Request By:
Mr. John R. Cox
Rowan County Attorney
P.O. Box 9
Morehead, Kentucky 40351
Opinion
Opinion By: Robert F. Stephens, Attorney General; By: Charles W. Runyan, Assistant Deputy Attorney General
Rowan Fiscal Court is desirous of granting Rowan Water Inc., a nonprofit corporation presently selling water to county residents, the authority to develop and construct sanitary sewer collector lines throughout Rowan County. Such sewer system would tie into a new sewage treatment facility presently under construction by the Morehead Utility Plant Board and the city of Morehead.
Rowan Water, Inc., is authorized by its articles of incorporation to develop and construct sanitary sewer systems.
Your question is whether fiscal court has the power to give this Chapter 273 corporation the authority to develop and construct a sanitary sewer system for county residents [unincorporated territory, we assume].
The corporation, as a seller of water, is subject to the regulatory authority of the P.S.C. under KRS 278.012 and 278.010(3)(d). Since the corporation intends to establish only sewer collector lines, and not "sewage treatment" facility as envisioned in KRS 278.010(3)(f), the corporation in the sewer line business would not be subject to the regulatory authority of the P.S.C.
The fiscal court has the authority to establish sewage distribution systems in the county by appropriate ordinance enacted pursuant to KRS 67.083(3)(c) and (r).
Assuming that the sewer lines would be constructed along or through county road rights of way, it is our opinion that the fiscal court has the authority to grant a franchise to the corporation in connection with the sewer lines operation pursuant to §§ 163 and 164 of the Kentucky Constitution, assuming it is the highest and best bidder.
The court specifically held in
Ray v. City of Owensboro, Ky., 415 S.W.2d 77 (1967) 79, that the list of utilities which are subject to the granting of franchises in § 163, Constitution, are not comprehensive. The court wrote that the purpose of the section was to give a city [or a county for that matter] control of the streets, alleys, and public grounds and to make it possible for the city to provide the services of those utilities to its inhabitants. Thus the court held that the right to grant franchises "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." (Emphasis added). Further, the court held that § 164 of the Constitution, relating to letting the franchise out on bids, is self-operative.
The courts have held that the following services or utilities are proper subjects of franchise under the two constitutional sections: auto-bus line operating over the streets [
Peoples Transit Co. v. Louisville Railway, 220 Ky. 728, 295 S.W. 1055]; garbage collection [
City of Bowling Green v. Davis, 313 Ky. 203, 230 S.W.2d 909]; extraction of sand and gravel [
Willis v. Boyd, 224 Ky. 732, 7 S.W.2d 216]; toll bridge across a navigable stream [
Irvine Toll Bridge Co. v. Estill Co., 210 Ky. 170, 275 S.W. 634]; emergency ambulance service [Ray v. City of Owensboro, above]; and cable television [City of Owensboro v. Top Vision Cable Co. of Ky., Ky., 487 S.W.2d 283 (1972) 287]. Of course the court has recognized that the right to enfranchise extends to counties as well as to cities.
Akers v. Floyd County Fiscal Court, Ky., 556 S.W.2d 146 (1977). See KRS 67.080, 67.083 and § 164, Constitution.
It is our opinion that under §§ 163 and 164, Constitution, the fiscal court can grant a franchise for the sewer line operation after advertisement for bids, as set forth in § 164. If this corporation happens to be the only bidder, after proper advertising for bids, an award of franchise could still be made provided the contract contains terms reasonable to both parties. The purpose of the bidding is to insure that all interested bidders get a chance at it and thus promote the idea of the fiscal court's getting the best possible consideration for the franchise by sale to the highest and best bidder.
Willis v. Davis, Ky., 534 S.W.2d 255 (1976) 256.
As to whether or not an exclusive franchise is issued that is a matter lying within the sound discretion of fiscal court. The court said in Ray v. City of Owensboro, above, that only where the public interest demands should competition be restrained or limited.
The franchise term cannot exceed 20 years. Section 164, Constitution. The fiscal court should charge a reasonable consideration for granting a franchise. The courts would probably uphold an annual amount not exceeding three percent (3%) of the utility's annual gross user charges. The corporation getting an award would also have to contract to charge a reasonable user fee for such sewage services.