Knowledgebase-Cities' Ability to Offer Cable Service as Joint Venture


Information Product

Title:Cities' Ability to Offer Cable Service as Joint Venture
Summary:MTAS was asked whether a city may create and operate a cable television franchise.
Original Author:Ashburn, Melissa
Co-Author:
Product Create Date:05/06/2003
Last Reviewed on::05/17/2017
Subject:Cable television; Franchises; Telecommunications
Type:Legal Opinion
Legal Opinion: Cities' Ability to Offer Cable Service as Joint Venture public.doc

Reference Documents:

Text of Document: May 6, 2003

Re: Cities’ ability to offer cable service as joint venture

Dear City Manager,

I have been advised of an issue which is under consideration in your City and neighboring municipalities concerning the ability of cities in Tennessee to enter into a joint venture to offer cable service to their residents. Whether a city may create and operate a cable television franchise is a question of both statutory authority and charter powers.

The Interlocal Cooperation Act, codified at T.C.A. 12-9-101, et seq., operates to:

permit local governmental units the most efficient use of their powers by enabling them to cooperate with other localities on a basis of mutual advantage and thereby provide services and facilities in a manner and pursuant to forms of governmental organization that will accord best with geographic, economic, population, and other factors influencing the needs and development of local communities. T.C.A. 12-9-102.

The Act has been applied to permit cities to enter into agreements concerning a wide variety of services, including salt treatment for icy roads, use of county jails for city offenders, enforcement of city ordinances by county courts, police service and fire protection. The following language defines those specific agreements which may be entered into, and the limits which apply:

(A)(1) Any power or powers, privileges or authority exercised or capable of exercise by a public agency of this state, including those provided in 6-54-307 [mutual aid agreements], may be exercised and enjoyed jointly with any other public agency of this state having the power or powers, privilege and authority.... The authority for joint or cooperative action of political subdivisions shall apply to powers, privileges or authority vested in, funded by, and/or under the control of their governing bodies and relative to which the governing bodies may make other types of contracts. No joint or cooperative agreement shall be entered into affecting or relating to the constitutional or statutory powers, privileges or authority of officers of political subdivisions, or agencies of political subdivisions with a separate governing board and having powers granted by statute independent of the governing body. Notwithstanding any provisions of the law to the contrary, any municipality may enter into an agreement with the sheriff, court of general sessions, and the governing body of any county in which it is located to provide for the enforcement of the municipality’s ordinances according to the provisions of 8-8-201(34) and 16-15-501....
(2) Agencies of political subdivisions that have governing boards separate from the governing bodies of the political subdivisions may make agreements for joint or cooperative action with other such agencies and with other public agencies. The power to make joint or cooperative agreements includes any power, privilege or authority exercised or that may be exercised by each of the agencies that is a party to the agreement. Agreements between agencies of political subdivisions that have separate governing boards and other such agencies and public agencies shall substantially conform to the requirements of this chapter. The governing bodies of such political subdivisions shall require agreements made by their agencies pursuant to this chapter to be submitted to the governing body for approval before the agreements take effect.
(b) Any two (2) of more public agencies may enter into agreements with one another for joint or cooperative action pursuant to the provisions of this chapter. Appropriate action of the governing bodies of the participating public agencies by resolution or otherwise pursuant to law shall be necessary before any such agreement may enter into force.
***T.C.A. 12-9-104. It is important to note that individual cities which enter into cooperative agreements must have either the statutory or charter authority to exercise the powers covered by the agreement.

The Tennessee General Assembly passed legislation in 1999 which enables a municipality operating an electric plant to establish a joint venture with other parties to provide cable and other services within the municipality’s service area. The statute provides:

each municipality operating an electric plant has the power and is authorized within its service area and on behalf of its municipality, acting through the authorization of the board or supervisory body having responsibility for the municipal electric plant, to contract to establish a joint venture or other business relationship with one (1) or more third parties to provide the services authorized by 7-52-601; provided, that with respect to cable services, at least one (1) such third party shall be a current franchise holder that has been providing services in any state (either itself or its predecessor or predecessors) for not less than three (3) years at the time of the establishment of the joint venture or other business relationship. Any such joint venture or other business relationship shall be subject to the provisions of 7-52-602 - 7-52-609. T.C.A. 7-52-103(c). Emphasis added.

The services which the municipality is authorized to provide under such an agreement are specified in T.C.A. 7-52-601:

(a) Each municipality operating an electric plant described in 7-52-401 has the power and is authorized within its service area, under the provisions of this act and on behalf of its municipality acting through authorization of the board or supervisory body having responsibility for the municipal electric plant (herein sometimes referred to as “governing board”), to acquire, construct, own, improve, operate, lease, maintain, sell, mortgage, pledge or otherwise dispose of any system, plant, or equipment for the provisions of cable service, two-way video transmission, video programming, Internet services, or any other like system, plant, or equipment within and/or without the corporate or county limits of such municipality, within the corporate or county limits of any other municipality. A municipality may only provide cable service, two-way video transmission, video programming, Internet services or other like service through its board or supervisory body having responsibility for the municipality’s electric plant. A municipality providing any of the services authorized by this section may not dispose of all or substantially all of the system, plant, and equipment used to provide such services except upon compliance with the procedures set forth in 7-52-132.
(b) The services permitted by this part do not include telephone, telegraph, and telecommunications services permitted under part 4 of this chapter.
(c) Notwithstanding the foregoing, a municipality shall not have any power or authority under subsection (a) in any area where a privately-held cable television operator is providing cable service over a cable system and in total serves six thousand (6,000) or fewer subscribers over one (1) or more cable systems.
(d) Notwithstanding the foregoing, a municipality shall not have any power or authority under subsection (a) in any area of any existing telephone cooperative that has been providing cable service for not less than ten (10) years under the authority of the federal communications commission. T.C.A. 7-52-601. Emphasis added.

Pursuant to the above quoted statutory provision, a municipality may, through its electric system, provide cable service outside municipal boundaries, as long as such service only extends to cover the service area of the electric plant. Therefore, a city providing electric service to another municipality may extend cable service to the outside municipality. T.C.A. 7-52-103(a) contains the language relied on by municipalities when providing electric utility service to another, outside municipality, which may be tied into our analysis of the ability of such cities to offer cable service in the same areas.

Prior to establishing a cable service or entering into an agreement with other cities to provide cable service, the municipal electric system must file a business plan with the comptroller of the treasury containing specific data listed in T.C.A. 7-52-602(1). Sixty (60) days after forwarding the plan to the comptroller, whether an analysis has been received or not, the electric board must publish a notice of the intent to offer the services and hold a public hearing. T.C.A. 7-52-602(2),(3). At least 14 days after the hearing, the electric plant board may only proceed with the services after receiving either a 2/3 majority vote of the municipal legislative body or approval through public referendum. T.C.A. 7-52-602(4),(5).

Municipalities which enter into agreements for the provision of cable service within the service area of their municipal electric plant must establish a separate department to handle such functions, which has a separate accounting and record keeping system. T.C.A. 7-52-603(a)(1)(A). The electric system cannot subsidize the operation of the cable service, but may lend funds at interest. T.C.A. 7-52-603(a)(1)(A),(B).

The Tennessee Attorney General was asked in 1988 whether a city may enter into an agreement with other local governments to provide cable services beyond the corporate limits of the municipality. Tenn. Op. Atty. Gen. No. 88-170. The Attorney General opined that services cannot extend beyond the corporate limits “except as otherwise authorized by statute.” The above quoted statutory language found in T.C.A. 7-52-103(c), was passed by the General Assembly after the Attorney General issued this opinion, therefore providing the statutory authority that was lacking in 1988. The Attorney General further opined that a county has no authority to enter into such an agreement.

After reviewing the powers granted to municipalities in the above cited statutes, it appears that it is legal for Tennessee municipalities operating electric plants to enter into interlocal agreements for cable services, to extend to those areas served by the electric plant. The service areas may include municipalities which do not operate electric plants.

The next step in evaluating whether your city may enter into an interlocal agreement for cable service is to examine the language contained in the city’s charter to determine if the city has the authority needed. Article II, Section 1, subparagraphs (12) and (13) contain language indicating that your City has the requisite power to enter into such agreements and grant the necessary franchise for cable service. Each city with which your City makes such an agreement must have similar provisions in their charter.

I hope this information is helpful. Please let us know if you need further information or have any questions.

Thank you for consulting with MTAS.

Sincerely,

Melissa A. Ashburn
Legal Consultant

Please remember that these legal opinions were written based on the facts of a given city at a certain time. The laws referenced in any opinion may have changed or may not be applicable to your city or circumstances.

Always consult with your city attorney or an MTAS consultant before taking any action based on information contained in this database.