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No easy resolution in sight for right-of-way fee dispute with OC

As county lawsuit continues, WL probing for possible legislative action


In the eyes of Oregon City Mayor Doug Neeley, it’s a long-overdue acknowledgment of service and boundaries. For West Linn and other members of Clackamas County’s Tri-City Service District, it’s nothing less than an unlawful tax.

Such is the divide between both sides as the debate continues over new franchise fees instituted by Oregon City for right of way usage. As a lawsuit filed by the Tri-City Service District presses forward, and as a state representative considers legislative action, a compromise does not appear to be imminent.

“I hope we can work it out,” Neeley said. “But it might end up in litigation.”

By way of an ordinance passed in November, Oregon City will now charge the Tri-City Service District and other individual cities based on either the total linear feet of utility facilities located on Oregon City right of way or six percent of the gross revenue generated by those facilities — whichever is greater. The Tri-City Service District includes West Linn, Oregon City and Gladstone.

The fees went into effect 30 days after being adopted by the Oregon City Commission.

As a result of the new ordinance, West Linn is on the hook for a share of the $191,000 Tri-City Service District fee as well as 40 percent of the $85,000 fee owed by the South Fork Water Board, which is partly owned by the city.

The Tri-City Service District’s water pollution control plant is located in Oregon City, and cleans more than seven million gallons of wastewater daily. In an April 2 resolution, Oregon City pledged to use the new revenues exclusively for “maintenance and improvements to the city’s wastewater collection system ... that directly or indirectly benefit the Tri-City Sewer Service District.”

The new fees would also require West Linn to pay $5,000 annually for the use of a water transmission line located on Oregon City right of way. The pipeline was first installed in 1972, according to City Manager Chris Jordan.

In total, the fees add up to an estimated $110,000 charged to West Linn. According to West Linn City Manager Chris Jordan, the city is required to make the $5,000 payment in quarterly installments, and has submitted two payments so far in 2014.

“We are being charged a tax, and we didn’t have a say in if we agree with the tax,” West Linn City Councilor Thomas Frank said. “I don’t have a problem with having two parties come together and decide something like that. But they voted unilaterally to do this, where we weren’t part of the discussion.”

In June, the Tri-City Service District filed a lawsuit in the Oregon circuit court, alleging that new franchise fees are unlawful forms of taxation from which the district is exempt by Oregon law. As part of its 2014-15 budget effective July 1, the Tri-City Service District also voted to assess a higher wastewater treatment service rate to Oregon City taxpayers to make up for the new franchise fees.

“The Board of County Commissioners made the decision that Oregon City residents will pay the whole fee,” Neeley said. “That’s not acceptable to us. We accept equity ... services are provided to the three cities, and we feel there’s got to be an equitable distribution of those fees to those entities.”

“Oregon City is concerned with Tri-City’s methodology used to determine the rate,” Oregon City’s Right of Way and Contracts Coordinator Lance Powlison said. “With the pending litigation, I cannot be specific on what, if any, action will be taken by the city regarding the rate.”

For Neeley, the franchise fees are better described as long overdue rent payments, rather than taxes.

“Let’s say I’ve got a friend, and I’ve rented to him for several years without him paying rent,” Neeley said. “I say, ‘Well, we can’t do that anymore. You’re going to have to pay rent.’ I can do that. It’s the same situation.”

Frank understands that logic — to a degree. “The other option is the lineal foot model — we would have paid $15,000 under that model,” Frank said. “I would have been fine with that ... within the right of way, they have maintenance to do, so that’s fine.”

The much higher $110,000 figure for West Linn comes from Oregon City’s decision to charge based on gross revenue generated by the right of way facilities.

“In a bigger perspective, this really does set a precedent for the state,” Frank said. “There are towns and cities all over the state that use a neighbor’s right of way. To have a city come in and unilaterally make this change sets a bad precedent for the state.”

In response, Neeley pointed to a 2012 case in the Jackson County Circuit Court, during which the court ruled in favor of the City of Phoenix and found that it was within the city’s rights to charge a franchise fee to Rogue Valley Sewer Services in exchange for right of way usage. The court cited Oregon’s “home rule” charter, which grants cities an authority independent of state law.

In a May 22 letter to representatives from Clackamas County, West Linn and Gladstone, Neeley wrote, “I cannot understand how the county’s view of Oregon City’s home-rule authority could have diminished so quickly and so drastically.”

West Linn has engaged the League of Oregon Cities on the issue, but Frank said “so far they have taken a neutral stand on it.”

State Rep. Julie Parrish (R-West Linn), on the other hand, expressed concern about the issue and said there may be legislative action further down the line.

“I am working with the city of West Linn on this issue and have committed to a legislative solution if we need one,” Parrish said. “Ultimately, I think we need to preserve relationships for our neighboring cities, but arbitrary fees raised from one municipality to the other without consideration of what that does elsewhere in the system is a problem.”

Parrish said she plans to meet with Oregon City officials later this month, and that she is “interested in hearing their concerns.”

“We’re all in this together,” Parrish said, “and ultimately, (we) need to give the best accountability we can to taxpayers on both sides of the river.”


By Patrick Malee
Reporter
503-636-1281 ex
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