Request By:
Hon. Ronald G. Sheffer
Sheffer, Hoffman, Neel and Wilson
Suite 312 Citi-Center
230 Second Street
Henderson, Kentucky 42420
Opinion
Opinion By: Steven L. Beshear, Attorney General; Walter C. Herdman, Asst. Deputy Attorney General
This is in response to your letter of August 3 in which you as the attorney for the city of Henderson refer to the fact the city has by contract granted Felt's Merchant Alarm Service, Inc., of Evansville the exclusive right to locate an alarm monitoring console at the city police station. The contract is for one year. At the present time the console monitors approximately 100 residential and business alarms in the city. You also enclose a copy of the contract and raise the question as to whether or not this type of contract constitutes a franchise required to be let by bids pursuant to the terms of Sections 163 and 164 of the Constitution. You further relate the following additional facts together with the question mentioned above:
"The contract also grants Felts the exclusive right to accept or reject any alarm companies application for monitoring service, the right to charge a one hundred dollar ($100.00) per alarm one (1) time hook-up fee, the right to charge seventy-five dollars ($75.00) per alarm each year for connection to the monitoring console, and the right to charge seven dollars and fifty cents ($7.50) per month ($90.00 per year) per alarm which is designated as a monitoring fee. Felts pays this latter charge to the City apparently to fund the city personnel required to watch the monitor. Many other small cities that provide this service do not charge for the police department services.
The contract is renewable on January 1 of each year. The question the City of Henderson would like to present to you is as follows: Would the City of Henderson be legally correct in renewing this contract or would it be required to advertise and secure competitive bidding from other alarm service companies?"
We believe that the type of contract referred to would be classified in the category of a franchise since it would appear to possess many of the attributes of a public utility referred to in the case of City of Owensboro v. Topvision Cable Co., of Ky., Ky., 487 S.W.2d 283 (1972). The court in this case declared that a TV cable business is a business to be franchised. It further pointed out that utility services other than those enumerated in Section 163 of the Constitution are subject to franchise. More specifically, we quote the following from the Owensboro case:
"This court has ruled decisively that services other than those enumerated in section 163 of the Kentucky Constitution are subject to franchise. In the case of Ray v. City of Owensboro, Ky., 415 S.W.2d 77 (1967), the right of the city to require a franchise for the operation of ambulance service was attacked. We said:
'It will be noted that section 163 deals with certain specific subjects, to-wit, street railway, gas, water, steam heating, telephone or electric light companies within a city or town. We do not believe the right granted cities by this section is today limited to these specific utilities. The purpose of the section was to give the city control of the streets, alleys and public grounds and to make it possible for the city to provide the services of these utilities to its inhabitants. Therefore, the right granted is not and properly should not be restricted to those utilities enumerated, but applies to all utilities and services which might today be proper subjects for control, when the original intent and purpose of the act is considered.'
We have held the following projects to be subjects for franchise: Garbage collection, City of Bowling Green v. Davis, 313 Ky. 203, 230 S.W.2d 909 (1950); automobile-bus line operating over streets, People's Transit Co. v. Louisville Railway Co., 220 Ky. 728, 295 S.W. 1055 (1927); right to use a part of a river bed for the extraction of sand and gravel, Willis v. Boyd, 224 Ky. 732, 7 S.W.2d 216 (1928).
It cannot be denied that television is an integral part of American life. It possesses many of the attributes of a public utility. It is of a public nature. It is said in 36 Am.Jur.2d, Franchises, section 3, page 725:
'Generally speaking, the right to carry on any business of a public nature, such as the establishment, construction, and operation of a public utility and the collection of tolls or charges for its use or service, or the use of highways for such purpose, is a franchise. '" (Emphasis added.)
Referring to McQuillin, Mun. Corp., Vol. 12, Sec. 34.04 we quote the following:
"Speaking generally, a franchise is a special privilege of a public nature conferred by governmental authority upon individuals as such, or artificial personalities usually called corporations, and which privilege did not belong to individuals generally as a matter of common right."
Next we quote the following excerpt from Section 34.08 to wit:
"In connection with the law relating to franchises, the term 'public utilities' is often used. One of the distinguishing characteristics of a public utility is the devotion of private property by the owner to a service which is useful to the public, and which the public has the right to have rendered with reasonable efficiency and at proper charges, so long as it is continued. The term implies public use and the duty to serve the public, whether the public may enjoy its service outright or by permission only. In sum, in order to constitute a public utility, the business or enterprise must be impressed with a public interest, and those engaged therein must hold themselves out as serving or ready to serve all members of the public to the extent of their capacitiy, and the nature of the service must be such that all members of the public have an enforceable right to demand it."
The alarm monitoring system established by the abovementioned corporation in the police station authorizes subscribers to the system to receive added police protection for a fee. At the same time the company pays the city a fee to help defray the expenses of monitoring the system at the police department. The system is a form of public service and available to anyone desiring the additional service. It would, therefore, appear that this service possesses many of the attributes of a public utility and fits the general rules regarding the nature of a franchise referred to in the Owensboro case and the text from McQuillin quoted above. The case you cited, that of Louisville Home Telephone Co., v. City of Louisville, 130 Ky. 611, 113 S.W. 855 (1908), also appears to support this conclusion.
Under the circumstances, we believe that because of the nature of services to be furnished under the contract here involved, such contract would constitute a franchise that would be required to be let on a bid basis under the terms of Section 164 of the Constitution.