Lori Hudson Flanery in Her Official Capacity as Secretary of the Finance and Administration Cabinet, Commonwealth of Kentucky v. City of Florence, Kentucky

520 S.W.3d 355, 2017 Ky. LEXIS 277
CourtKentucky Supreme Court
DecidedJune 15, 2017
Docket2015 SC 000181
StatusUnknown
Cited by4 cases

This text of 520 S.W.3d 355 (Lori Hudson Flanery in Her Official Capacity as Secretary of the Finance and Administration Cabinet, Commonwealth of Kentucky v. City of Florence, Kentucky) is published on Counsel Stack Legal Research, covering Kentucky Supreme Court primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

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Lori Hudson Flanery in Her Official Capacity as Secretary of the Finance and Administration Cabinet, Commonwealth of Kentucky v. City of Florence, Kentucky, 520 S.W.3d 355, 2017 Ky. LEXIS 277 (Ky. 2017).

Opinions

OPINION OF THE COURT BY

JUSTICE KELLER

Lori 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 Greens-burg, 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.

I. BACKGROUND.

In 2006, the General Assembly enacted the Multichannel Video Programming and Communications Services Tax (the Tele-com 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(l)(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.

[358]*358The 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.

The 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.

Section 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.

As 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(l)(a)-(c). To compensate local governments for this loss of revenue, the statute mandates that a portion of the funds generated by the Tele-com 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 Telecom Tax.

In 2011, the Cities filed a petition for declaratory relief, alleging that the Tele-com 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 164.1 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.2 We set forth additional facts as necessary below.

[359]*359II. STANDARD OF REVIEW.

This 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. 1967). 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 ease before us—a task most aptly reserved for the legislative branch.” However, 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 Fell:

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.

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520 S.W.3d 355, 2017 Ky. LEXIS 277, Counsel Stack Legal Research, https://law.counselstack.com/opinion/lori-hudson-flanery-in-her-official-capacity-as-secretary-of-the-finance-ky-2017.