Chapter 10 - § 10.6 • FRANCHISES

• Jurisdiction: Colorado

§ 10.6 • FRANCHISES

§ 10.6.1—In General

The Colorado Constitution provides that "[n]o . . . law . . . making any irrevocable grant of . . . franchises . . . shall be passed by the general assembly."³⁹⁹ Franchises are special privileges conferred by the government upon individuals which do not belong to citizens of the country generally of common right.⁴⁰⁰ Thus, although anyone may use streets and highways for ordinary purposes, even for conducting such business thereon as does not permanently occupy and obstruct the street or highway to the exclusion of others, if a business permanently occupies and obstructs a street or highway, as by the erection of a building or the laying of car tracks, the right to do so can only be granted by franchise.⁴⁰¹ The grant of a franchise does not suspend the power of the state to regulate the franchisee.⁴⁰² An ordinance purporting to grant a franchise which is not authorized by law,⁴⁰³ or is not adopted in accordance with statutory provisions,⁴⁰⁴ is void. The section of the Local Government Land Use Control Enabling Act of 1974 that provides for local government regulation of the construction or improvement of major electrical or natural gas facilities⁴⁰⁵ does not limit the authority of a municipal government to require or grant a public utility franchise.⁴⁰⁶ Franchise fees are not taxes, but rather are the price paid to rent use of public rights of way.⁴⁰⁷

In 1907, the Eighth Circuit outlined the factors to be considered in determining whether the grant of a privilege is a franchise or only a license:

A franchise is a right or privilege granted by the sovereignty to one or more parties to do some act or acts which they could not perform without this grant from the sovereign power. . . . Familiar illustrations are the right to be a corporation, to hold property, to sue and be sued as such, the right to build a bridge or operate a ferry over a public stream and to collect tolls therefor, the right to construct and operate on and in the streets of a city a street railway, waterworks, gasworks, electric light works, to supply the city and its inhabitants with transportation, water, gas, and electric lights respectively, and to take tolls therefor. In this country, the title of every lawful franchise is deraigned from the nation or the state . . . .

It is not, however, every privilege or permission granted by state or city to occupy or to use public rivers, highways, or streets that rises to the dignity of a franchise. A privilege granted by a city to a private party to occupy or use a portion of a public street temporarily . . . is a license and not a franchise. The exact line of demarcation between franchises and licenses may not be clearly drawn, but their general characters and limits are so well known and so clearly established that it is not difficult to assign many rights granted to the class to which they belong.
A right or privilege which is essential to the performance of the general function or purpose of the grantee, and which is and can be granted by the sovereignty alone, such as the right or privilege of a corporation to operate an ordinary or commercial railroad, a street railroad, city waterworks or gasworks, and to collect tolls therefor, is a franchise. . . .

A right or privilege not essential to the general function or purpose of the grantee, and of such a nature that a private party might grant a like right or privilege upon his property, such as a temporary or revocable permission to occupy or use a portion of some public ground, highway, or street, is a license and not a franchise. A privilege of the latter character, such as a permission to lay and operate a railroad across or for a short distance upon a public street, is a grant of an easement or right of way. An

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