KENTUCKY CATV ASSOCIATION, INC. (D/B/A KENTUCKY CABLE TELECOMMUNICATIONS ASSOCIATION, INC.) APPELLANT
CITY OF FLORENCE, KENTUCKY; CITY OF WINCHESTER, KENTUCKY; CITY OF GREENSBURG, KENTUCKY; CITY OF MAYFIELD, KENTUCKY; KENTUCKY LEAGUE OF CITIES, INC.; LORI HUDSON FLANERY, IN HER OFFICIAL CAPACITY AS SECRETARY OF THE FINANCE AND ADMINISTRATION CABINET; AND THOMAS B. MILLER, IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF THE DEPARTMENT OF REVENUE APPELLEES AND LORI HUDSON FLANERY, IN HER OFFICIAL CAPACITY AS SECRETARY OF THE FINANCE AND ADMINISTRATION CABINET, COMMONWEALTH OF KENTUCKY; AND THOMAS B. MILLER, IN HIS OFFICIAL CAPACITY AS COMMISSIONER OF THE DEPARTMENT OF REVENUE, FINANCE AND ADMINISTRATION CABINET, COMMONWEALTH OF KENTUCKY APPELLANTS.
CITY OF FLORENCE, KENTUCKY; CITY OF WINCHESTER, KENTUCKY; CITY OF GREENSBURG, KENTUCKY; CITY OF MAYFIELD, KENTUCKY; KENTUCKY LEAGUE OF CITIES, INC.; AND KENTUCKY CATV ASSOCIATION, INC. APPELLEES
APPEAL FROM COURT OF APPEALS CASE NO. 2013-CA-001112-MR
FRANKLIN CIRCUIT COURT NO. 11-CI-01418
COUNSEL FOR KENTUCKY CATV ASSOCIATION, INC.: Douglas Frank
Brent Timothy Joseph Eifler Jackson W. White Stoll Keenon
Ogden PLLC Eric S. Tresh Maria M. Todorova Sutherland Asbill
& Brennan, LLP
COUNSEL FOR LORI HUDSON FLANERY, IN HER OFFICIAL CAPACITY AS
SECRETARY OF THE FINANCE AND ADMINISTRATION CABINET,
COMMONWEALTH OF KENTUCKY; THOMAS B. MILLER, IN HIS OFFICIAL
CAPACITY AS COMMISSIONER OF THE DEPARTMENT OF REVENUE,
FINANCE AND ADMINISTRATION CABINET, COMMONWEALTH OF KENTUCKY:
Bethany Atkins Rice Office of Legal Services for Revenue
COUNSEL FOR CITY OF FLORENCE, KENTUCKY; CITY OF WINCHESTER,
KENTUCKY; CITY OF GREENSBURG, KENTUCKY; CITY OF MAYFIELD,
KENTUCKY; AND KENTUCKY LEAGUE OF CITIES, INC.: Barbara B.
Edelman David James Treacy Haley Trogdlen McCauley Dinsmore
& Shohl LLP
COUNSEL FOR AMICUS CURIAE, CHARTER COMMUNICATIONS, INC.: John
Nalbandian Taft Stettinius & Hollister, LLP Gardner F.
Gillespie J. Aaron George Sheppard Mullin Richter &
Hudson Flanery, in her official capacity as Secretary of the
Finance and Administration Cabinet for the Commonwealth of
Kentucky; Thomas B. Miller, in his official capacity as
Commissioner of the Department of Revenue for the
Commonwealth of Kentucky (Cabinet); and Kentucky CATV
Association, Inc. (KYCATV) appeal the decision of the Court
of Appeals reversing the Franklin Circuit Court's
judgment in their favor and remanding with instructions to
grant judgment in favor of the City of Florence, Kentucky;
City of Winchester, Kentucky; City of Greensburg, Kentucky;
City of Mayfield, Kentucky; and Kentucky League of Cities,
Inc. (Cities). This Court granted discretionary review, and
for the reasons stated herein, we affirm the opinion of the
Court of Appeals, vacate the Franklin Circuit Court's
judgment, and remand for entry of summary judgment in favor
of the Cities.
2005, the General Assembly enacted the Multichannel Video
Programming and Communications Services Tax (the Telecom
Tax). Kentucky Revised Statute (KRS) 136.600 et seq.
While the Telecom Tax as a whole changes the way the
Commonwealth taxes video telecommunications and programming
providers, the subject of this litigation is one provision
prohibiting "every political subdivision of the
state" from collecting franchise fees or taxes on
franchises subject to the Telecom Tax. KRS 136.660(1)(a)-(c)
(Prohibition Provision). The Telecom Tax authority
encompasses each of the Commonwealth's political
subdivisions; however, we note that only the Cities are
parties to this litigation.
Telecom Tax assesses a tax on the gross revenues received by
all multichannel video programming (MVP) and communications
service providers, and is composed of excise taxes, sales
taxes, and other similar taxes on the property of MVP service
providers. MVP service is programming provided by a
television broadcast station or similar entity and includes
cable television services, satellite broadcast and wireless
cable services, and internet protocol television.
Telecom Tax imposes a 3% excise tax on all retail purchase of
MVP services, as well as a 2.4% tax on the gross revenues
received by all providers of MVP services, and a 1.3% tax on
the gross revenues received by providers of communications
services. KRS 136.604 and KRS 136.616. These provisions
effectively impose a 5.4% tax on total charges for MVP
services and a 4.3% tax on total charges for
telecommunications services. Revenue collected under the
Telecom Tax is then deposited into the General Fund.
163 of the Kentucky Constitution provides that no utilities
shall be permitted within a city or town without the consent
of their legislative bodies. Section 164 of the Kentucky
Constitution authorizes counties, cities, towns, taxing
districts, and other municipalities to grant franchises,
subject to a twenty-year limitation thereon. Historically,
municipalities collected franchise fees as compensation for
granting utilities use of municipal rights-of-way, pursuant
to Sections 163 and 164. Cable companies were required to
obtain the local government's permission to use roads and
rights-of-way, and the municipalities granted them permission
via permits, to which franchise fees applied.
noted above, the Telecom Tax's Prohibition Provision
prohibits local governments from levying or collecting
franchise fees or taxes from MVP and communications
providers. KRS 136.660(1)(a)-(c). To compensate local
governments for this loss of revenue, the statute mandates
that a portion of the funds generated by the Telecom Tax be
disbursed to the municipalities as "monthly
hold-harmless amounts, " which are capped at a total of
$36, 408, 000.00 annually. KRS 136.650(2)(c). The parties do
not dispute that this amounts to only 83% of the $42, 100,
000.00 annually collected by the municipalities prior to the
2011, the Cities filed a petition for declaratory relief,
alleging that the Telecom Tax violates their right to grant
franchises and to collect franchise fees as provided in
Sections 163 and 164 of the Kentucky Constitution. The
Cabinet and KYCATV denied the Cities' allegations and all
parties filed motions for judgment on the pleadings. The
circuit court granted the Cabinet's and KYCATV's
motions and dismissed the petition, holding that the Telecom
Tax does not violate Sections 163 and 164. The Court of
Appeals then vacated the circuit court's judgment and
remanded, finding that the Telecom Tax's Prohibition
Provision violates Sections 163 and 164, entitling the Cities
to summary judgment. We set forth additional facts as necessary
STANDARD OF REVIEW.
case concerns a matter of constitutional construction or
interpretation, which we review de novo. Greene v.
Commonwealth, 349 S.W.3d 892, 898 (Ky. 2011). In
conducting that review, we must construe the constitutional
provisions at issue in a manner that carries out the intent
of the framers because "[t]he polestar in the
construction of Constitutions is the intention of the makers
and adopters." Grantz v. Grauman, 302 S.W.2d
364, 367 (Ky. 1957). We gather that intent "both from
the letter and the spirit of the document." Id.
The dissent states that the majority, by looking to the
framers' intent, "dangerously teeter[s] on injecting
our own policy preferences into the case before us-a task
most aptly reserved for the legislative branch."
we are "simply doing what we are charged to do."
Jefferson Cnty. Bd. of Educ. v. Fell, 391
S.W.3d 713, 727 (Ky. 2012). As this Court stated in
Where the statute is ambiguous, the Court may properly resort
to legislative history. [MPM Financial Group, Inc. v.
Morton, 289 S.W.3d 193, 198 (Ky. 2009)]; Fiscal
Court of Jefferson Co. v. City of Louisville, 559 S.W.2d
478, 480 (Ky. 1977) ("The report of legislative
committees may give some clue. Prior drafts of the statute
may show where meaning was intentionally changed. Bills
presented but not passed may have some bearing. Words spoken
in debate may be looked at to determine the intent of the
legislature."). Often legislative history is referenced,
even where a statute is unambiguous, simply to underscore the
correctness of a particular construction. See Stephenson
v. Woodward, 182 S'.W.3d 162, 172 (Ky. 2005) (Resort
to legislative history is unnecessary when the statute is
"abundantly clear, " but in case at bar
"legislative history is enlightening and serves only to
strengthen our foregoing conclusion.").
Id. at 719-20.
asserting that the Telecom Tax's Prohibition Provision
does not violate the Kentucky Constitution, Appellants make
two main arguments: 1) Sections 163 and 164 neither
explicitly nor implicitly provide municipalities the power to
collect franchise fees; and 2) Section 181 grants the General
Assembly the power to prohibit municipalities from collecting
franchise fees. We address each argument below.
Kentucky Constitution Sections 163 and 164.
Section 163 of the Kentucky Constitution provides:
No street railway, gas, water, steam heating, telephone, or
electric light company, within a city or town, shall be
permitted or authorized to construct its tracks, lay its
pipes or mains, or erect its poles, posts or other apparatus
along, over, under or across the streets, alleys or public
grounds of a city or town, without the consent of the proper
legislative bodies or boards of such city or town being first
obtained; but when charters have been heretofore granted