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THAFII?INGTON, SMITH & HARGROVE <br /> ATTORNEYS AT LAW <br /> RAL1:1(H1, NORTH CAROLINA <br /> CARLISLE W.HIQGDQ'8 <br /> 1 11387.10001 <br /> MAILING AODRE,A <br /> •1,HAROLD THARNOTON P.O.Box 1161 <br /> RI <br /> WADE M.S?1tTD <br /> RALEIGH.N.C:.27(.10:2 <br /> ROGER N',SMITH - <br /> WADE H.HAROROVR OFFH:FS <br /> GEORGE T.ROGISTER.JR. BOB FAYL�•ITEVILLE STREET MALI. <br /> CARLYN 0.POOLE RALEIGH.N.C.27001 <br /> RICHARD A.SCHWARTZ <br /> •JOHN R.EDWARDS <br /> MARK J.PRAK <br /> TELEPHONE <br /> DOUGLAS E.KINOSBEHY 1R/938:21-4711 <br /> ELIZABETH F.KUNR OLM - <br /> KIM C.WETHERILL TEI,E(;C)YIER <br /> ANN E.MAJESTIC <br /> (Gib)828-1383 <br /> RANDALL M.RODEN May 28, 19 8 7 <br /> BURTON CRAIGE <br /> MICHAEL CROWELL <br /> J.DAVID FARREN <br /> 0.DRYAN COLLINS..JR. <br /> C.ALLISON BROWN <br /> Geoffrey E. Gledhill, Esquire <br /> Coleman, Bernholz, Dickerson, <br /> Bernholz, Gledhill & Hargrave <br /> 110 Churton Street <br /> Hillsborough, North Carolina 27278 <br /> Dear Geof: <br /> I have enclosed a copy of the Court of Appeals <br /> decision that I mentioned today. I have not had a chance <br /> yet to check for a citation. As the decision itself <br /> indicates, the Lexington case involved the interpretation <br /> of a provision in "An Ordinance Providing For The Granting <br /> Of Franchises For The Operation And Maintenance Of Community <br /> Antenna Television Systems. " This Ordinance was incorporated <br /> in the subsequent franchise ordinance, which was then <br /> accepted by the cable company. That much of the case <br /> appears identical to the Orange County situation. <br /> The issue in the case was whether the franchise "tax" <br /> provision in the enabling ordinance required the cable <br /> operator to pay the tax on revenue from pay services like <br /> HBO. As I mentioned, the Court of Appeals analyzed the <br /> case in traditional contract terms and found, "based on <br /> the plain words of the ordinance, " that the franchise tax <br /> could not be imposed on revenues not included in the terms <br /> of the ordinance, "which was written into a contract with <br /> the defendant. " <br /> The Court of Appeals did not explicitly state that <br /> the City could not impose the tax by simply amending the <br /> ordinance to cover the service in question, but I believe <br /> a fair reading of the case is that the Court found that <br /> the service in question was not within the contemplation <br /> of the parties at the time the ordinance was incorporated <br /> into the franchise. <br />