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Northwest Natural Gas Co. v. City of Gresham

Court of Appeals of Oregon

July 2, 2014

NORTHWEST NATURAL GAS COMPANY, an Oregon corporation; and PORTLAND GENERAL ELECTRIC COMPANY, an Oregon corporation, Plaintiffs-Respondents,
CITY OF GRESHAM, a municipality and public body within the state of Oregon, Defendant-Appellant and ROCKWOOD WATER PEOPLE'S UTILITY DISTRICT, Intervenor-Respondent,

Argued and Submitted January 14, 2013.

Multnomah County Circuit Court. 110708422. Stephen K. Bushong, Judge.

David R. Ris argued the cause and filed the briefs for appellant.

Jeffrey G. Condit argued the cause for respondents Northwest Natural Gas Company and Portland General Electric Company. With him on the brief was Miller Nash LLP.

Casey M. Nokes argued the cause for respondent Rockwood Water People's Utility District. With him on the brief were Clark I. Balfour, Jon W. Monson, and Cable Huston Benedict Haagensen & Lloyd LLP.

Before Armstrong, Presiding Judge, and Hadlock, Judge, and Egan, Judge.


Page 66

[264 Or.App. 36] ARMSTRONG, P. J.

Plaintiffs Northwest Natural Gas (NW Natural), Portland General Electric (PGE), and Rockwood Water People's Utility District (Rockwood) brought this declaratory relief action challenging a City of Gresham resolution that increased plaintiffs' utility-license fees from five percent to seven percent of the gross revenue that plaintiffs receive from their Gresham operations. Plaintiffs contended that the city could not impose the increased fee because ORS 221.450 preempted the city's authority to charge a fee of more than five percent. The city responded that the statute did not apply because the ordinance imposed a utility-license fee and not a " privilege tax," as the latter term is used in ORS 221.450. On cross-motions for summary judgment, the trial court concluded that the statute did apply and declared the city's resolution void and unenforceable. On appeal, we conclude that the city's fee increase was not preempted by ORS 221.450 because plaintiffs are not operating " without a franchise from the city," as that phrase is used in the statute. Accordingly, we reverse and remand.

The case was litigated below on stipulated facts and exhibits, from which we relate the following. The city is a home-rule municipality, which, under its charter, " has all powers [that] the constitution, statutes, and common law of the United States and of this state expressly and impliedly grant or allow municipalities as fully as though this charter specifically enumerated each of those powers." Gresham Charter of 1978, ch II, § 5.

In 2001, the city enacted ordinances 1523 and 1524, which established the city's Utility Licensing Ordinance. See City of Gresham Revised Code (GRC), arts 6.30, 6.35. The city's stated purposes for the ordinance are, among other things, to permit and regulate reasonable access to the public rights-of-way by entities providing utility services in the city and to assure that the city is fairly and reasonably compensated for permitting that use. GRC 6.30.020. All public and private utilities operating within the city that occupy the public rights-of-way are required to obtain a license from the city, and, unless otherwise specified, a license has a term of 10 years. GRC 6.30.070. The ordinance [264 Or.App. 37] also sets out the terms under which a utility may operate in the public rights-of-way, including terms regulating the location, construction, relocation, and removal of utility facilities; requiring permits and fees for work in the rights-of-way; and covering other general regulatory matters, such as indemnity, mapping, and enforcement. See generally GRC arts 6.30, 6.35.

Under the ordinance, each utility licensee must pay a license fee:

Page 67

" Each license granted pursuant to this article shall be subject to the condition that the licensee pays a license fee in an amount or by a method or methods established from time to time by council resolution[,] which may include payment of a minimum license fee. The city may elect in the resolution establishing the license fee to dedicate all or a portion of the license fee to specific funds, projects or programs of the city."

GRC 6.30.110(1)(a). In accordance with that provision, the city passed a resolution in 2001 establishing a utility-license fee of five percent of utility gross revenues, but it exempted city-owned and special-district-owned utilities from paying the fee. By resolutions passed in 2002 and 2003, the city made the five percent fee applicable to user fees collected by city-owned utilities and Rockwood.

The city passed the resolution at issue in this case in 2011. That resolution increased the utility-license fee from five percent to seven percent. Before imposing the fee, the city notified plaintiffs of the increase and told them that the city had increased the fee " [t]o avoid further service reductions in the police and fire departments."

Plaintiffs, all of which were operating under licenses from the city, brought this action challenging the city's authority to increase the utility-license fee from five to seven percent. Plaintiffs argued that the city's resolution is void because ORS 221.450 limits the city to charging a maximum fee of five percent.[1] Rockwood also argued, in the alternative, [264 Or.App. 38] that the city could not charge its increased fee against Rockwood because, as a municipal corporation, Rockwood cannot be taxed by the city without express state authorization to do that.

On the parties' cross-motions for summary judgment, the trial court agreed with plaintiffs that the city's fee increase was preempted by ORS 221.450, and, consequently, the court did not reach Rockwood's alternate argument. In a lengthy letter opinion, the court concluded that the city's utility-license fee was a privilege tax under ORS 221.450, and, accordingly, the ...

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