## Facts

- The City of Gary enacted ordinances in January 1998 establishing a telecommunications policy and creating the Gary Access, Information, and Telecommunications Trust (GAITT).
- A companion ordinance imposed a “requirements-based fee” on telecommunications providers using city rights-of-way.
- The fee for 1998 totaled $20,000,000, set by reference to local telecommunications revenues and subject to certain credits; Ameritech’s assessed share was about $3.2 million under an allocation formula tied to services offered.
- The ordinances contemplated that GAITT would develop a future methodology for setting fees.
- Ameritech sued for declaratory and injunctive relief, arguing the charge was an unauthorized tax and was barred by state law.
- While the dispute was pending, a statutory amendment effective March 13, 1998 limited municipal payments for rights-of-way to amounts not exceeding reasonably incurred costs of managing the rights-of-way.
- The trial court declared the fee void as beyond the City’s authority; the Indiana Supreme Court accepted transfer.

## Issues

1. Whether the requirements-based fee was an unauthorized municipal tax or a permissible charge for commercial use of municipal property (rights-of-way).
2. Whether, before the March 13, 1998 statutory amendment, the City had authority to demand compensation for private commercial use of rights-of-way.
3. Whether the March 13, 1998 amendment limited or preempted the City’s fee regime, and from what date.

## Decision

- The Indiana Supreme Court reversed in part the judgment declaring the fee entirely void.
- The Court held the City initially had authority to charge compensation for private, commercial use of its rights-of-way as municipal real estate, until the legislature limited that authority.
- The Court held that, after March 13, 1998, state law restricted municipal recovery to reasonably incurred rights-of-way management costs, barring enforcement of fees exceeding those costs going forward.
- The case was remanded for proceedings consistent with the City’s pre-amendment authority and the post-amendment statutory limitation.

## Legal Principles

- A municipality may act as a property owner and charge compensation for private, commercial use of municipal real estate, including rights-of-way, absent a contrary legislative restriction.
- A charge imposed for use of municipal property may be valid as a proprietary compensation mechanism even if it is not supportable as a tax.
- When the legislature enacts an express limitation on municipal compensation for rights-of-way (restricting it to reasonably incurred management costs), local ordinances authorizing broader payments must yield from the statute’s effective date.

## Conclusion

The court held that Gary could charge telecommunications providers compensation for commercial use of its rights-of-way before the legislature restricted that authority, but that the statutory amendment effective March 13, 1998 limited any municipal payments to reasonably incurred management costs, preventing enforcement of broader fees thereafter.


City of Gary, Ind. v. Ind. Bell Tel. Co., 732 N.E.2d 149 (Ind. 2000)