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Rogue Valley Sewer Services v. City of Phoenix

Court of Appeals of Oregon

April 9, 2014

ROGUE VALLEY SEWER SERVICES, an Oregon municipality, Plaintiff-Appellant,
CITY OF PHOENIX, an Oregon municipality, Defendant-Respondent

Argued and Submitted September 28, 2012

Jackson County Circuit Court. 103450E2. G. Philip Arnold, Judge.

Tommy A. Brooks argued the cause for appellant. Clark I. Balfour, Carla Scott, and Cable Huston Benedict Haagensen & Lloyd LLP filed the opening brief. With him on the reply brief were Clark I. Balfour and Carla Scott.

Kurt H. Knudsen argued the cause and filed the brief for respondent.

Before Armstrong, Presiding Judge, and Duncan, Judge, and Brewer, Judge pro tempore.


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[262 Or.App. 185] ARMSTRONG, P. J.

At issue in this case is the validity of a City of Phoenix ordinance that imposes on Rogue Valley Sewer Services (RVS) a five percent fee on gross receipts that RVS collects from residents of the city for sewer services. RVS contends that the city is not authorized to charge the fee and seeks to enjoin the city from enforcing the ordinance. The trial court decided the issue on summary judgment and concluded that the city's ordinance was valid. RVS appeals, and we affirm.

The relevant facts are not disputed. RVS is a sanitary authority organized under ORS chapter 450. In 2004, RVS began providing sewer services to city residents pursuant to a contract with the city. See ORS 450.830 (" The authority may furnish sewage disposal service to areas outside the authority on a contract basis." ). In 2006, the city residents passed a ballot measure that, with RVS's approval, annexed the city into the boundaries of RVS for sewer services.

The city is a home-rule municipality governed by a charter enacted in 2009. Among other things, the charter grants the city the following authority:

" Section 4. Powers. The city has all powers that the constitutions, statutes, and

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common law of the United States and of this state now or hereafter expressly or impliedly grant or allow the city, as fully as though this charter specifically enumerated each of those powers.
" Section 5. Construction of Powers. The charter will be liberally construed so that the city may exercise fully all powers possible under this charter and under United States and Oregon law. All powers are continuing unless a specific grant of powers clearly indicates the contrary."

2009 Phoenix Charter, ch II, § § 4, 5.

In 2010, the city adopted ordinance 928, as amended by ordinance 931, which " imposes and levies an annual franchise fee in an amount equal to five percent of the annual gross revenue of RVS as defined herein. Such payment shall be in addition to taxes or fees, if any, owed to the city by RVS or that are imposed by law." Phoenix Municipal Code § 13.20.030. The ordinance defines " gross revenue" as " any [262 Or.App. 186] revenue * * * received by RVS from the operation of its business within the city limits of the city of Phoenix; provided, however, that such phrase shall not include [certain fees, debts, and other exclusions]." Id.

In the preamble to the adoption of ordinance 928, the city stated, among other things, that " it is the intent of the City to cover its full costs and the full impacts to its streets and rights of way in connection with the RVS sewerage system," that " the primary purpose of the collection of a franchise fee from RVS is to regulate and reimburse the City for its costs associated with RVS, and not to raise revenue," that " the intent of the City in enacting this ordinance is to allocate money collected from RVS only for costs and reimbursement connected with proper regulatory purposes," and that " there is a direct relationship between the fee charged and the burden produced by the fee payer, RVS." The preamble also stated that, in imposing the fee on RVS, the city relied on its implied authority to charge a franchise fee on a utility for operation in the city rights-of-way, " even absent an agreement between the City and the utility," and ORS 450.815(7), which gives RVS the authority to use city rights-of-way for utility purposes, subject to complying with conditions of consent imposed by the city.

RVS brought this action seeking a declaration that the city's ordinance is invalid and an injunction prohibiting the city from attempting to collect the five percent franchise fee. RVS and the city both moved for summary judgment. RVS argued that the city's authority to impose a franchise fee on RVS was preempted by Oregon law. Specifically, RVS argued that the imposition of the fee constituted an impermissible regulation of RVS's utility rates because RVS would be required to raise rates to cover the fee and because the ordinance is inconsistent with ORS 221.420, which permits local governments to levy franchise fees against certain utilities, but not a sanitary authority, for use of public rights-of-way. The city argued that it was authorized to impose the fee based on its authority as a home-rule municipality to collect a franchise fee from a utility using the city rights-of-way; ORS 450.815(7), which requires a sanitary authority to comply with a city's conditions of consent to use the city [262 Or.App. 187] rights-of-way; and the city's authority to impose conditions on a license to use the city rights-of-way.

The court granted the city's summary judgment motion and denied RVS's motion. In its order, the trial court framed the issue as " whether or not the City of Phoenix, Oregon, under its home rule charter can charge a franchise fee on sewer operations provide by [RVS]." The trial court concluded that " the analysis of the City of Phoenix in its motion and in its response to [RVS]'s motion is correct in that it has the authority to impose the fee."

Following entry of the trial court's order, RVS lodged an objection to the city's proposed judgment. RVS asserted that the trial court's order had not disposed of all the issues in the case because it had not decided whether the amount of the city's franchise fee was reasonable. The trial court rejected RVS's objection, concluding that RVS had not challenged the reasonableness of the fee in its complaint, nor in its motion for summary judgment. The court concluded:

" To be sure, in arguing the ordinance is too broad, RVS cited the amount of the

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fee, but any such argument is subsumed within the argument about the propriety of the ordinance (assuming [the city] had the authority to enact it), and the [c]ourt's decision upholding [the city]'s authority to impose the fee, the content of the ordinance, and the imposition of ...

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