DALLAS, Texas — The cities of Tyler and Nacogdoches are among 25 Texas cities suing three streaming services for accusations of not paying millions in municipal franchise fees dating back to 2007.
The lawsuit, which is filed in Dallas County, accuses Netflix, Hulu and Disney of not paying annual franchise fees that are required by the Texas Public Utility Regulatory Act and used to fund basic city services, according to a news release from the city of Nacogdoches.
Other cities that have joined the lawsuit include Abilene, Allen, Amarillo, Arlington, Austin, Beaumont, Carrollton, Dallas, Denton, Frisco, Fort Worth, Garland, Grand Prairie, Houston, Irving, Lewisville, McKinney, Mesquite, Pearland, Plano, Rowlett, Sugar Land and Waco, the statement read.
PURA requires that a video service provider pay a Texas municipality a 5% franchise fee, if the video service’s programming is delivered using wireline facilities located at least in part in the public right of way, the city of Nacogdoches said.
A public right of way includes utility poles over the streets or sidewalks or beneath the roads. These fees fund city services like police, fire protection, libraries and road repairs, the release stated.
Steven Kirkland, city attorney for the city of Nacogdoches, said Nacogdoches is seeking reimbursement and interest since Disney, Hulu, and Netflix started streaming their platforms in Texas in 2007, 2011, and 2019, respectively.
“With this lawsuit, we hope to ensure streaming video companies’ compliance with their PURA obligations moving forward and also recoup unpaid franchise fees from the Disney, Hulu, and Netflix streaming services as follow-on relief,” Kirkland said. “If streaming companies refuse to pay these fees, the city has to cut services or seek alternate sources of revenue. We have an obligation to our residents to ensure that these companies comply with state law and pay what is owed to the city.”
Dallas-based McKool Smith is serving co-counsel for the lawsuit with Austin-based Ashcroft Sutton Reyes and St. Louis-based Korein Tillery. Other cities are expected to join the litigation, the Nacogdoches statement read.
“Disney, Hulu and Netflix have long withheld statutorily required payments to cities throughout Texas, depriving them of fees that help fund essential city services,” said McKool Smith principal Steven Wolens said. “This case was filed on behalf of our municipal clients to ensure future compliance with PURA and recoup significant fees owed by some of the nation’s largest streaming services.”
CBS19 has reached out to the city of Tyler for comment.
