Texas Supreme Court justices will decide whether two state laws are giving unlawful discounts to cable and telecommunication service providers, resulting in millions in lost revenue for dozens of cities across the state.
The court granted the state’s request to review the case in which both the trial court and the Austin-based Third Court of Appeals ruled two laws passed by the Texas Legislature in 2017 and 2019 capping costs for providers are unconstitutional. Justices will hear arguments in the case March 5.
"The (Texas) Constitution says you can't give public property away for free," Bob Heath, one of the plaintiffs' attorneys, told KERA News. "That's exactly what's going on here."
KERA News has reached out to the Texas Attorney General's Office for comment and will update this story with any response.
State lawmakers passed Senate Bill 1004 in 2017, allowing wireless network providers install network nodes in public rights-of-way — like roads — and cities to charge the providers an annual $250 right-of-way rate per node. The nodes are typically installed on street lights or utility poles 30-40 feet above the ground, enabling 5G wireless services.
Two years later, lawmakers passed Senate Bill 1152. Instead of requiring companies providing both cable and telecom services to pay cities to deliver both services, the law allowed companies to only pay whichever charge was higher.
Texas argued the laws incentivize technology improvements, provide uniform regulation, reduce consumer costs and eliminate “double taxation” for utility companies. The laws passed as providers started rolling out 5G wireless technology and asked federal and state officials to streamline the process.
But 59 cities — including Dallas, Austin, San Antonio, Houston and El Paso — soon sued Texas, arguing those laws violate "gift" clauses in the state constitution that ban the Legislature from authorizing political subdivisions, like cities and counties, to give public money or things of value to private corporations without sufficient consideration and public purpose.
The cities argue the $250 cap on right-of-way rates is significantly lower than market value — which they say is anywhere from $1,000 to $2,500. Along with only one set of tax revenue, they’d earn less money. Houston estimated it lost $10 million in revenue from just one telecom provider, and other cities estimated they’d lose $100 million per year altogether.
Cities and municipal interest groups argue the financial loss leaves less money for cities to fund essential services for residents.
"If the cities are able to recover that revenue and collect it going forward," Heath said, "it means that cities have an easier time providing the services that they provide, whether it's police protection, parks — whatever."
The Third Court of Appeals declared SB 1152 unconstitutional and ruled that the trial court needed to further consider whether the $250 rate cap in SB 1004 was adequate in comparison to market value for public right-of-way use.
The state argues the fact that the companies will be charged at all indicates they are not receiving a gift. The state also argues cities lack standing to bring their suits because the state doesn’t enforce the fee caps — and ultimately, the state owns public roads, not the cities.
"SB 1152 checks all the boxes to avoid Gift Clause problems," the attorney general’s office wrote in its petition to the Texas Supreme Court. "It does not transfer right-of-way access gratuitously, but rather requires providers to pay for that access."
Toluwani Osibamowo is KERA’s law and justice reporter. Got a tip? Email Toluwani at tosibamowo@kera.org.
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