TCG DETROIT V CITY OF DEARBORN
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STATE OF MICHIGAN
COURT OF APPEALS
TCG DETROIT,
FOR PUBLICATION
March 4, 2004
9:10 a.m.
Plaintiff-Counterdefendant/
Appellee,
v
No. 232609
Wayne Circuit Court
LC No. 98-803937-CK
CITY OF DEARBORN,
Defendant-Counterplaintiff/
Appellant.
Updated Copy
May 21, 2004
Before: Smolenski, P.J., and White and Wilder, JJ.
WHITE, J.
Defendant City of Dearborn (Dearborn) appeals as of right the order denying its motion
for summary disposition, which challenged the constitutionality of certain provisions of the
Michigan Telecommunications Act (MTA), MCL 484.2101 et seq., article 2A of which has since
been repealed,1 and the court's rulings regarding what constitutes "fixed and variable costs"
thereunder. We affirm.
1
Neither party raised this in supplemental briefing, but we note that article 2A of the MTA,
MCL 484.2251-484.2254, was repealed in 2002, during the pendency of this appeal, and that a
new act, the Metropolitan Extension Telecommunications Rights-of-Way Oversight Act,
codified at MCL 484.3101 et seq., took effect on November 1, 2002. Subsection 1(2) of the new
act states:
The purpose of this act is to do all of the following:
(a) Encourage competition in the availability, prices, terms, and other
conditions of providing telecommunication services.
(continued…)
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I
The facts as stated in the circuit court's opinion denying defendant's motion for summary
disposition are not in dispute:
TCG is licensed by the Michigan Public Service Commission to provide
local telecommunications services within the City [of Dearborn]. Its chief
competitor in providing local telecommunications services within the City is
Ameritech, who is the incumbent local exchange carrier. However, TCG does not
(…continued)
(b) Encourage the introduction of new services, the entry of new
providers, the development of new technologies, and increase investment in the
telecommunication infrastructure in this state.
(c) Improve the opportunities for economic development and the delivery
of telecommunication services.
(d) Streamline the process for authorizing access to and use of public
rights-of-way by telecommunication providers.
(e) Ensure the reasonable control and management of public rights-ofway by municipalities within this state.
(f) Provide for a common public rights-of-way maintenance fee applicable
to telecommunication providers.
(g) Ensure effective review and disposition of disputes under this act.
* * *
(j) Create an authority to coordinate public right-of-way matters with
municipalities. [MCL 484.3101(2). Emphasis added.]
Section 3 of the new act provides that the oversight authority is established as an
autonomous agency, that the director of the authority shall be appointed by the governor.
Subsection 3(3) provides that
[t]he authority shall coordinate public right-of-way matters with municipalities,
assess the fees required under this act, and have the exclusive power to assess
fees on telecommunication providers owning telecommunication facilities in
public rights-of-way within a municipality in a metropolitan area to recover the
costs of using the rights-of-way by the provider. [MCL 484.3103(3). Emphasis
added. See also n 8.]
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possess any telecommunications facilities within the City. TCG sought, through
an agreement with Detroit Edison, to install fiber optic cable in existing Edison
ducts. These, however, lie in the City's rights of way.
Sometime in early 1994, the City was informed of TCG's plan to install
fiber optic cable in the Edison ducts. By this time approximately seven out of a
planned twenty-seven miles of fiber optic cable within Edison's existing conduit
had been installed in the City. The City objected and asserted, as it presently
does, that TCG needed to enter into a franchise agreement with the City before
entering into the City's right of ways [sic] to install telecommunications facilities,
such as fiber optic cable. Thereafter TCG negotiated with the City to enter into a
franchise agreement that would enable TCG to use the City's rights of way.
During this time the City adopted its Telecommunications Ordinance [.]
By September 1995, the parties nearly reached an agreement. The
proposed agreement required TCG to pay the City a franchise fee of 4% of TCG's
gross revenues, a $50,000 one time payment, and up to $2500 of the costs
incurred by the City in connection with its granting the franchise. Also under the
proposed agreement, TCG, if it should ever install its own conduit within the City,
would also install, at its own cost, an inner conduit for use by the City. Finally,
the proposed agreement contained a "most favored nation" clause under which
TCG would be obligated to pay the City, at its election, a higher percentage of
revenue in the event TCG agreed to pay a higher percentage to any other
municipality within the tri-county area.
The parties continued to negotiate over the resolution of some apparently
minor details when, on November 30, 1995, under 1995 PA 216, MCL 484.2101
et seq., the revised provisions of the Michigan Telecommunications Act (the Act)
took effect. Based on the provisions of the Act, TCG took the position that it no
longer needed to enter into a franchise agreement with the City. TCG maintained
that upon its complying with the provisions of the Act, the City was required to
issue a permit for the use of its rights of way. Further negotiations ultimately
came to an impasse and this case followed.
Procedural Posture
In September 1996, plaintiff TCG filed a complaint against Dearborn in the United States
District Court for the Eastern District of Michigan seeking a declaratory ruling, an injunction,
and damages, and alleging that Dearborn had violated § 253 of the Federal Communications Act
(FCA), 47 USC 151 et seq., and article 2A of the MTA, by failing to allow TCG access to public
rights-of-way in Dearborn for placement of fiber optic cables. The district court dismissed the
state law claims without prejudice. With regard to the federal claim, the court found that the fees
Dearborn sought (the same fees it initially sought in the instant case, i.e., four percent of TCG's
gross revenues, a one-time charge of $50,000, and the requirement that if TCG installed its own
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conduit in the rights-of-way, it do so for the city as well) were "fair and reasonable" under
subsection 253(c) of the FCA, which provides that local governments retain authority "to require
fair and reasonable compensation from telecommunications providers," for use of a public rightof-way. TCG Detroit v Dearborn, 16 F Supp 2d 785, 788-791 (ED Mich, 1998), aff 'd 206 F3d
618 (CA 6, 2000).
TCG refiled the state law counts in February 1998, in a seven-count complaint for
declaratory judgment and an injunction. Counts I, II, and III allege violation of the MTA by
failure to issue a permit, failure to limit permit conditions as necessary to manage rights-of-way,
and failure to limit fees and assessments to Dearborn's fixed and variable costs, respectively.
TCG sought a declaration that Dearborn's Telecommunications Regulatory Ordinance2 is invalid
because it is contrary to the MTA, and that Dearborn may not require TCG to enter into a
franchise agreement or pay the franchise fees Dearborn demanded.
Dearborn counterclaimed, seeking past due franchise fees and TCG's ejection from its
rights-of-way should it fail to pay Dearborn the fees sought.
Dearborn filed a motion for summary disposition asserting that portions of article 2A of
the MTA are unconstitutional in that they impermissibly impinge on Dearborn's franchising
rights derived from Const 1963, art 7, § 29. The circuit court denied Dearborn's motion,
concluding that the MTA could be construed consistently with art 7, § 29. Dearborn's motion for
partial reconsideration was denied.
TCG moved for summary disposition, arguing that portions of Dearborn's 1994 ordinance
violated the MTA, and that certain provisions of the draft franchise agreement Dearborn and
TCG had nearly agreed on infringed on the Michigan Public Service Commission's power and
authority and violated the MTA. The court3 granted TCG's motion in part and denied it in part,
concluding that the challenged portions of Dearborn's ordinance did not violate the MTA, but
that portions of the draft franchise agreement did. The rulings on TCG's motion have not been
appealed.
II
We first address Dearborn's argument that § 253 of the MTA, MCL 484.2253, which
provides that a local government may not exact compensation for telephone companies' access to
its rights-of-way in excess of its "fixed and variable costs . . . in granting a permit and
2
Telecommunications Regulatory Ordinance No. 94-605 regulated "the granting of franchises
for telecommunications systems."
3
Judge Marianne O. Battani presided over the case until June 2000, thereafter Judge Gershwin
A. Drain presided.
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maintaining the right-of-ways, easements, or public places used by a provider," impermissibly
impinges on the grant of authority to local governments provided in Const 1963, art 7, § 29.
A
The constitutionality of § 253 of the MTA presents a question of law that this Court
reviews de novo. Tolksdorf v Griffith, 464 Mich 1, 5; 626 NW2d 163 (2001). "[A] statute is
presumed to be constitutional unless its unconstitutionality is clearly apparent." McDougall v
Schanz, 461 Mich 15, 24; 597 NW2d 148 (1999). The constitutionality of a statute must be
determined on the basis of the provisions of the act itself. Judicial Attorneys Ass'n v Michigan,
459 Mich 291, 303; 586 NW2d 894 (1998). The party challenging the constitutionality of the
statute has the burden of proving the invalidity of the statute. In re Trejo Minors, 462 Mich 341,
355; 612 NW2d 407 (2000). The constitutionality of a statute will ordinarily not be considered
unless it is essential to the disposition of the case. Trent v Suburban Mobility Auth for Regional
Transportation, 252 Mich App 247, 252; 651 NW2d 171 (2002).
Const 1963, art 7, § 29 provides:
No person, partnership, association or corporation, public or private,
operating a public utility shall have the right to the use of the highways, streets,
alleys or other public places of any county, township, city or village for wires,
poles, pipes, tracks, conduits or other utility facilities, without the consent of the
duly constituted authority of the county, township, city or village; or to transact
local business therein without first obtaining a franchise from the township, city
or village. Except as otherwise provided in this constitution the right of all
counties, townships, cities and villages to the reasonable control of their
highways, streets, alleys and public places is hereby reserved to such local units
of government. [Emphasis added.]
The predecessor provision, Const 1908, art 8, § 28 provided:
No person, partnership, association or corporation operating a public
utility shall have the right to the use of the highways, streets, alleys or other
public places of any city, village or township for wires, poles, pipes, tracks or
conduits, without the consent of the duly constituted authorities of such city,
village or township; nor to transact a local business therein without first obtaining
a franchise therefor from such city, village or township. The right of all cities,
villages and townships to the reasonable control of their streets, alleys and public
places is hereby reserved to such cities, villages and townships.
Article 2A of the MTA, MCL 484.2251-484.2253, provided at pertinent times (see n 1):
ARTICLE 2A
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Sec. 251. (1) Except as provided in subsections (2) and (3), a local unit of
government shall grant a permit for access to and the ongoing use of all right-ofways, easements, and public places under its control and jurisdiction to providers
of telecommunication services.
(2) This section shall not limit a local unit of government's right to review
and approve a provider's access to and ongoing use of a right-of-way, easement,
or public place or limit the unit's authority to ensure and protect the health, safety,
and welfare of the public.
(3) A local unit of government shall approve or deny access under this
section within 90 days from the date a provider files an application for a permit
for access to a right-of-way, easement, or public place. A provider's right to
access and use of a right-of-way, easement, or public place shall not be
unreasonably denied by a local unit of government. A local unit of government
may require as a condition of the permit that a bond be posted by the provider,
which shall not exceed the reasonable cost, to ensure that the right-of-way,
easement, or public place is returned to its original condition during and after the
provider's access and use.
Sec. 252. Any conditions of a permit granted under section 251 shall be
limited to the provider's access and usage of any right-of-way, easement, or public
place.
Sec. 253. Any fees or assessments made under section 251 shall be on a
nondiscriminatory basis and shall not exceed the fixed and variable costs to the
local unit of government in granting a permit and maintaining the right-of-ways,
easements, or public places used by a provider. [Emphasis added.]
B
We first observe that Dearborn does not argue that the MTA violates Const 1963, art 7, §
29 because it impermissibly compels local units of government to grant a use permit, and thus
consent. Rather, Dearborn argues that included in a local government's right to grant or withhold
a use permit or consent is the right to exact reasonable compensation therefor, that local units of
government retain autonomous proprietary authority over their rights-of-way, and that the
Legislature may not restrict their authority to charge any reasonable compensation for the use of
those rights-of-way. We do not agree.
Const 1963, art 7, § 29 has three clauses. The first states that public utilities cannot use
the rights-of-way of local units of government for wires, poles, conduits, and so forth without
consent; the second clause forbids a utility from conducting local business without first obtaining
a franchise; and the third clause declares that local units of government retain the right to
reasonably control their highways, streets, alleys, and public places.
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The circuit court concluded that Dearborn had failed to show how the MTA violates the
second clause (regarding franchises) and the third clause ("reasonable control" proviso).
Dearborn did not explicitly argue below that the MTA violates the first provision (regarding
consent). The circuit court rejected Dearborn's constitutional challenge, concluding that "article
2A of the [MTA] concerning the extent to which municipalities may attach conditions to permits
to telecommunication providers for access and use of public rights-of-way was a valid exercise
of legislative power and not invalid under Art 7, § 29."
C
The constitutional provision at issue first appeared in Const 1908, art 8, § 28. Before
1908, the matter was addressed through statutes, e.g., cities were granted rights to grant
franchises for public utilities, and state statutes providing for public utility rights-of-way required
local consent.4 Most of the cases addressing Const 1963, art 7, § 29 and its predecessor concern
the third clause ("reasonable control" proviso). Many of the cases concern a city's authority to
set the rates charged by the public utility provider, rather than the amount the city can charge the
provider as a condition of consent.
While art 7, § 29 has been discussed in many cases, no case directly addresses the
consent clause in the context presented here. Nevertheless, the cases assist in understanding the
scope and operation of art 7, § 29.
1
Boerth v Detroit City Gas Co, 152 Mich 654; 116 NW 628 (1908), concerned events that
preceded the 1908 Constitution, but set forth principles relied on in later cases. In Boerth, the
city had entered into a contract with the gas company that was then made the subject of an
ordinance. The contract/ordinance granted the defendant the right, for thirty years, to lay its gas
pipes in the city and provided that the defendant could not charge more than ninety cents per
thousand cubic feet. A customer brought suit, asserting that the defendant's charge to him of
eighty cents per thousand cubic feet was unlawful and discriminatory because others were
charged less. The question was whether the city had the authority to grant the defendant the right
to charge eighty cents per thousand cubic feet. The city charter granted the city the right to
control, prescribe, and regulate the manner in which the highways and rights-of-way within the
city shall be used and to provide for and regulate the lighting of the avenues, streets, alleys, and
so forth. The state statute provided:
4
See cases discussed later in this opinion, including Boerth v Detroit City Gas Co, 152 Mich
654; 116 NW 628 (1908), and City of Niles v Michigan Gas & Electric, 273 Mich 255; 262 NW
900 (1935).
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"Any corporation formed under this act . . . shall have full power to
manufacture . . . and sell . . . gas . . . and shall have power to lay conductors for
conducting gas . . . through the streets, lanes, or squares of any city, town or village
where said corporation is located, or carrying on its business, . . . . which pipes or
conductors shall be laid with the consent of the municipal authorities of such cities,
townships or villages through which the same are laid under such reasonable
regulations as they may prescribe." [Id. at 656-657, quoting 2 Comp Laws 7123.]
The Court reasoned that the city had broad powers, in that without its consent a gas company
cannot lay its pipes in the streets. The city may refuse to grant that consent, and may attach
conditions to its consent. The statute does not say what conditions are permissible, only that they
must be reasonable. The Court found that it was not unreasonable to prescribe rates as a
condition of the grant of consent. The Court considered whether the authority to prescribe rates
can be implied as an incident to the authority to attach conditions to its consent. The
complainant argued that the power of a municipality to prescribe rates could not be found to exist
by implication. The Court held that the principle that there is a strong presumption against the
grant of legislative authority had no application to the case because it was not alleged that the
city had the legislative authority to set rates, only that it had the power to contract for rates. The
Court upheld the city's right to enter into a contract setting the rates.
In Kalamazoo v Kalamazoo Circuit Judge, 200 Mich 146; 166 NW 998 (1918), the gas
company was incorporated under state law. In 1894, it applied to the city for consent to lay
mains and services in the streets. An ordinance was passed granting such consent, which
included various conditions and fixed the price to be charged consumers. It granted consent for
twenty-two years (until July 14, 1916). The ordinance was accepted by the gas company.
Shortly before the consent was about to expire, the city investigated the cost of producing gas
and passed an ordinance, to become effective August 1, 1916, that set new gas rates and
penalties for violation of the ordinance. The new gas rates were lower than the original rates.
The gas company continued to charge rates that were lower than those set in the original
ordinance, but higher than those set in the 1916 ordinance. The city sought to enforce the
penalty for violating the ordinance.
The Court first quoted Const 1908, art 8, § 28, and, without discussion, stated that the last
sentence was in issue (the "reasonable control" proviso). The Court observed that the case law
from other states was not in harmony. It quoted from Missouri and Wisconsin cases that held
that the right to impose reasonable regulations on the use of the streets related to the planting of
poles and the stringing of wires and the like, and not to the regulation of rates charged by the
utility. The Court stated, however, that it had previously adopted a contrary view, citing Boerth,
supra, and had held, "prior to the adoption of the present Constitution, that language quite
similar to that here under consideration permitted the city of Detroit to attach conditions to its
consent to the use of its streets by a gas company, and that as a condition it might fix reasonable
rates." Kalamazoo Circuit Judge, supra, 200 Mich at 152. The Court cited cases from other
states in accord. The Court observed, however, that in Boerth, the issue was the right to contract
for such rates, referred to as the administrative power of municipalities, as distinguished from the
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legislative power to set rates unilaterally. The Court went on to discuss the difference between
administrative or proprietary powers and legislative powers in the context of a municipality. The
Court determined that the legislative power to fix rates was not delegated to the city by the
constitutional provision and that the charter did not so provide. The Court concluded that the
city had the right to contract for rates as a condition for using the streets, but it could not enact
an ordinance fixing rates to be enforced by penalties. The Court then stated that it did not have
before it, and did not pass on, the issue of the rights municipalities might have under home-rule
charters.
In Kalamazoo v Titus, 208 Mich 252; 175 NW 480 (1919), the city sought to enforce
another ordinance, adopted in 1918. By then the city had a home-rule charter authorizing it to
regulate the rates of public utility companies using its streets in cases where the franchise had
expired. The 1918 ordinance provided for the regulation of the sale of gas in Kalamazoo and
included rate and penalty provisions. The city alleged that the gas company charged in excess of
the rate provided by the ordinance and operated its plant and used the streets without regard to
the provisions of the ordinance and without obtaining any permission or authority from the city.
The circuit court determined that the ordinance was invalid because it was legislative in character
and the city did not have the power to enact it. On appeal, the Supreme Court extensively
discussed the relationship between state and local governments, the rights of municipalities, and
the import of the new constitutional provisions involving municipalities, and affirmed. The
Court stated:
With regard to the subject we are considering, the impressive thing about
these constitutional provisions is that they recognize and affirm the theory that
cities owe their origin and their powers to the legislature. And while cities may
refer power to do some things, as, for example, power to acquire certain public
works, directly to some of these constitutional provisions, it must be admitted that
all of these provisions should be considered with reference to the fact that
legislative power is vested in the legislature and that the Constitution recognizes,
as former Constitutions have recognized, the general control of the legislature
over cities. That the legislative power ought to be exercised in such manner as to
preserve the right of local self-government is a doctrine which in application in no
way modifies or qualifies the idea of the general legislative power of creation and
control. [Id. at 265.]
In Traverse City v Citizens' Tel Co, 195 Mich 373; 161 NW 983 (1917), the city, in 1898,
had entered into a thirty-year franchise, allowing the defendant's assignor to install poles, wires,
and so forth, that included set rates to be charged its users. In 1914, the defendant began to
charge rates in excess of that allowed by the franchise. Id. at 381. The city sought injunctive
relief. The defendant argued, inter alia, that the matter should be addressed to the state railroad
commission, which was granted authority over telephone lines under 1911 PA 138. The Court
held that the defendant's right under its primary franchise from the state to use highways for the
extension of its lines did not relieve it from contractual obligations arising from a secondary
franchise granted by the city.
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The right conferred by the general law upon telephone companies to use
highways of the State as avenues of communication for their methods of transmitting
messages and to establish their lines along them for that purpose does not confer the
unrestricted right to invade cities and villages and erect their poles or string their
wires where and as they may find it most economical or convenient. While the
municipalities may not annul the general statute by arbitrarily refusing to permit the
use of their streets to telephone companies, they may have under their charters, as in
the instant case, controlling authority within reasonable limits, in the exercise of their
police power, to direct upon which streets and in what manner the lines shall be
installed . . . . [Citizens' Tel, supra, 195 Mich at 382-383. Citations omitted.]
The dispute continued in Traverse City v Michigan Railroad Comm, 202 Mich 575; 168
NW 481 (1918). While the first Traverse City case was on appeal to the Supreme Court,
Citizens' Telephone Company applied to the railroad commission for authority to increase its
charges beyond that set forth in its contract with the city. Authority to do so was granted to the
telephone company, and the city sought an injunction from the circuit court. The circuit court
dismissed the case and the city appealed. Id. at 577-578. The state statute provided that the
commission had the authority
"to make, alter, amend or abolish any rate or charge for any service, and may
regulate by rules or orders any service or facility; and it shall likewise prescribe
the standard of construction and equipment that shall be maintained by any
person, copartnership or corporation maintaining a physical connection between
the lines and facilities of any such person, copartnership or corporation, and the
lines and facilities of any other person, copartnership or corporation." [Id. at 579
quoting 2 Comp Laws 1915, § 6691.]
The Supreme Court affirmed, holding that the legislative authority to set rates superceded the
implied permissive authority of the city to contract for rates, and that the contract was made
subject to that legislative authority being exercised in the future. Michigan Railroad Comm,
supra, 202 Mich at 587.
In City of Niles v Michigan Gas & Electric Co, 273 Mich 255; 262 NW 900 (1935), an
1895 statute granted the city the right to contract with an entity, from year to year or for a period
not exceeding ten years, for the provision of light to the city. The 1908 Constitution was then
adopted, and in 1913 the city granted a thirty-year franchise to the defendant, which provided for
a charge of one dollar per thousand cubic feet of gas. The 1908 Constitution, in art 8, § 25,
provided that no city shall grant any public utility franchise that is not subject to revocation at the
will of the city, unless such proposition is first approved by 3/5ths of the electors, and also
provided, in art 8, § 29, that no franchise or license shall be granted by any municipality for a
period longer than thirty years. Const 1908, art 8, § 28, the predecessor of the section involved
here, stated that no public utility has the right to use the highways for wires, poles, conduits, and
so forth without the consent of the city, nor to transact a local business without first obtaining a
franchise. The 1913 franchise ordinance was approved by the electors. In 1918 and 1920, the
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city adopted ordinances, and in 1932, the city adopted a resolution, increasing the price that
could be charged for gas. The city then commenced an action to set aside the ordinances and
resolution as illegal and to restore the 1913 rate. The majority concluded that the 1908
Constitution did not repeal the 1895 statute's ten-year limitation on franchises. Citing Boerth,
supra, the Court held that the provisions in § 28 regarding municipal control over streets, alleys,
or other public places carried with them an authority over public utility rates as a condition of
using the streets, but observed, citing Traverse City, supra, that the implied power to fix rates
under § 28 is inoperative when the Legislature exercises its reserved power. The Court further
stated that under a city's powers implied from § 28, the city, if there were no statute, could not
make an irrevocable thirty-year contract for rates even by vote of the electors because such
contract would be subject to annulment by legislative exercise of the superior power. Niles,
supra, 273 Mich at 264. The dissenting justices would have held that the municipal electors had
the power to grant a thirty-year franchise.
Thus, the gist of these cases is that a city has the implied power to contract for rates to be
charged consumers as a condition of granting consent to the use of its rights-of-way, but that
implied power must give way to the state's legislative power to set rates when the state exercises
that power.
2
Another group of cases addresses more directly a local unit of government's powers with
respect to consent and the imposition of fees for use of rights-of-way.
Detroit v Detroit United Railway, 172 Mich 136; 137 NW 645 (1912), involved the fees
the city charged the utility for use of the streets, rather than the rates charged customers by the
utility. The city had granted the defendant a franchise to operate a street railway. The city
alleged that the franchise had expired, and that the city had passed resolutions allowing the
defendant to continue to operate only on certain terms, including the payment of $200 a day for
the use of the city streets. The defendant continued to operate but did not pay the fee. The city
contended that by continuing to operate, the defendant accepted the terms of the resolutions and
was compelled to pay the amount due. The city sought to have the defendant enjoined from
operating and compelled to remove its equipment, unless it complied with the resolutions.
Relying on the law applicable to landlord and tenant relationships where the tenant holds over
after the expiration of the lease, the city argued that it had the right to set the terms for future use
of the streets and that the defendant's use of the streets thereafter constituted an acceptance of the
terms.
The Court agreed that the franchises had expired. The Court rejected the analogy to the
landlord/tenant situation, and found that the defendant did not accept, but had objected to, the
rates. The Court further rejected as repugnant to the doctrine that a franchise is a mutual
contract, the contention that the city could "arbitrarily," and without consent of the grantee,
impose terms on the franchisee. The Court then addressed the defendant's contention that the
creation of the Michigan railroad commission took from the municipality the right to locally
control the operation of the railway. The defendant argued that street railways were placed on
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the same footing as general railways and that the franchise from the state was sufficient. The
Court stated:
It is true that the authority to incorporate, to engage in the business of
constructing and operating a street railway, to charge tolls for carrying passengers
and freight, to occupy the public streets, emanates primarily from the State. The
same is true of the fundamental rights of any corporation authorized to exist by the
Constitution and laws of this State, but it is also true that all municipalities of this
State are given by statute the supervision and reasonable control of all public streets
and highways, within their respective limits, and our attention is called to no
provision of law to the contrary. This has always been the policy of this State, and
in Const. art. 8, § 28, it is provided:
"No person, partnership, association or corporation operating a public utility
shall have the right to the use of the highways, streets, alleys or other public places
of any city, village or township for wires, poles, pipes, tracks or conduits[,] without
the consent of the duly constituted authorities of such city, village or township; nor
to transact the local business therein without first obtaining a franchise therefor
from such city, village or township. The right of all cities, villages[] and townships
to the reasonable control of their streets, alleys and public places is hereby reserved
to such cities, villages and townships."
The laws authorizing the organization of companies to operate street
railways within municipalities of this State all have provisions that corporations
so organized are not authorized to enter upon and construct such railways without
the consent of the municipality. The principle of local self-government has
always been fostered in this State and upheld by this court. While the legislature,
in establishing the Michigan railroad commission and fixing its powers, has given
it certain specified rights relative to certain street railroads and interurban
railways, yet it is evident from the particular legislation referred to that there was
no legislative intent to reject the established policy of maintaining local selfgovernment, and to institute a new policy in derogation thereof. Section 3c, of the
Michigan railroad commission law, among other things, provides, after giving
certain of these powers above referred to, as follows:
"Provided further, that nothing in this act contained shall apply to street
and electric railroads engaged solely in the transportation of passengers within the
limits of cities or within a distance of five miles of the boundaries thereof." [3
How. Stat. 2d Ed. § 6526, subd. c.]
The franchises involved in this litigation were all granted for a period not
to exceed 30 years, and were grants solely for the transportation of passengers,
and therefore come within the express proviso above quoted. It is apparent that
the legislature had no intention of providing for interference by the Michigan
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railroad commission with the authority of municipalities over their streets, and the
contention to the contrary is untenable. [Id. at 156-158.]
The Supreme Court then determined that the contract ended when the franchise ended and that
the defendant's right to occupy the streets had terminated. The city had the right to compel the
defendant to remove its property, but could not unilaterally impose a fee on the defendant. Id. at
158-159.
In Detroit, Wyandotte & Trenton Transit Co v Detroit, 260 Mich 124; 244 NW 424
(1932), the plaintiffs jitney operators challenged a city ordinance barring the operation of jitneys
in Detroit. The circuit court had upheld the ordinances, but had done so before the enactment of
1931 PA 212 and 312. The Court requested briefs on the effect of the state statutes on the
validity of the ordinance. The Court quoted Const 1908, art 8, § 28 and stated that the plaintiffs
operated public utilities but did not need a franchise from the city because the plaintiffs did not
use the streets for wires, poles, pipes, and so forth, nor transact a local business. The Court thus
directed its attention to the right of the city to reasonable control of its streets. The Court
examined the constitutional debates and statements that the word "reasonable" was inserted to
place a limitation on the authority of the municipalities. The city relied on cases stating that the
city may prohibit the use of its streets for gain. The Court stated that those cases "must be read
in connection with the fact that the cases involved carriers doing a local business and concerned
regulatory, not prohibitory, ordinances. The question of the effect of State statutes upon local
powers did not arise." Transit Co, supra, 260 Mich at 127. The Court determined that by the
newly enacted statutes, the state had taken jurisdiction of all carriers of persons or property for
hire and had put them under supervision of the Michigan public utilities commission, intending
to "occupy the field." The Court continued:
The legislative authority cannot infringe upon the constitutional right of
the city to reasonable control of its streets. Nor do Acts Nos. 212 and 312 purport
to do so. On the contrary, section 17 of Act No. 212 and section 12 of Act No.
312, expressly preserve such local control. But the enactment of the statutes had
the effect of withdrawing from the city all authority over carriers covered by
them, except such power as is strictly referable to reasonable control of the streets
or as is reserved to it by law. . . .
It is apparent that an ordinance prohibiting the operation of specified kinds
of motor vehicle on city streets, the carriers not doing a local business, prima
facie is an invasion of the State's jurisdiction over them and is invalid.
* * *
Methods of operation undoubtedly may become the subject of reasonable
regulation by the city. But the number and kind of carriers for hire permitted to
engage in nonlocal business are matters upon which the State has taken
jurisdiction and are beyond city veto. . . . As framed [the ordinance] bears no
-13-
relation to the constitutional right of reasonable control of streets, invades the
jurisdiction of the State, and is invalid as against carriers doing no local business.
[Id. at 128-129. Citations omitted.]
Thus, under the reasonable control clause, where the state occupies the field, the city loses all
power except as is "strictly referable" to the reasonable control of the streets.
In People ex rel Maybury v Mut Gas-Light Co of Detroit, 38 Mich 154 (1878), a case
arising before the constitutional provision was adopted, the city sought to file a quo warranto
proceeding to deprive the defendant of its franchise, contending that the defendant was in breach
of some of the conditions of the franchise. The Court determined that such a proceeding was not
contemplated. In discussing the issue, it said:
The statute providing for the incorporation of gas companies allows them
to lay pipes through the streets, lanes and squares of any city, . . . where they are
located "with the consent of the municipal authorities of said city . . . under such
reasonable regulations as they may prescribe." . . .
. . . In the present instance the State has shown by the incorporating act
that public policy is not opposed to and is in favor of allowing gas companies to
exist, as they only can exist by having power to lay their pipes. The consent of
the municipal corporation is required because the terms on which streets may be
safely allowed to be occupied for the purposes of laying gas pipes can be best
determined by leaving the regulation to be harmonized with all other exigencies
by the authorities controlling their use. The law contemplates that permission will
not be unreasonably refused or unreasonably burdened, but regards the
municipality as competent to determine the proper conditions for itself. [Id. at
155.]
Maybury was relied on in Union Twp v Mt Pleasant, 381 Mich 82; 158 NW2d 905
(1968), where the defendant city sought to lay an additional water pipe connecting it to its water
source. It obtained the permission of the county road commission, but not the township through
which the road right-of-way ran. The Court determined that notwithstanding the McNitt act,
1931 PA 130, 1948 CL 247.1 et seq., under which the county took over township roads, the
defendant was still required under the Constitution to obtain the consent of both jurisdictions.
Citing Maybury, the Court said:
That on occasion there may be conflict between the county and township
when the consent of both is sought, we do not doubt. However, consent of neither
can be refused arbitrarily and unreasonably and we are not inclined to believe
that such refusal need be anticipated. [Union Twp, supra, 381 Mich at 90.
Emphasis added.]
In North Star Line, Inc v Grand Rapids, 259 Mich 654; 244 NW 192 (1932), the Court
addressed the plaintiff interurban common carriers' challenge to a Grand Rapids ordinance
-14-
purporting to regulate and license such carriers. The Court addressed the third clause of the
constitutional provision. It stated that subject to the constitutional provision vesting reasonable
control of the streets in the cities and villages, the state has control of the highways. The Court
analyzed the various provisions of the ordinance to determine if they impermissibly affected the
common carriers when they operated outside the city and found that several provisions
impermissibly invaded the field of supervision in which the state had chosen to operate. The
Court then addressed the city's licensing fee of $15. The Court determined that the amount
charged for the license "must be gauged by the expense incurred by the municipality incident to
issuing the license and supervising the business the licensee carries on thereunder, if supervision
is required" and that a license fee may not be a tax in disguise. Id. at 663. The Court determined
that in light of the extensive state regulation of the field, the amount of supervision required of
the city was almost negligible, and thus the $15 fee was excessive and only a nominal fee would
be proper.
The gist of these cases is that where the activity being conducted on a city's rights-of-way
is purely local, the city retains broad authority over the terms of its consent, although it may not
unilaterally impose a fee after a grant of consent has expired. However, where the Legislature
has occupied the field, a city retains only such power as is strictly referable to the reasonable
control of its streets, which does not include the power to prohibit the activity; and if the city
charges a fee, that fee must be based on the expense to the city of issuing a license and of
supervising the activity, if supervision is required. Even where the consent of the city is
required, as where pipe is to be laid in a right-of-way, consent cannot be refused arbitrarily or
unreasonably.
D
Guided by these cases, we turn to the question at hand. We reiterate that the issue framed
by Dearborn is not whether the state can by statute constitutionally require that a municipality
grant consent to a telecommunications company to lay conduit, but whether the state can
constitutionally limit its rights under the Constitution by limiting the amount it can charge as a
condition of consent.5 Thus, the city's real complaint is the limitation of the amount of money it
is permitted to charge, rather than that the statute compels the city to grant a use permit or
consent.
1
5
Dearborn states the issue: "Whether § 253 of the telecommunications act—providing that local
governments may not exact compensation for telephone companies' access to the right-of-way in
excess of 'fixed and variable costs'—impinges impermissibly on the grant of authority to local
governments in Art VII, §29 of the constitution."
-15-
We first address the third clause of § 29,6 the reasonable-control clause. The right to the
reasonable control of the streets carries with it the implied power to contract for reasonable terms
as a condition of allowing use of the streets. Dearborn may contract for a fee for consent, as it
may contract for set rates to be charged its resident consumers. However, this implied power is
exercised by entering into contracts with providers, not by unilaterally imposing the terms of the
grant of consent. The latter would constitute an attempt to exercise a state legislative function.
Further, the implied power to contract is subject to the superior legislative powers of the state.
To be sure, no case specifically says that a local government cannot contract for fees (as
distinguished from rates charged to consumers) that conflict with fees set by the state, but we
conclude from the cases that a local government may not do so. When focusing on the third
clause regarding reasonable control, the source of the power to set fees for use is the same as the
source of the power to set rates; it is an implied administrative power based on the right of
reasonable control. Neither the power to set fees nor the power to set rates is expressly granted
to local units of government. The state's powers are broad, and the local government's powers
under the third clause (reasonable control) are subject to the superior powers of the state, even
when the rates are otherwise reasonable. Because both powers are implied and the source of the
powers is the same, we conclude that there is no reason to distinguish Dearborn's power to set
fees under the reasonable-control clause from its power to set rates under that clause. Both are
subject to the control of the Legislature.
As with rates, there is no express legislative grant of the power to fix fees other than by
contract. Since the Constitution does not expressly grant that right to the cities, it remains with
the state, and is subject to the state's control if exercised. Just as the state has the power to set
rates, and thereby set the outside parameters of a city's powers to contract, it has the power to set
the fees that can be charged nonlocal businesses, and the imposition of a fixed and variable cost
fee structure does not impinge on a city's right to the reasonable control of its streets.
2
Focusing on the first clause (consent proviso), the question is whether the state can limit
the city's ability to state the terms on which its consent will be granted. The city appears to
concede that there is a reasonableness limitation, but argues that that is the extent to which it can
be constitutionally limited, i.e., it can charge anything that is reasonable.
We start from the point that even under the consent clause, the power to set fees is an
implied permissive contractual authority, and not a broad legislative authority. The city can
negotiate a contract setting forth fees, but cannot unilaterally impose a fee pursuant to this
clause. Detroit United Railway, supra. The city can possibly withhold consent from anyone not
willing to pay its fee, but the city cannot withhold consent unreasonably or arbitrarily. Thus, the
6
The second clause of Const 1963, art 7, § 29 is not at issue because TCG does not seek to
conduct a local business.
-16-
extent of the city's right is that it may require as a condition of consent that a reasonable fee be
paid, and may withhold consent from those who do not agree to pay the reasonable fee.
Dearborn is not claiming here that it ought to be able to withhold consent from TCG
because TCG will not agree to pay what Dearborn deems a reasonable fee. That is, Dearborn
does not complain that the statute unconstitutionally infringes on its right to exclude
telecommunication carriers who will not pay four percent of revenues. Rather, Dearborn asserts
that § 253 of the MTA is unconstitutional not because it forces the city to accept the carrier, but
because it forecloses the city from insisting on reasonable fees other than a fee determined by the
fixed and variable costs. Thus, we must determine whether the right of consent is so broad as to
preclude the state from setting the fees a city can charge if it does consent.
By its terms, the consent provision of art 7, § 29 only addresses consent, not the right to
charge for that consent. While the authority to so charge through contract has been found to be
implied in this provision, it has only been found in the context of a contract agreed to by the
parties. Thus, the question becomes whether the implied authority to exact fees through contract
is tantamount to an unqualified right to negotiate any fee that can be regarded as reasonable,
without legislative constraint on the terms of the fee. That is, does the Constitution guarantee
that implied authority against interference by the Legislature? We conclude it does not.
The consent provision does not use the word "reasonable," and does not have the
introductory clause "Except as otherwise provided in this constitution." But, while sometimes
mentioned, the cases do not seem to rely on either of these qualifications. Rather, the discussion
focuses on the nature of municipal and state legislative powers, and the principle that the
municipality only has such powers as are expressly granted. Here, what is expressly granted is
the right to grant or withhold consent. Even under the first clause, the right to set fees through
contract is permissive and implied. Thus, the same analysis that is applied to the third clause
would support the conclusion that with respect to the first clause (consent clause), the Legislature
can set fees as long as it does not impermissibly infringe on the right to grant or withhold
consent. Also, under North Star Line, supra, fees that may be imposed pursuant to valid local
regulation must be gauged by the expense of such regulation. The standard of fixed and variable
costs is consistent with that principle.
III
Dearborn argues that even assuming that § 253 of the MTA constitutionally imposes a
limitation on Dearborn's authority to negotiate right-of-way fees in return for its consent, the
circuit court misinterpreted § 253 in determining the scope of costs properly included in
calculating the limitation imposed by that section. Dearborn argues that limiting it to recovery of
the marginal costs specifically assignable to TCG's use of the right-of-way was error.
Statutory interpretation presents a question of law that is reviewed de novo. Oakland Co
Bd of Co Rd Comm'rs v Michigan Prop & Cas Guaranty Ass'n, 456 Mich 590, 610; 575 NW2d
751 (1998).
-17-
A
Contrary to defendant's argument, the circuit court did not limit Dearborn's fee to
"incremental" or "marginal" costs, nor did TCG advance such an argument. TCG, rather,
advanced the proposition that there must be a substantial nexus or at least a reasonable
relationship between the actual maintenance costs incurred by Dearborn and TCG's use of
specific public rights-of-way located in Dearborn. TCG did not advance a "marginal" cost
theory. The circuit court adhered to language in § 253 tying "fixed and variable costs" to
Dearborn's costs in granting a permit and maintaining the rights-of-way used by a provider.
TCG objected below when Dearborn attempted at trial to categorize TCG's approach as one of
"incremental" or "marginal" costs; the trial court agreed that TCG's expert had not advanced such
an approach, and sustained the objection. Dearborn's argument mischaracterizes the proceedings
below.7
The only evidence Dearborn submitted at trial regarding its fixed and variable costs was
the Plante & Moran "full cost approach" report that concluded that Dearborn spent $37,377,070
(approximately twenty-five percent of its entire budgeted expenditures for all purposes) to
"manage" and maintain all its rights-of-way for the year ending June 30, 1998. Dearborn
maintained at trial that the second Plante & Moran study, which arrived at a figure of $10,890,
was reached by applying a "marginal cost" approach, and that that approach did not accord with
the "fixed and variable costs" provision of the statute.
Dearborn's position, as expressed in closing argument, was that it had not apportioned
what part of the $37 million dollars TCG could be charged as a fee, but from Dearborn's
engineer's trial testimony that there were approximately ten users of rights-of-way in Dearborn,
the fee apportionable to TCG would be approximately three million dollars, which Dearborn
could reduce in its discretion, but probably would still be in excess of one million dollars. The
trial court was not obliged to accept Dearborn's position when Dearborn had not shown that the
figures represented the fixed and variable costs to Dearborn in granting a permit and maintaining
the rights-of-way used by TCG.8
7
We do not agree with our dissenting colleague's characterization of our holding as including
"that the trial court properly interpreted and applied § 253 to require a substantial nexus between
the fee defendant charged plaintiff and the costs incurred by defendant to maintain its rights-of
way, easements, or public places attributable to use by plaintiff." Post at ___. We do not adopt a
substantial nexus standard, or any particular standard; rather, we hold that the trial court properly
focused on the statutory phrase "[a]ny fees . . . shall not exceed the fixed and variable costs to the
local unit of government in granting a permit and maintaining the right-of-ways, easements, or
public places used by a provider," MCL 484.2253, and that Dearborn did not present evidence
addressed to the statutory standard, see section IV, below.
8
We note in this regard that, under the Metropolitan Extension Telecommunications Rights-ofWay Oversight Act, MCL 484.3101 et seq., which took effect November 1, 2002, providers are
(continued…)
-18-
(…continued)
required to obtain permits, MCL 484.3105, but the fees providers such as TCG may be charged
for use of public rights-of-way are a small fraction of the fees Dearborn sought in the instant
proceedings.
Section 8 of the new act, MCL 484.3108, provides, in relevant part:
(1) Except as otherwise provided by this act, a provider shall pay to the
authority an annual maintenance fee as required under this act.
(2) The authority shall determine for each provider the amount of fees
required under this section. April 1 to March 31 shall be the annual period
covered by each assessment and April 29 the date due for payment. The authority
shall prescribe the schedule for the allocation and disbursement of the fees under
this act. The authority shall disburse the annual maintenance fee to each
municipality . . . on or before the last day of the month following the month of
receipt of the fees by the authority. . . .
(3) Except as otherwise provided under subsection (6), for the period of
November 1, 2002 to March 31, 2003, a provider shall pay an initial annual
maintenance fee to the authority on April 29, 2003 of 2 cents per each linear foot
of public right-of-way occupied by the provider's facilities within a metropolitan
area, prorated for the period specified in this subsection.
(4) Except as otherwise provided under subsection (6), for each year after
the initial period provided for under subsection (3), a provider shall pay the
authority an annual maintenance fee of 5 cents per each linear foot of public rightof-way occupied by the provider's facilities within a metropolitan area.
(5) The fee required under this section is based on the linear feet occupied
by the provider regardless of the quantity or type of the provider's facilities
utilizing the public right-of-way or whether the facilities are leased to another
provider.
See also n 1. There is no published case law, and little writing, on the Metropolitan Extension
Telecommunications Rights-of-Way Oversight Act, MCL 484.3101 et seq., but it was the topic
of an address given by Michigan Public Service Commission Chairperson Laura Chappelle at the
2002 Communication Policy and Law Symposium at MSU-Detroit College of Law, and was
published as a law review article, Michigan Hi-Speed Internet Plan: Balancing Interests;
Moving Ahead, 2002 MSU-DCL L R 743. Chappelle noted:
Even though Michigan's former law was ahead of many other states'
statutes and the federal requirements in demanding that rights-of-way fees be
based on actual costs, some local units of government sought to thwart that
(continued…)
-19-
B
Regarding defendant's contention that the court should consider the United States District
Court's finding that the fees sought by Dearborn were "fair and reasonable" under the Federal
Telecommunications Act, see TCG Detroit, supra, 16 F Supp 2d at 788-791, we agree with the
circuit court's rejection of this argument:
The court notes the City's reliance on the opinion rendered in TCG Detroit
v City of Dearborn, . . . the federal companion case to the instant case, in which
the Court found that the fees sought by the City were "fair and reasonable."
However, that case did not involve the question of whether the fees sought by the
City complied with the requirements of § 253 [of the MTA], or were otherwise
based exclusively on the City's "fixed and variable costs." Indeed, the Court
dismissed all state claims in that case. Hence, the Court's finding is not relevant
to the issues presently involved in the case at bar.
C
Dearborn is correct that § 253 does not expressly prescribe the method by which a local
government must set its fee. However, because Dearborn did not determine its "fixed and
variable costs" as defined in § 253, see section IV below, it cannot be said whether charging
TCG four percent of its gross revenues, plus the one-time fee of $50,000, does or does not
exceed Dearborn's "fixed and variable costs."
IV
Dearborn also argues that the trial court clearly erred in finding that TCG's evidence of
some of Dearborn's costs established its "fixed and variable costs" allowed under the statute.
Dearborn argues that TCG introduced evidence relevant only to Dearborn's marginal or
incremental costs, and not all of those, and never quantified the dollar amount it was to pay.
Dearborn contends that it was TCG's burden to submit evidence of Dearborn's "fixed and
variable costs" under § 253. Our colleague, in partial dissent, concludes that the trial court erred
as a matter of law in placing the burden of proof on Dearborn to establish that its proposed fee
did not exceed its "fixed and variable costs" under § 253. We do not agree that the trial court so
ruled.
The trial court recognized that the burden was on TCG to establish that Dearborn's
percentage-of-gross-revenue fee exceeded Dearborn's fixed and variable costs in granting a
(…continued)
mandate and creatively (and not so creatively) insisted on heavy fees. [Id., p
745.]
-20-
permit and maintaining the rights-of-way used by TCG. What the trial court did, twice (in a
scheduling order and in granting TCG's motion to compel) was order that Dearborn compute and
provide to TCG in discovery a figure representing its fixed and variable costs in granting TCG a
permit and maintaining rights-of-way used by TCG, in order that TCG could then go forward
and attempt to meet its burden of proof of showing that Dearborn's proposed fee of four percent
gross revenues exceeded Dearborn's "fixed and variable costs" as provided under § 253. This
was not tantamount to a misallocation of the burden of proof.
We do not agree with our dissenting colleague that the trial court committed error that
requires reversal in excluding Dearborn from presenting expert testimony in support of its
percentage-of-revenue approach at trial. Defendant's witnesses testified regarding Dearborn's
fixed and variable costs; they were simply prevented from testifying that those costs should be
apportioned by way of a percentage-of-revenue approach. Given the court's pretrial rulings,
discussed earlier, its grant of TCG's motion in limine was proper. See also section V.
V
Dearborn also argues that the trial court made no findings regarding the amounts of either
the city's proposed franchise fee or the city's fixed and variable costs, thus a judgment that the
city's proposed franchise fee exceeded its fixed and variable costs is unsupported by proper
subordinate findings, contrary to MCR 2.517. We disagree.
The trial court did make findings of fact regarding "fixed and variable costs" attributable
to TCG, both in its opinion read from the bench, and the judgment, i.e., up to $2,500 of
documented actual costs for the first year and up to $500 annually of documented actual costs
thereafter. Further, the trial court found that a fee of four percent of gross revenues, plus
$50,000, as proposed by Dearborn greatly exceeded its "fixed and variable costs." The court's
findings of fact included:
THE COURT: [B]oth parties agree that there are two issues that remain.
They are, first, what are Dearborn's fixed and variable costs in granting a permit
and maintaining the right of ways [sic], easements, and public places used by . . .
TCG Detroit. I want to address that issue first.
TCG has taken the position that the cost of issuing a permit is at most
$2500.00 to the City of Dearborn and that there is a de minimis amount involved
in maintaining the rights of way which they put at $500.00.
To date, the City of Dearborn has not given this Court a specific figure
that it believes TCG should pay to get a permit or to maintain the rights of way. . .
. The City of Dearborn's whole defense of this case is based on . . . the cost
accumulation theory, and all their witnesses testified about it with few exceptions.
Mr. O'Donnell, Frank Audia of Plante Moran, Dr. McLean, Mr. Krumm, all
basically subscribed to this cost accumulation theory.
-21-
However, their last witness, Mr. Godfrey Udoji, came down to reality a
little bit and began to talk about the number of users of the right of way and the
practicalities of issuing a permit and maintaining the right of way. But this really
didn't go very far. And the problem I have with the cost accumulation theory is
that most of those costs that make up that amount really have no relationship to
the cost brought about by TCG.
The amount that should be shared by TCG and other users of the right of
way the City of Dearborn says is 37 million dollars, almost a quarter of the City's
total budget. And included in that amount is half of the police department's
budget, a large portion of the 19th District Court's budget, a large part of the fire
department's budget, and I could go on. . . . .
And during the arguments I asked Mr. Malone [Dearborn's counsel] what
he thought TCG should be paying for a permit and for maintaining the rights of
way, and the closest he could come to an answer was the 37 million divided up
between ten to twelve users. And the simple math is that TCG would have to pay
at least three million alone annually for maintaining the right of way. That type
of fee would be illogical and irrational. And there's some other adjectives I could
use to describe a fee like that, but I don't need to overmake [sic] my point . . . [.]
And the City has maintained that position throughout this litigation and I totally
reject that position out of hand just like Judge Battani did.
Now, there was a separate report that came into evidence that was referred
to as the 11K report. . . . [N]either side felt that it was an accurate assessment of
costs mentioned in the statute and both sides rejected it . . .
That report placed the cost of issuing a permit and maintaining the right of
way at almost $11,000 for the first year. And again, I've got some grave problems
with that report also. It attributes a hundred hours of lawyer work to the issuing
of the permit and maintaining the right of way the first year. And in essence, that
means that a lawyer would spend two and a half weeks solely devoted to issuing a
permit and maintaining the d [sic] of way that single year, and this is difficult to
buy and I can't accept it.
It likewise includes 50 hours to the building and safety department for a
permit and maintenance, and again, that's like one person working a week and a
day on the permit and maintenance. And there's other costs that I have serious
problems with, and I specifically find that this report involves some inflated
figures.
Now, let me shift to plaintiff 's case and their witnesses. The plaintiff 's
key witness in the Court's opinion was their expert, Mr. Pocalyko, whom I found
to be very credible and believable. I likewise find that I didn't think he was
impeached or discredited in any significant way. He was sensible, rational,
-22-
logical in his analysis and in his applications. His interpretation and view of the
law was much more in this Court's opinion practical and realistic. And I found
him more credible not only in the application of a theory of the costs, but also his
assessment of costs. And also his practical experience in the real world and his
curriculum vitae was extremely impressive and was much more so than the men
from academia called by the City of Dearborn. . . . Mr. Pocalyko was highly
critical of both the 37 million dollar and the 11K report, and I agree with his
analysis on the figures contained in his report.
So what am I left with here. Plaintiff through Mr. Coy says that the
$2500.00 amount that they're seeking the Court to set as the cap was a negotiated
fee between TCG and the City of Dearborn. It was what they had originally
agreed to as a fee cost for issuing the permit.
Mr. Pocalyko . . . was pretty much in agreement with that figure in his
discussion in his report. He stated in his report and I accept that. From all I've
seen, realistically, the costs of maintenance of the rights of way that could really
be attributable to TCG alone is de minimis. And Mr. Pocalyko set it at $500.00
annually and I accept that also and believe that much has been shown.
Therefore, this Court finds that Plaintiff TCG Detroit has met their burden
of proof and shown that the fixed and variable costs to the City of Dearborn do
not exceed $2500 for the issuance of a permit, and that the maintenance costs to
the City of Dearborn that can be ascribed to TCG Detroit is [sic], quote, "de
minimis", unquote, and will be set at up to $500.00 annually. [Emphasis added.]
We agree with Dearborn that the fixed and variable costs are not limited to those that can
be specifically attributed to the incremental increase caused by TCG's use of the rights-of-way.
Such a concept ignores the inclusion of the term "fixed" costs. Nevertheless, we are satisfied
that the trial court did not err in rejecting Dearborn's figures as not reflecting the fixed and
variable costs contemplated by the statute. Dearborn included the costs incident to all rights of
way, easements, and public places. It included amounts attributable to the police department,
fire department, and the district court. It did not attempt to narrow the amounts to those
attributable to the easements used by TCG, even on a percentage basis, and did not attempt to
limit the costs to those legitimately connected to maintaining the easements used by TCG. Faced
with Dearborn's figures or TCG's figures, or a figure based on a report that both sides rejected,
the court did not err in accepting TCG's expert's figures.
Conclusion
We conclude that although it is an open question whether the MTA impermissibly
compelled a local unit of government to grant consent in violation of Const 1963, art 7, § 29, that
issue is not before us. Dearborn has maintained that the issue is the compensation it may exact
from TCG, not whether it can withhold its consent altogether and prevent TCG from any use of
its rights-of-way. With regard to this issue, we conclude that Const 1963, art 7, § 29 does not
-23-
grant a local unit of government the right to be free from legislative limitations on the amount it
can charge for the use of its rights-of-way. The right to withhold consent is simply that; it does
not include the power to legislate regarding the cost of consent.
Given the manner in which Dearborn advanced a percentage-of-revenue fee approach,
i.e., without determining whether four percent of TCG's revenue correlated to TCG's use of the
rights-of-way, the court did not err in holding that the percentage-of-revenue fee approach did
not meet the requirements of § 253 of the MTA.
Affirmed.
Smolenski, P.J., concurred.
/s/ Helene N. White
/s/ Michael R. Smolenski
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