12/17/2014 (2) - Laserfiche WebLink

Home Browse Search

402 So. 2d 1209, *; 1981 Fla. App. LEXIS 20623, ** 11. Art. VH,, §3(a), FlaConst [**7] Expert witnesses for the OUC testified that it was not an uncommon practice in other states for tax exempt utilities to make "tax -equivalent" payments to local governmental bodies providing them with valuable services. Failure to make such payments would have the effect of discriminating against the county taxpayers because they presumably would have to pay through higher taxes for the free services received by the utility. We have found no controlling precedent in Florida on this point. In some jurisdictions, such payments are not allowed. n However, the PSC has approved the pay- ment of "reasonable" charitable contributions by regu- lated utilities and the inclusion of these amounts in oper- ating expenses of the utility for purposes of calculating reasonable rates. " The allowance or disallowance of such "in lieu of tax" payments as operating expenses for purposes of determining the rate structure or rate base of a utility is a matter more appropriate for determination by the PSC than the courts " where the payments (as in this case) are reasonable in amount for the purpose in- tended, are actually made, and are made pursuant to a reasonable ground or basis. 1' 12. State v. Department of Pub. Serv., 19 Wash.2d 200, 142 P.2d 498 (1943). [**8] 13. City of Miami v. Florida Pub. Serv. Commit; 208 So.2d 249 (Fla.1968). See also: In re Petitions of Burlington ElecLight Dept 135 Vt. 114, 373 A.2d 514 (1977); 56 An.ho:2d Mu- nicipal Corporation § 583 (1971). 14. See: Occidental Chem. Co. v. Mayo, 351 So.2d 336 (Fla 1977). 15. In re Petitions of Burlington Elec. Light Dept 135 Vt. 114, 373 A2d 514 (1977). We conclude that Rosalind failed to establish that the OUCs inclusion of the "in lieu of tax" payments to Orange County as an operating expense was arbitrary or unreasonable. 1° 16. Shevin v. Yarborough, 274 Sa2d 505 (Fla 1973); Columbus & S Ohio Elec. Co. v. Public UtiL Comm'n of Ohio, 58 Ohio St2d 120, 388 N.E2d 1378 (1979). II. "FRANCHISE" PAYMENTS MADE BY OUC TO THE CITY OF ORLANDO. The record showed that since 1970, the OUC has been paying to the City of Orlando substantial annual payments 17 labeled "franchise -equivalent" fee. [**9] The OUC pays the franchise fee to Orlando in addition to profits earned by the OUC. " For example, in 1973, $ Page 3 1,442,561 was paid to the City of Orlando as a franchise fee and the OUC also paid the City $ 5,542,000 in prof- its. The OUC keeps as retained earnings about as much as it pays Orlando in profits. 17. Approximately $ 2 million per year. 18. The amount of the fee is based roughly on 6% of the revenues earned in Orlando. Six per- cent for a true franchise fee is fairly standard in Florida. Florida League of Cities, Municipal Util- ities in Florida 122, 123 (1974). We note that the PSC now required real franchise fees to be paid only by the consumers in the cities charging the fees. City of St Petersburg v. Hawkins, 366 So.2d 429 (F1a1978). However, this is an area of discretion available to the PSC. In any event we do not consider the OUC's franchise fee as a real franchise payment. The OUC shows the franchise fee as an operating expense, which reduces its net operating income. How- ever, there ("101 is no franchise agreement between the City and the OUC. Further, the OUC witnesses ad- mitted [*1213] that the franchise fee was treated as additional income on the OUCs reports filed with the Federal Power Commission and on its official bond statements, and that these funds would be available to pay bonds or other "real" operating expenses if needed. Rosalind argues that the OUC's treatment of the franchise fee as an operating expense is an improper method to mask additional profits. Since the OUC is in actuality part of the City of Orlando, no payment to a third party is possible. It is merely a transfer of funds from one pocket to another. We agree that the franchise fee should be considered as additional OUC profit. See: City of Logansport v. Public Serv. Comm% of Ind, 202 Ind 523, 177 NE 249, 76 ALR 838 (1931). However, assuming the franchise fee constitutes ad- ditional profits to the OUC, and should in fact be treated as such, this does not, by itself; establish that the OUC's rates are unreasonable. Municipal utilities in Florida are entitled to earn a profit on their utilities operations, and some municipalities in Florida take a higher percentage of the utility's [**11] profit into general revenues than Orlando does, even including the franchise -equivalent payment. " 19. The City of Jacksonville receives 30% of its utility's gross revenue. In an extreme case, there may arise the specter of a tax-free town made wealthy by its utilities operations both in- side and outside its political limits. No witness testified that the OUC was earning an excessive amount of profit on its operations. Further, the 5 �o