Request By:
Mr. Challen P. McCoy
Nelson County Attorney
113 W. Stephen Foster Ave.
Bardstown, Kentucky 40004
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
The Nelson County Fiscal Court is proposing to adopt a garbage franchise ordinance whereby the county will be divided into eleven (11) garbage pickup areas. See Ky. Const. § 164; KRS 67.080; and City of Owensboro v. Top Vision Cable Co. of Ky., Ky., 487 S.W.2d 283 (1972). These additional facts were given:
"With this ordinance it is then proposed that there be advertisement for bids for contracts to be awarded to the individual areas by one or several contracts to the one or several successful bidders for the respective area or area, as the case may be resulting from the bidding. The county would receive no money from the award of the franchise and the successful bidder or bidders in his proposal would be required to have a fixed rate to be charged to the invididual user, which rate would be a standard rate for the applicable area. In this way there would be a fixed rate for each area, but different areas may have different rates."
Your question is whether it would be legal for the fiscal court to receive no money payment for an exclusive garbage franchise. Of course the users of the garbage system would be charged at a fixed rate.
The court decisions reflect that political subdivisions of the state were delegated the power by the provisions of §§ 163 and 164 of the Kentucky Constitution to grant franchises with reference to proper subjects in their territory of which they were given supervisory jurisdiction by the laws of the state.
Irvine Toll Bridge Co. v. Estill County, 210 Ky, 170, 275 S.W. 634 (1925) 636; and
Ray v. City of Owensboro, Ky., 415 S.W.2d 77 (1967) 79. In connection with garbage franchises, see KRS 67.083(3)(c), KRS 109.041(1), and
City of Bowling Green v. Davis, 313 Ky. 203, 230 S.W.2d 909 (1950) 911. Fiscal courts have supervisory control over county roads and have express statutory authority to let garbage contracts.
Since a garbage franchise issued by the fiscal court under § 163 and 164, Constitution, involves a contract, the franchise price is determined through the award and contract documents, after bidding procedure. The court said in City of Owensboro v. Top Vision Cable Co. of Ky., Ky., 487 S.W.2d 283 (1972) 287, that "a franchise is an agreement between the granting authority and the holder and partakes of the usual incidents of a contract." (Emphasis added). Also see 12 McQuillin, Municipal Corporations, § 34.06.
It is elementary that a valid contract must generally involve a valuable consideration moving to both parties. In the garbage franchise case of
Willis v. Davis, Ky., 534 S.W.2d 255 (1976), and while the court reversed for the failure to advertise properly, the language of the court at pages 256-257 strongly suggests that the person or corporation getting the franchise must pay a reasonable and valuable consideration to the county:
"'The purpose of "due advertisement" provided for is to give information to all who may desire to become purchasers of the franchise, and to enable them to make bids therefor, and to secure the municipalities against the loss of valuable rights for mere paltry considerations. It is to give information to all, who have an interest in the privileges to be sold, of what is proposed to be done, that citizens of a municipality may protect their rights in such matters in any proper way that necessity may create. The sale to the highest and best bidder is to enable the municipality to receive the value of the privilege to be granted away, and to prevent municipal councils from granting valuable rights and privileges to favorites without any sufficient consideration. It follows, as a natural sequence, that the only thing which can be lawfully sold is the thing which has been advertised for sale.'"
Here the franchise will involve the enfranchised party's running its garbage vehicles over county roads. It is our opinion that the issuance of a garbage franchise must necessarily involve a reasonable consideration to be paid to the county. By way of analogy the Federal Communications Commission has ruled that the consideration paid to a governmental unit for a cable TV franchise should not exceed three percent (3%) of the annual gross user charges. See City of Owensboro v. Top Vision Cable Co., above, holding in a cable TV situation that the trial court should determine the question of remuneration to the city on the basis of what a reasonable fee would be for Top Vision's use of the city's public ways for the cable TV service.