Ohio PUC Issues Decision Striking Down City of Dayton's Ordinance Governing Fees for Using Public Rights-of-Way

On June 26, 2003, in the Complaint of WorldCom, Inc., AT&T Corp., and Time Warner Telecom of Ohio, L.P. v. City of Dayton, the Public Utilities Commission of Ohio (“PUCO”) issued an important decision invalidating provisions of a municipal ordinance that imposed an arbitrary classification system and fee structure upon telecommunications service providers that use public rights-of-way. The decision, together with a recent decision by PUCO against the City of Toledo, indicates that municipalities seeking to impose stringent requirements and substantial fees on telecommunications providers must adhere closely to state laws that limit municipal regulations to reasonable standards and that restrict right-of-way fees to actual costs.

In July 2002, the Ohio legislature enacted a statute, a revised Chapter 4939, that established the manner in which municipal corporations could control activities within their rights-of-way and that limited the fees which they could charge. Chapter 4939 prohibits municipalities from enforcing fees for use of the public rights-of-way that are not “based only on costs that the municipal corporation both has actually incurred and can clearly demonstrate are or can be properly allocated and assigned to the occupancy or use of a public way.” In addition, the costs must be “reasonably and competitively neutrally allocated” among all users of the rights-of-way.

The City of Dayton, however, subsequently enacted an Ordinance that, among other requirements, imposed not only individual construction permit fees but also general Application Fees and annual Registration Maintenance Fees ranging from $12,500 to $50,000 per year based upon where a telecommunications provider falls within three arbitrary “bands” of miles of public way occupied.

Consistent with and following its decision in the Toledo case, PUCO ruled that the Application Fees and the Registration Maintenance fees assessed by mileage bands were not  based on actual costs and were unreasonable, discriminatory, and unlawful. In particular, the Commission found that it was “unfair to require all users of the public way to share in costs that are caused by, and therefore under the control of, individual users.” PUCO concluded that the City should instead “charge the users who are engaging in construction activities at the time of their application for permits, or subsequently” and that “it is those parties who should bear the costs that they cause.” To implement this principle, the Commission directed the City to increase the fee for each construction permit to equal the actual costs to the City’s Division of Civil Engineering in supervising the public right-of-ways. The PUCO noted that, in the future, the City could also recover costs other than engineering costs, including “administrative function” costs and computerized mapping costs, through its permit process, but only once they were actually incurred and documented, as opposed to being merely estimated.

Please let us know if you have any questions concerning this or any related matter or would like a copy of the decision.