Request By:
Honorable Thomas C. Brite
Attorney at Law
Court Square
Hardinsburg, Kentucky 40143
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Walter C. Herdman, Assistant Deputy Attorney General
This is in response to your letter of May 4 in which you request an opinion on behalf of the Hardinsburg City Council with respect to the following problem:
"In January, the city advertised for bids for garbage removal for a two-year period. The contract was awarded under the proper bidding procedure to an independent contractor located in the City of Hardinsburg. The landfill where the garbage must be disposed of in this county is owned by the county. Recently, the Fiscal Court of Breckinridge County voted a rate increase at the landfill. As a result of this rate increase, the independent contractor has been placed in a difficult financial squeeze. The City would like to know if it can make an adjustment with the contractor under these conditions? . . ."
Our response to your question as to whether or not the city can make a rate adjustment in the garbage removal franchise under the conditions related above would be in the affirmative.
Pursuant to § 164 of the Constitution franchises granted by a city cannot be enlarged insofar as their duration or term. However, there is no prohibition against amending the franchise in order to alter the rate schedule or regulatory matters provided it is by agreement. In this respect we initially refer to the case of
Johnson County Gas Co. v. Stafford, 198 Ky. 208, 248 S.W. 515 (1923), from which we quote as follows:
"Under this provision [Sec. 164 of the Const.] it is the earnest contention of counsel for appellee that the changing of the rates prescribed in the original franchise by the amendatory ordinances was equivalent, under the terms of the quoted section, to the granting of a new franchise, and that as no franchise may be granted until due advertisement and public sale thereof, the amendatory ordinances were void.
"But an analysis of the language used in that section will readily disclose the fallacy of this view; the inhibition in the first place is against the granting of any franchise or privilege or the making of any contract in reference thereto for a term exceeding twenty years, but in the succeeding sentence wherein provision is made for the advertisement and public sale, it is only said that such franchise or privilege -- not contract or amendatory contract -- 'Shall first, after due advertisement, receive bids therefor publicly, and award the same to the highest and best bidder.' The inhibition is against the granting of a franchise or privilege or making a contract for a term exceeding twenty years, and further against granting a franchise or privilege without advertisement or public sale, but there is no inhibition expressed or implied against entering into a contract or amendatory contract except that the same shall not be for a term exceeding twenty years." (Emphasis added).
In the case of
Lutes v. Fayette Home Telephone Co., 155 Ky. 555, 160 S.W. 179 (1913), the court held that a city may modify a contract involving rates and charges with the consent of the other party. See also McQuillin, Mun. Corps., Vol. 12, § 34.44 and the case of
Poggel v. Louisville Ry. Co., 225 Ky. 784, 10 S.W.2d 305 (1928). We are also enclosing copies of OAG 79-261 and OAG 79-175 relating to this subject.
As we have indicated above, we see no legal objection to the city amending its garbage franchise ordinance with the consent of the contractor to adjust the rate schedule in order to offset the rate increase charged the contractor by the fiscal court to utilize the landfill disposal facilities.