Policy

Mich. Franchise-Fee Class-Action Suit Rejected

3/11/2004 7:51 AM Eastern

A county judge in Michigan has rejected a franchise-fee challenge by cable customers in Muskegon, Mich., asserting that cable companies, and not subscribers, are franchise-fee taxpayers.

Class-action attorneys filed suit in 13 cities in Michigan in November, asserting that the cities collect money for the purpose of reimbursing themselves for the use of rights-of-way, but that they use excess funds for other general municipal purposes.

The suits alleged that the amount collected in excess of the actual cost to regulate is actually a tax, assessed in violation of a section in the Michigan constitution that requires voter approval of tax levies.

The suits were filed in various county courts, but in the first opinion, Judge James Graves of the Circuit Court of Muskegon County said cable subscribers are actually reimbursing the actual taxpayer -- the cable operator -- when they remit the franchise fee listed on their bills.

The judge dismissed the suit in an opinion issued March 9 based on lack of standing, rather than on other municipal arguments such as federal pre-emption, or that franchise fees are rental fees paid by cable companies for rights-of-way use, so the assessment is not a tax.

March