Middletown Tp. v. Storer Cable Communications, Inc.

• Court: New Jersey Superior Court – Appellate Division
• Writing for the Court: BAIME
• Citation: 206 N.J.Super. 572,503 A.2d 357
• Decision Date: 26 November 1985
• Parties: TOWNSHIP OF MIDDLETOWN, Appellant, v. STORER CABLE COMMUNICATIONS, INC., Respondent, and New Jersey Cable Television Associates, Intervenor.

Page 572

206 N.J.Super. 572 503 A.2d 357 TOWNSHIP OF MIDDLETOWN, Appellant,
v.
STORER CABLE COMMUNICATIONS, INC., Respondent,
and
New Jersey Cable Television Associates, Intervenor. Superior Court of New Jersey,
Appellate Division. Submitted Oct. 30, 1985.
Decided Nov. 26, 1985.

[503 A.2d 359]

Page 575

Benjamin P. De Sena, Englewood, for appellant.

Kirsten, Friedman & Cherin, Newark, for respondent (Dennis C. Linken, Newark, on the brief).

Holzapfel, Perkins & Kelly, Union, for intervenor (Cynthia D. Benn, Edison on the brief).

Irwin I. Kimmelman, Atty. Gen., for respondent Bd. of Public Utility Com'rs (Andrea Silkowitz, Deputy Atty. Gen., of counsel; Joseph L. Yannotti, Deputy Atty. Gen., on the brief).

Before Judges FRITZ, GAYNOR and BAIME.

The opinion of the Court was delivered by

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BAIME, J.A.D.

This is an appeal by the Township of Middletown (Township) from a final determination of the Board of Public Utility Commissioners (Board) in two related administrative proceedings pertaining to the construction and operation of a cable television system in the municipality. In its written decision, the Board rejected the Township's request to charge Storer Cable Communications, Inc. (Storer), the franchisee, an annual franchise fee in excess of that prescribed by N.J.S.A. 48:5A-30(a). The Board also determined that the same statute barred the Township from imposing road opening permit fees upon Storer.

A brief description of the applicable statutory provisions is necessary for a complete understanding of the issues presented. In 1972, our Legislature enacted the Cable Television Act. N.J.S.A. 48:5A-1 et seq. The statutory scheme provides a framework for the issuance and regulation of cable television franchises. The power over cable television, both in franchising and regulation, is divided between the Board and the municipalities. Clear T.V. Cable Corp. v. Public Util. Comm'rs, 85 N.J. 30, 35, 424 A.2d 1151 (1981). The statutory plan is effected by requiring companies to obtain from the Board a certificate of approval. N.J.S.A. 48:5A-15. A precondition for the certificate is the consent of the municipality in which the company intends to operate. N.J.S.A. 48:5A-22.

N.J.S.A. 48:5A-30(a) empowers the municipality to require the company to pay a franchise fee equal to 2% of the gross revenues derived from services provided within its borders. The statute states that the franchisee must file a verified statement with the chief fiscal officer of the municipality "showing the gross receipts from such charges" and must pay the 2% fee "as a yearly franchise revenue for the use of the streets." N.J.S.A. 48:5A-30(a). This revenue is to be "in lieu of all other franchise taxes and municipal license fees." Ibid. N.J.S.A. 48:5A-30(c) provides that a municipality may petition

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the Board for permission to charge an annual fee greater than 2% of the franchisee's gross revenues derived from services within its territory. In that event, a hearing is to be conducted. Under the statute, the Board may grant the petition and allow a franchise fee greater than that otherwise prescribed if it "is satisfied that [such action] is warranted by the expenses to the municipality with respect to the regulation or supervision within its territory of cable television, or any other expenses caused by the existence and operation" of such services.

This appeal presents two principal questions. Initially, at issue is whether the Board properly denied the Township's petition to impose a franchise fee equal to 5% of Storer's gross revenues derived from the latter's services in the municipality. The second question is whether the imposition upon the franchisee of road opening permit fees by the Township pursuant to its municipal ordinance constitutes a violation of N.J.S.A. 48:5A-30(a).

We need not recount the protracted and complex procedural history relating to this case. Suffice it to say that extensive hearings were conducted with respect to both of the issues presented. The salient facts [503 A.2d 360] are not disputed and are essentially a matter of public record. On March 27, 1979 the Township adopted an ordinance consenting to operation of a cable television system by Monmouth Cablevision, Inc. (Monmouth). See N.J.S.A. 48:5A-22. The ordinance provided that Monmouth would pay the Township a yearly franchise fee equal to 5% of the company's revenues derived from its services in the municipality. Shortly thereafter, Monmouth filed a petition with the Board in which it sought a certificate of approval. See N.J.S.A. 48:5A-15. On August 3, 1979 the Board granted Monmouth's petition, but conditioned the certificate of approval upon the Township's agreement to limit its franchise fee to 2% of Monmouth's revenues in the municipality. The Township's request for a higher fee was referred to the Office of Administrative Law.

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While the matter was pending, Monmouth was sold to Storer. In 1983, it came to the attention of the Office of Cable Television (Office) that the Township was exacting road opening permit fees from Storer. Under its ordinance, the Township charged fees in accordance with a graduated scale for the right to excavate municipal roads. The regulatory officer of the Office of Cable Television advised the Township that imposition of road opening permit fees was prohibited by N.J.S.A. 48:5A-30(a), and directed it to suspend the practice immediately. On December 13, 1983 the Township filed a petition to review the regulatory officer's directive. The matter was referred to the Office of Administrative Law.

The petitions were consolidated for the purpose of additional hearings. On September 19, 1984 the administrative law judge issued her initial decision. She recommended that the Board permit the Township to impose an annual franchise fee equal to 2 1/2% of the revenues derived by Storer from its services in the municipality. Her conclusion was predicated in part upon her finding that the Township was "unique" because of the "level of services offered to residents" and the "extraordinary degree of citizen participation." She also cited the large size of the Township and its considerable regulatory expenses relating to resolution of citizen complaints against utilities. In that respect, the judge observed that the revenues derived from the 2% franchise fee were sufficient to satisfy all "out-of-pocket" expenses pertaining to regulation and supervision of cable television services in the municipality. Although ambiguously phrased, she apparently concluded that the Township was entitled to recover additional funds for use of its streets. The judge also decided that the Township was not barred by N.J.S.A. 48:5A-30(a) from charging road opening permit fees.

The Board rejected the judge's initial decision and recommendations. In its written determination, the Board found that the Township's out-of-pocket expenses pertaining to the regulation of cable television "could not have exceeded $34,500." The Board also noted that most of these costs were not of a

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recurring nature since they related to the initial construction and start-up operations of the cable television system. Since the Township had derived $34,985 from franchise revenues through 1983, the municipality's expenses pertaining to...