Legislative Battles

HB 753: Garbage Franchise Fees

House Bill 753 was an effort to restrict the payment of certain fees to municipalities by entities that hold municipal solid waste management service contracts. The legislation would have capped the City’s solid waste franchise fees at 2 percent, cutting the City’s current 4 percent franchise fee revenue in half. Waste management operators, who provide services in Houston, have profited from the use of the public right-of-way since 2003. The passage of this bill would have resulted in a $4 million annual loss for the City of Houston.

When the City implemented the fee, it was not set arbitrarily. The City researched other franchise agreements to determine the fair market value of the right-of-way. Other franchise agreements were at 4 and 5 percent, depending on the scope of use. Other stakeholders were consulted in the creation of the Solid Waste Franchise structure and the 4 percent fee in Chapter 39 of the City of Houston Code of Ordinances.

The City worked with industry stakeholders to create a regulatory framework for solid waste haulers as well as our citizens. As a result of our inclusive work with industry members, the City of Houston currently holds franchise agreements with 272 waste hauling companies that operate within the city limits. In the 18 years that this ordinance has been in place, the City has received no complaints from the industry or the public about the franchise fee rates or the services provided.

In addition to Houston, other cities in Texas collect franchise fees from solid waste haulers. Texas cities spend billions of dollars each year maintaining the public rights-of-way for the health, safety, and benefit of all who use them. The proposed bill dictates what these municipalities should receive in remuneration for a public asset, without any rational basis for limiting the franchise fee to 2 percent. This one-size-fits-all approach purports to arbitrarily set the value of all municipal right-of-way for every municipality that currently has a franchise fee above 2 percent.

The Texas Constitution has long required valued-based rental fees for the use of public property. The Texas Constitution, art. III, § 52 (a) and art. XI, § 3, prohibits the State and other governmental entities (e.g., cities) from making “gifts of public property.” A gift includes allowing the use of public property to any entity for less than market value. Tex. Atty. Gen. Op. DM-232 (1993). Thus, any reduction in the public right-of-way compensation for solid waste management operators, such as the reduction that would result from the enactment of HB 753, constitutes an illegal gift of public property and a threat to the public right-of-way and the residents, cities, and companies that use it.

HB 753 died when it was left pending in the House Environmental Regulation Committee.