ID: 9714432
Source: CourtListenerOpinion
Date Created: 2023-08-26 05:37:21.277736+00
Date Added: 2024-06-11T18:23:26.031387
License: Public Domain

JUSTICE HEIPLE delivered the opinion of the court: The question presented by this case is whether municipal governments can extort toll charges or franchise fees for the crossing of public ways. They cannot. The factual context of this case is that AT&T is laying an underground fiber optic cable along an 85-mile line in northern Illinois between Glenview and Rockford. The line is being laid along railroad right-of-way of the Chicago and North Western Transportation Company (CNW) pursuant to an easement granted by CNW. The cable is designed to carry only long distance telephone communications. Additionally, telecommunications traffic can enter or leave the cable only at AT&T’s terminal points in Glenview, Rockford, and Rolling Meadows. In transversing the 85-mile cable route following the railroad right-of-way, the cable must pass under more than 140 travelled public ways subject to the jurisdiction of five counties, six townships, 13 cities and villages, plus the Illinois Department of Transportation, the Corps of Engineers and the Illinois Toll Authority. Five cities and villages in the path of this cable will not permit street crossings unless AT&T agrees to so-called franchise agreements or tolls which AT&T refused to pay. Various demands were made upon AT&T, including a percentage of gross revenues and $2.50 per foot of cable within the municipalities regardless of whether the cable was crossing the street or located entirely on CNW’s property. It is to be noted that none of the municipalities object to the installation of the cable per se. They simply want to collect a toll for it. In an action by the telephone company, the trial court initially entered a preliminary injunction in favor of the telephone company allowing the installation of the fiber optic cable without a franchise agreement. The appellate court, on an interlocutory appeal taken by the municipalities, affirmed the granting of the preliminary injunction, and the cause was subsequently returned to the trial court for a ruling on the permanent injunction. A permanent injunction barring the municipalities’ interference with the installation of the fiber optic cable was entered by the trial court and the municipalities again appealed. The appellate court concluded that municipalities do not have an absolute right to require a franchise agreement as a prerequisite to a telephone company’s utilization of the public streets. (216 Ill. App. 3d 474.) We allowed the municipalities’ petition for leave to appeal and, in a split decision, reversed the appellate court. A majority of this court held that the municipalities have the right to prohibit AT&T from crossing public streets without a franchise agreement, and that the franchise agreement could require AT&T to pay rent for the crossing of the streets. Thereafter, AT&T’s petition for rehearing was allowed (134 Ill. 2d R. 367), and the case was reargued. Today we rule that municipalities do not have a proprietary interest in the public streets and may not raise revenue by coercing telephone companies into franchise agreements. FACTS The detailed factual background of this case is as follows. Plaintiffs, American Telephone and Telegraph Company, and AT&T Communications of Illinois, Inc. (hereinafter collectively referred to as AT&T), were laying an underground 85-mile long fiber optic cable between Glenview and Rockford, Illinois. The cable, pursuant to an easement granted to AT&T by the Chicago and North Western Transportation Company, was being installed below ground along the side of a railroad roadbed. The cable was located exclusively on CNW’s private property except at points where the railroad roadbed intersected with public streets. More than 140 streets, roads, and highways cross the Glenview/Rockford cable route, and except for the municipalities of Arlington Heights, Palatine, Barrington, Lake Barrington, and Crystal Lake, AT&T was able to receive the appropriate undercrossing permits for either no charge or by paying an administrative fee. AT&T was informed that the Northwest Municipal Conference would negotiate franchise agreements between AT&T and the defendant municipalities. Initially, the Northwest Municipal Conference proposed that AT&T enter into a franchise agreement similar to an existing agreement between AT&T and the City of Chicago. This agreement provided for the paying of 2% of AT&T’s gross revenues derived from long-distance calls originating in the City of Chicago, or a minimum payment of $5 million per year. AT&T refused to accept this proposal. The Northwest Municipal Conference offered an alternative proposal requiring AT&T to pay each of the defendant municipalities $2.50 per foot of cable installed within the municipality. This proposal made it immaterial whether the cable was undercrossing public streets or located on CNW’s private property. AT&T also rejected this proposal and responded with its own offer of $1 per foot of cable located on the public right-of-way and paying an administrative fee of $5,000 per year. This proposal was rejected and an agreement was not reached. In 1987, AT&T submitted permit applications to the defendant municipalities seeking permission to install the fiber optic cable beneath the street crossings. The Village of Lake Barrington initially granted a permit, but it was revoked prior to the installation of the fiber optic cable. The other defendant municipalities refused to issue the permits. The rationale for denying AT&T’s permit application was based upon the fact that a franchise agreement had not been entered into. However, none of the municipal ordinances required a permit applicant to enter into a franchise agreement in order to obtain a permit. On August 11, 1987, AT&T mailed notices to the villages of Arlington Heights, Barrington and Palatine in an effort to invoke the eminent domain authority of telephone companies as specified in section 4 of the Telephone Company Act (Ill. Rev. Stat. 1987, ch. 134, par. 20). The notices gave the villages 10 days’ notice that AT&T intended to begin constructing its fiber optic cable under various streets intersecting with the CNW railroad. A similar letter was mailed to the City of Crystal Lake on September 11, 1987. AT&T commenced work in the villages of Arlington Heights and Palatine. However, since permits had not been issued and a franchise agreement had not been entered into, the municipalities ordered AT&T to stop work. AT&T filed a complaint against the defendant municipalities and sought a preliminary injunction to prevent their future interference in the installation of the fiber optic cable under the streets. During the injunction hearings, defendants maintained that “[Requiring payment of a fee as a condition for use of *** property by a commercial enterprise is a legitimate means of raising revenue.” Defendants also took the position that AT&T had “no right whatsoever” to undercross their streets, and that they have an “absolute right to exclude” AT&T from any use of public streets except on such terms as they may demand. On November 2, 1987, the trial court entered an interlocutory order granting a preliminary injunction in favor of AT&T which allowed them to “construct, maintain, lay, alter, bore or locate and use its fiber optic cable along, upon, under, and across any highway, street, road, or alley under the control or claimed control of the defendants.” Additionally, the injunction ordered arbitration between AT&T and the defendant municipalities. Subsequently, defendants appealed from the interlocutory order and the appellate court affirmed that part of the injunction authorizing AT&T’s use of the public streets within the municipalities and reversed the part ordering arbitration to take place. American Telephone & Telegraph Co. v. Village of Arlington Heights (1988), 174 Ill. App. 3d 381, appeal denied (1988), 123 Ill. 2d 555. On May 2, 1989, AT&T filed a motion before the trial court to convert the preliminary injunction to a permanent injunction. A permanent injunction was entered and the trial court determined that AT&T had the right to locate the fiber optic cable beneath the streets of the defendant municipalities pursuant to the Telegraph Act (Ill. Rev. Stat. 1987, ch. 134, par. 4) and the Public Utilities Act (Ill. Rev. Stat. 1987, ch. lll2/3, par. 13 — 202). Additionally, the court ruled that AT&T had the right to operate the cable without interference or disruption by the defendant municipalities. Defendants appealed, and the appellate court, with one justice dissenting, affirmed the trial court, concluding that municipalities do not have an absolute right to require a franchise agreement of a telephone company and that such an agreement is not a necessary precondition for the utilization of the public streets by AT&T. (216 Ill. App. 3d 474.) We now affirm the appellate court. DISCUSSION Defendants claim that they have the right to require revenue-raising franchise agreements or tolls as a precondition to the use of public streets by telephone companies. While municipalities have the authority to enact regulations relating to the use of the public streets and to charge reasonable regulatory fees for such use, they do not have the authority to hold the public streets hostage as a means of raising revenue. (Village of Lombard v. Illinois Bell Telephone Co. (1950), 405 Ill. 209, 217-18.) Defendants, by classifying their current attempt to raise revenue as franchise agreements, are attempting to circumvent both this court’s previous holdings prohibiting municipalities from charging rent for the use of city streets (Village of Lombard, 405 Ill. at 216) and the statutory requirement that the taxing of a telecommunications company must be based upon the business originating within the corporate limits of the municipality (Ill. Rev. Stat. 1987, ch. 24, par. 8 — 11—2(1)). It needs to be borne in mind that AT&T is not seeking permission to use city streets for the operation of a business within city limits such as a garbage collection service, a street railway, a cable TV franchise, etc. That is to say, they do not seek to garner revenue from the use of city streets. What is sought here is different in character from what would normally be considered a franchise-type business seeking protection, licensing and special privileges for the use of city streets. No person or entity within any of the municipalities in this case is to be connected to or have the use of the fiber optic cable which is sought to be laid. All that plaintiffs seek here is to get from one side of town to the other. Regardless of the name given to this particular method of revenue enhancement, whether it is called a franchise, a rental fee or a tax, it is, in its essence, a toll. Parenthetically, it is to be noted that there are 1,281 cities and villages in Illinois, 102 counties and 1,434 townships, each of which maintains travelled ways. If each of these governmental units had the right to charge tolls for conduits going under and over their streets, the effect would amount to legalized extortion and a crippling of communication and commerce as we know it. Municipalities do not possess proprietary powers over the public streets. They only possess regulatory powers. The public streets are held in trust for the use of the public. While numerous powers and rights regarding public streets have been granted to municipalities by the General Assembly, they are all regulatory in character, and do not grant any authority to rent or to lease parts, or all, of a public street. Village of Lombard, 405 Ill. at 216. Defendants cite several cases as authority for the proposition that the right to demand a franchise fee is an exercise of the municipalities’ proprietary power over public property. The principal cases relied on by the defendants, however, were all decided prior to this court’s decision in Village of Lombard v. Illinois Bell Telephone Co. (1950), 405 Ill. 209. (See City of Springfield v. Inter-State Independent Telephone & Telegraph Co. (1917), 279 Ill. 324; Chicago General Ry. Co. v. City of Chicago (1898), 176 Ill. 253.) In Village of Lombard, this court held that the powers a municipality has over its streets are all regulatory in character and a municipality has no authority to rent part or all of the public streets. (Village of Lombard, 405 Ill. at 216.) It has been argued that the Lombard decision is no longer good law, because five years after it was announced, the General Assembly amended the Revised Cities and Villages Act to include a provision allowing municipalities the right to collect compensation for the use of public streets. (Ill. Rev. Stat. 1955, ch. 24, par. 23 — 113.) Today the relevant statutory section provides: “Any of the taxes enumerated in this section may be in addition to the payment of money *** to the municipality *** as compensation for the use of its streets *** or installation and maintenance *** thereunder of *** wires ***.” (Ill. Rev. Stat. 1987, ch. 24, par. 8 — 11—2(4).) This section neither allows municipalities to tax the user of public streets nor does it allow the taxation of wires under the streets. This section is purely regulatory in nature. The General Assembly, at the same time that the above provision was added, also added what is today section 8 — 11—2(1) of the Illinois Municipal Code. Section 8 — 11—2(1) authorizes municipalities to impose a 5% tax on the gross receipts of a person engaged in the business of transmitting electronic messages. The gross receipts to which the tax applies are limited to the business which originates within the corporate limits of the municipality. (Ill. Rev. Stat. 1987, ch. 24, par. 8 — 11—2(1).) If the General Assembly intended to give municipalities the right to use the public streets as revenue-raising devices, it would have been unnecessary to explicitly provide for a way to tax electronic messages and to impose a 5% cap upon such a tax. It is reasonable to conclude that the General Assembly, by allowing municipalities to collect money for the use of streets and the installation and maintenance of wires under the streets, simply reinforced the regulatory power municipalities have over public streets. To conclude otherwise would render the express taxing provisions meaningless. Thus, municipalities only have regulatory powers over public streets and cannot charge tolls for their use. The character of defendants’ last proposal made to AT&T did not meet the scope of the permissible tax allowed by section 8 — 11—2(1) (Ill. Rev. Stat. 1987, ch. 24, par. 8 — 11—2(1)). Rather than being based upon the business originating within the corporate limits of the various municipalities as required by the statute, it attempted to collect $2.50 for each foot of cable installed within the municipalities, regardless of whether the cable was located on public or private property. The villages of Arlington Heights and Palatine are both home rule municipalities. As such, their powers are to be liberally construed. (Ill. Const. 1970, art. VII, §6.) However, the power of a home rule municipality to levy a tax is limited to issues of local rather than statewide concern. (People ex rel. Bernardi v. City of Highland Park (1988), 121 Ill. 2d 1, 12-13.) A telephone company which is running a fiber optic cable across the State and through various municipalities is not a matter of purely local concern and is an issue of statewide concern. Thus, the fact that the villages of Arlington Heights and Palatine are home rule municipalities does not permit this type of franchise agreement to be imposed upon AT&T. Defendants rely heavily upon City of Geneseo v. Illinois Northern Utilities Co. (1941), 378 Ill. 506, for the proposition that a franchise agreement may be required prior to a public utility’s utilization of the public streets. While this court in Geneseo stated that the Public Utilities Act did not affect the power of municipalities to permit or refuse a franchise to a public utility (Geneseo, 378 Ill. at 530), that case did not involve the power of a municipality to tax for the use, or rent, of the public streets. Additionally, Geneseo did not involve a telephone company or the Telephone Company Act. Ill. Rev. Stat. 1987, ch. 134, par. 20. Under section 4 of the Telephone Company Act, telephone companies are granted eminent domain authority over private property and the power to use any public ground of this State which is necessary for the extension of telephone poles, wires, cables or other appliances. (Ill. Rev. Stat. 1987, ch. 134, par. 20.) In relevant part, section 4 provides: “Every *** [telephone] company may, when it shall be necessary for the construction *** of its telephone system *** enter upon, take or damage private property *** and every such company is authorized to construct *** poles, wires, cables and other appliances as a proper use of highways, *** under and across any highway, street, alley, water or public ground in this state, but so as not to incommode the public in the use thereof: Provided, that nothing in this act shall interfere with the control now vested in cities, *** and villages in relation to the regulation of the poles, wires, cables and other appliances, and provided, that before any such lines shall be constructed along any such highway it shall be the duty of the telephone company *** to give to the highway commissioners having *** control over the road *** along *** which such line is proposed to be constructed [10 days written notice of the company’s purpose and intention. It is then the duty of the highway commissioners] to specify the portion of such road or highway upon which the said line may be placed ***; [if the] highway commissioners shall, for any reason, fail to make such specification within ten days after the service of such notice, then the *** [telephone] company *** may proceed to place *** its *** abutments so as not to interfere with other proper uses of said road or highway.” (Emphasis added.) (Ill. Rev. Stat. 1987, ch. 134, par. 20.) This section gives telephone companies the authority to lay wires under public streets. Defendant municipalities, relying on section 4 of the Telegraph Act (Ill. Rev. Stat. 1987, ch. 134, par. 4), argue that this statute does not give AT&T the authority to undercross their streets without prior consent. Section 4 of the Telegraph Act states that telegraph companies must receive written consent of a municipality prior to the construction of telegraph equipment. (Ill. Rev. Stat. 1987, ch. 134, par. 4.) Section 20 of the Telephone Act states that telephone companies may begin construction of a telephone line along a highway after giving the appropriate highway commissioners 10 days’ written notice. (Ill. Rev. Stat. 1987, ch. 134, par. 20.) Since highway commissioners do not have control over municipal streets which are not part of the State or county highway system, the 10-day notice provision does not apply to proposed construction of telephone lines along such streets. (People ex rel. Shallberg v. Central Union Telephone Co. (1908), 232 Ill. 260.) Thus, a telephone company must seek municipal consent prior to constructing its equipment along or under municipal streets. However, the consent of the municipality may not be unreasonably withheld, or refused for an improper reason. Collection of a toll is an improper reason. If the construction request is reasonable in light of factors such as public health, safety, necessity and convenience, municipal consent must be promptly given. (City of Vandalia v. Postal Telegraph-Cable Co. (1916), 274 Ill. 173, 176-77.) Analogous to the aforesaid 10-day notice requirement, municipalities should reasonably respond to a telephone company’s request within 10 days. Since the record reveals that AT&T’s proposed undercrossing of municipal streets would not interfere with the public health, safety, necessity or convince, consent should have been given. While AT&T and the defendant municipalities could have voluntarily entered into a contractual relationship under which AT&T would have agreed to pay for the undercrossing of public streets, absent such an agreement, defendants do not have the right to force AT&T to pay a toll under the guise of a franchise agreement. Additionally, it is immaterial that the defendants have been able to coerce other companies into similar agreements or that AT&T has been coerced into such agreements in the past. The mere fact that AT&T chose not to litigate every wrong thrust upon it does not prevent it from asserting its rights at the present time. Defendants’ only interest in the public streets is regulatory in nature. As such, any payment to which defendants would be entitled should only cover actual costs, including inspection, regulatory, administrative and repair costs associated with the tunneling under public streets. The fact that AT&T seeks to undercross certain streets in this case with a fiber optic cable results in no intrusion on, or diminution of, the use or safety of the streets. The fact that AT&T is a for-profit corporation is of no moment. One may reasonably ask, if the Salvation Army or the Sisters of St. Francis were proposing to lay a fiber optic cable, would the law be otherwise? It would not. Municipal governments, whether home rule or non-home-rule, are creatures of the Illinois Constitution. (Ill. Const. 1970, art. VII, §§6, 7.) They have no other powers. Nothing in the Illinois Constitution or Illinois statutory law authorizes cities and villages to charge tolls for the crossing of the streets. If the plaintiffs were carrying phone messages in trucks commuting between Glenview and Rockford (if such can be imagined), instead of carrying the messages on a fiber optic cable, the municipalities would not be authorized to stop the plaintiffs’ trucks and charge them tolls as they crossed municipal boundaries. The streets exist for the benefit of the entire public and are subject only to reasonable regulations regarding usage. Streets do not exist and were not created as either obstructions or revenue-producing property for municipalities. For the reasons set forth above, we affirm the judgment of the appellate court. Affirmed. JUSTICE McMORROW took no part in the consideration or decision of this case.