With a month left in the 2019 legislative session, Texas cities and the telecom industry are engaged in a late-surfacing smackdown that municipal leaders say threatens the loss of millions of dollars in local revenue along with potential cuts in city services.
Fort Worth Mayor Betsy Price says Fort Worth could lose between $7 million and $10 million and other big cities say they would lose even more. Houston, the state’s largest city, puts its potential losses at up to $27 million. Dallas would lose $9.3 million.
The battle centers on legislation that would cut right-of-way fees that telecom providers pay to cities to provide telephone and video service to customers. Industry leaders say the measure will mean reduced rates for many customers but opponents challenge that assertion, saying cable rate increases already appear to be on the horizon.
Sponsored by Sen. Kelly Hancock, R-North Richland Hills, and Rep. Dade Phelan, R-Beaumont, the telecom legislation is a top priority for the Texas Cable Association, the umbrella group for more than 90 percent of the state’s cable companies, including Charter Spectrum, one of the largest providers in Fort Worth.
The issue has drawn only limited attention amid the crush of showcase items such as school finance and property tax reform but it has nevertheless been the focus of intense lobbying, attacks and counter-attacks.
The Texas Municipal League, which represents more than 1,100 cities, cites the legislation as a prime example of what executive director Bennett Sandlin calls a concerted attack on cities and counties during the 140-day session. The organization is monitoring more than 150 bills that the group deems as potentially troublesome for local governments and ranks the cable measure among the ten “most harmful.”
Hancock’s bill passed the Senate 26-5 on April 4 and is in the House alongside the companion measure sponsored by Phelan, who chairs the House State Affairs Committee. The two measures are awaiting action in the House Calendars Committee, which determines which bills go to the floor for a vote. Rep. Phil King, R-Weatherford, is a co-author of the House bill.
The identical bills would alter a years-long practice under which cities charge telecommunications companies when using city right-of-way to provide their services. Currently, cities are permitted to charge providers for both telephone and cable TV services over the same line. The bills would allow the cities to charge for only one of the services, whichever is the largest amount.
Hancock, chairman of the Senate Business and Commerce Committee, said in an interview that the double charges are outdated and constitute the equivalent of requiring someone to have two leases “when they’re only using one apartment.” The bill recognizes changes in technology, he said, adding that “there’s no need for two lease agreements on a single wire.”
Walt Baum, president of the Texas Cable Association, said the current charges amount to a double tax, though opponents quarrel with the term, saying the fees in actuality constitute rent for use of the right of way.
“We’re still going to be paying millions of dollars in city budgets,” Baum said. “We’re just saying that for lines that provide both video and telecom services, that we can’t be charged twice.”
The overall reduction is expected to be more than $125 million annually and will take effect in January.
Baum said many consumers “will see a direct reduction” in their bills when the lesser charge is eliminated. The amount, he said, would probably be only “a dollar or two” for residential consumers but it could be as much as “a couple of hundred dollars a month” for small business customers.
Those representing the cities’ position, however, said any savings from the elimination of the fees would probably be absorbed by likely rate increases cited in recent media reports.
Said Snapper Carr, an attorney representing the Texas Coalition of Cities for Utility Issues: “Anyone that believes that the consumer is going to see a benefit from this, I would say there’s probably some ocean-front property in Arizona I’d like to talk to you about.”
The battle over cable revenue comes at a time when cites are worried about the impact of priority legislation to limit the future growth of property taxes, the largest source of revenue for most cities. Right-of-way fees constitute the largest source of non-tax revenue for many cities.
“This is a bit of a double whammy,” says Jeff Coyle, government and public affairs director for San Antonio, which would lose $7.9 million under the cable bill, according to a legislative break-down of the costs.
The House is expected to vote the week of April 28 on legislation requiring cities and counties to seek voter approval for property tax increases that are 3.5 percent higher than the previous year. Gov. Greg Abbott and the Republican leadership in the House and Senate have made tax reform and school finance their top legislative priorities but local officials say the proposed property tax caps will restrict their ability to perform core municipal functions such as road-funding and public safety.
Supporters of the telecom bill suggest that municipal leaders are overstating the impact of the measure, saying the potential revenue losses, particularly in the big cities, constitute only a comparatively small amount of their budgets.
But mayors and council members, taking issue with that assessment, have united against the bill and maintain that the revenue losses threaten job cuts and loss of services. They also contend that sparing telecom providers from paying a portion of the franchise fees would violate the Texas Constitution’s ban on giving away publicly owned property for less than fair market value.
In a letter to lawmakers in late March, Houston Mayor Sylvester Turner and members of the Houston City Council protested the “burdensome impact” of the Kelley-Phelan bills, saying the measures would “arbitrarily take” between $17 million and $27 million and “hand it to corporations.”
“These bills will affect the level of service the City provides to its residents and will likely result in job losses,” Turner and the Houston council members wrote. Bill Kelly, Houston’s government relations director, said the cable legislation is “the number one” measure that Houston hopes to defeat before lawmakers adjourn on May 27.
Members of the Denton City Council, in a resolution against the bill, said the legislation, by partly eliminating the fees, would force taxpayers to subsidize cable providers. Denton would lose $669,548, according to legislative estimates.
Fort Worth Mayor Price said the bill would “severely impact revenues for cities” although Fort Worth officials haven’t determined how the city government would respond to the potential shortfall.
Other North Texas cities publicly opposed to the bill include Dallas, McKinney, Irving, Richardson and Frisco.
Arlington would lose between $2.8 million and $4.5 million, said Jay Warren, Arlington’s director of communications and legislative affairs, but the city government hasn’t taken a position on the bill. “We’re monitoring it and want to see what unfolds,” Warren said.
But in Dallas, senior assistant city attorney Don Knight, said the loss of $9.3 million will clearly have an impact if the bill passes, probably resulting in an as-yet undetermined loss of city services.
When budget planners “run out of revenue, that’s when we stop doing things,” he said. “So that revenue line is going to move $9.3 million in the wrong direction. Things that could have been done with $9.3 million will not be done.”
Brian Anderson, spokesman for Charter Spectrum, declined comment on the bill, deferring questions to the Texas Cable Association.
At a press conference last week, the Texas Municipal League and mayors from Austin, Brownwood and Live Oak cited the cable legislation among the 10 “most harmful” bills that they say would undercut the authority of local government. Other measures included the proposed cap on revenue and bills that would pre-empt or reduce cities’ regulatory authority.
Another measure, which Sandlin said was aimed at “silencing cities,” would prevent cities from hiring lobbyists and paying dues to the municipal league. Supporters of the bill say taxpayers should not be required to subsidize lobbying activity for positions they may not support.
Many lawmakers defend their actions and counter that they are upholding their constitutional responsibilities in overseeing regulatory policies they say should be reserved for the state. “I think some of them have overstepped their authority,” Rep. Stephanie Klick, R-Fort Worth, said of the criticism from municipal leaders. “It’s the state that creates the cities.”