Franchising - An Essential Tool for Right-of-Way Management

Many city and county attorneys and public works directors are familiar with utility franchising issues, but many other city and county elected officials and staff are not, even though they may encounter them as part of their public duties. Understanding the basics of franchising will help in approaching these issues and in appreciating the complexity of the often unnoticed utility systems providing services to your residents and businesses.

First, what is a franchise in this context? A franchise is basically a contract between a city or county and a public or private utility provider who needs the public rights-of-way (ROWs) to deliver its services. The public streets and roads crisscrossing our cities and counties are the backbone of our transportation network, but the utilities located in those linear corridors are just as vital to our communities. Cities and counties, as well as the state Department of Transportation, enter into franchises with private companies and with other public agencies -- granting them the right to use the public ROWs for installation, maintenance, and repair of their facilities, typically underground pipes and conduits or above-ground cables and lights on poles. Sometimes the facilities in the ROWs are wireless antennas or equipment cabinets that are part of a telecommunications network. A franchise typically covers a wide range of topics, such as permitting procedures, notice requirements before digging in the ROWs, insurance and indemnification, length of the franchise, and any applicable costs, fees, or tax arrangements. 

Water and sewer pipes, natural gas distribution systems, fiber optic cables, electrical cables, and wireless phone systems – all these utilities rely on public ROWs for getting their services to businesses and residents - and somehow all that infrastructure needs to be installed and maintained within the ROWs without interfering with the use of our streets and sidewalks for public travel. Adding to the complexity are federal regulations that preempt local government authority on some aspects of telecommunications and cable television services. These are just some of the many factors that need to be taken into consideration when negotiating and administering franchise agreements.

Sometimes a road project impacts utilities in the ROW, and sometimes a utility provider needs to replace underground pipes – those projects need to be coordinated to minimize costs and inconvenience to the public who use the streets for driving, walking, or bicycling. Sometimes a water or sewer main breaks in the middle of the night, or a driver knocks down a telephone pole – at times like that it is important for all involved to have a good understanding of how to handle the emergency. A good franchise agreement contains provisions covering such situations, so that all involved know their rights and responsibilities – and who is responsible financially if one utility causes damage or disruption to another ROW user. No state statutes require cities and to enter into contracts with utility providers who install their facilities within the ROWs, but having a well-crafted franchise is an essential way to avoid disagreements and litigation.

Franchises are contracts, and they have a time limit – sometimes five, ten, or twenty years – we’ve seen gas distribution franchises with even longer terms. When a franchise is nearing the end of its term, the parties should take the opportunity to examine what changes should be made. The renewal of some franchises should be started long before expiration (particularly cable franchises because of special procedures contained in the federal cable TV statutes). A thoughtful and deliberate process of renegotiation can lead to far better results than waiting to the last minute, when there might be other pressing issues that keep the franchise from getting the attention it deserves.

Many cities and counties also have major energy pipelines transporting natural gas or petroleum products through their jurisdictions. (Those large pipelines are referred to as “transmission pipelines,” to differentiate them from the smaller “distribution pipelines.”) They pose special issues and raise safety concerns. They frequently cross a substantial amount of private property because the easements were negotiated decades ago when the lands were less developed. The regulation of transmission pipelines is under federal jurisdiction, but there are substantial issues that need to be addressed in a local government franchise for those facilities.

Keep in mind that there are procedural requirements when a city or county legislative body approves a franchise agreement. The county procedures are in chapter 36.55 RCW; for code cities, see RCW 35A.47.040 and RCW 35A.12.120; for towns, see RCW 35.27.330; for second class cities, see RCW 35.23.251. First class cities should refer to any relevant charter provisions. All classes of cites are bound by a range of statutes within chapter 35.21 RCW that impact road and franchising authority. In 2000, at a time when there was a surge in the installation of telecommunications facilities throughout the country, the Washington Legislature adopted provisions, codified in chapter 35.99 RCW, that limit and clarify the authority of all classes of cities when regulating telecommunications facilities in the rights-of-way, and that establish a framework for issuing "use permits" and "master permits" (basically, franchises) to telecommunications providers for locating their facilities in the ROW. See our webpage on Municipal Right-of-Way and Telecommunications.

You can access sample franchise agreements through the MRSC website - one way to find them is to type "franchise" in the search box, using the "Sample Documents" category. A well-crafted franchise should include clauses covering all of the practical issues that arise when multiple utilities are sharing a common corridor. If you rarely see or hear of utility franchising problems in your jurisdiction, that could indicate that your local officials and staff are handling these issues well.

Have a question or comment about this information? Let me know below or contact me directly at jdoherty@mrsc.org.