Northwest Natural Gas Co. v. City of Gresham
Northwest Natural Gas Co. v. City of Gresham
Opinion of the Court
Plaintiffs Northwest Natural Gas, Portland General Electric, and Rockwood Water People’s Utility District 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,” which is a condition that must be met for the statute to apply. 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
Under the ordinance, each utility licensee must pay a license fee:
“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.
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 city was prohibited from charging more than the five percent tax authorized under that statute.
The court then entered a general declaratory judgment for plaintiffs, as follows:
“1. With respect to Plaintiffs’ claims for declaratory relief, the Court declares that (i) Defendant City of Gresham’s Utility License Fee is a privilege tax within the meaning of ORS 221.450; and (ii) the City of Gresham’s Resolution 3056, to the extent it purports to increase its Utility License Fee owed by Plaintiffs from 5% to 7% of gross revenue, violates ORS 221.450 and is void, unlawful, and unenforceable;
“2. The Court dismisses Defendant City of Gresham’s claims for declaratory relief and costs with prejudice; and
“3. The Court awards Plaintiffs their costs and disbursements in an amount to be determined by supplemental judgment in accordance with ORCP 68.”
The city appeals the general judgment and assigns as error both the grant of plaintiffs’ motions for summary judgment and the denial of its motion for summary judgment.
When reviewing the validity of an enactment by a home-rule municipality, such as the city, we follow the methodology set out in LaGrande /Astoria v. PERB, 281 Or 137, 142, 576 P2d 1204, adh’d to on recons, 284 Or 173, 586 P2d 765 (1978). In LaGrande /Astoria, the Oregon Supreme Court held that “the validity of local action depends, first, on whether it is authorized by the local charter or by a statute ***; second, on whether it contravenes state or federal law.” See also AT&T Communications v. City of Eugene, 177 Or App 379, 389, 35 P3d 1029 (2001), rev den, 334 Or 491 (2002) (“Whether a city has the authority to impose a tax *** depends on two issues: First, whether the charter of the city confers the authority to impose the tax; and second, whether that authority has been preempted by state or federal law.”). Here, plaintiffs do not dispute that the city could enact its resolution and impose its increased fee pursuant to the broad, general powers granted to the city by its home-rule charter.
A brief discussion of the historical development of ORS 221.450, as well as of ORS 221.420, is a useful starting point. In 1911, in what would eventually become ORS 221.420, the legislature enacted a statute that expressly gave municipalities the power to regulate utilities. See Or Laws 1911, ch 279, § 61. In 1931, the legislature amended the utility-regulation statutes, including the predecessor to ORS 221.420. See Or Laws 1931, ch 103. The 1931 version of the predecessor to ORS 221.420 provided, as relevant:
“Every city and town in Oregon shall have power: * * * To determine by contract or prescribe by ordinance or otherwise, the quality and character of each kind of product or service to be furnished or rendered by any public utility, furnishing any product or service within such city or town, and all other terms and conditions upon which any public utility may be permitted to occupy the streets, highways or other public property within such city or town, and to exclude or eject any public utility therefrom.”
Or Laws 1931, ch 103, § 8. In its current form, ORS 221.420 continues to provide that cities have the power to “[dieter-mine by contract or prescribe by ordinance or otherwise,
Also in 1931, by a separate bill, the legislature enacted the predecessor to ORS 221.450. See Or Laws 1931, ch 234, § 1. That version of the statute provided, as relevant:
“The city council or other governing body of every incorporated city and town in Oregon hereby is authorized to levy and collect from every privately owned public utility operating within such city or town without a franchise, for the period of one year, a privilege tax for the use of the public streets, alleys and highways in such city or town, in an amount of not less than 5 per cent annually, of the gross earning revenue of such utility currently earned within the boundary of such city or town.”
The legislature amended that statute in 1933 in both its regular and second special sessions to reduce from one year to 30 days the period in which a utility that operates without a franchise becomes subject to the statute, and to change the five percent tax from a floor to a ceiling. Or Laws 1933, ch 466, § 1; Or Laws 1933, ch 24, § 1 (2d Spec Sess). Following those amendments, the statute provided:
“The city council or other governing body of every incorporated city and town in Oregon hereby is authorized to levy and collect from every privately owned public utility operating for a period of 30 days within such city or town without a franchise from such city or town and actually using the streets, alleys and/or highways in such city or town for other than travel on such streets or highways, a privilege tax for the use of said public streets, alleys and/or highways in such city or town in an amount not exceeding five per cent of the gross revenues of such utility concurrently earned within the boundary of such city or town * * *.”
Or Laws 1933, ch 24, § 1 (2d Spec Sess). Since 1933, the statute has undergone further minor amendments, and now provides, as relevant:
*42 “[T]he city council or other governing body of every incorporated city may levy and collect a privilege tax from Oregon Community Power and from every electric cooperative, people’s utility district, privately owned public utility, telecommunications carrier as defined in ORS 133.721 or heating company. The privilege tax may be collected only if the entity is operating for a period of 30 days within the city without a franchise from the city and actually using the streets, alleys or highways, or all of them, in such city for other than travel on such streets or highways. The privilege tax shall be for the use of those public streets, alleys or highways, or all of them, in such city in an amount not exceeding five percent of the gross revenues of the cooperative, utility, district or company currently earned within the boundary of the city.”
ORS 221.450. Although ORS 221.450 has evolved over time, it consistently has applied only to utilities operating “without a franchise.”
The parties appear to have assumed in this litigation that a license granted to a utility under the city’s Utility Licensing Ordinance is not a “franchise” and, thus, that plaintiffs are operating “without a franchise from the city” for purposes of ORS 221.450. The parties’ arguments on appeal, as below, focused on whether the city’s fee is a “privilege tax” limited by ORS 221.450 to five percent of the utilities’ respective gross revenues. Because we have an independent duty to correctly construe and apply statutes,
The city asserts in its supplemental memorandum that its utility-licensing scheme has the same characteristics as a franchise, in that it establishes the terms and conditions by which a utility may occupy its streets, and thus should be treated as a franchise from the city for purposes of ORS 221.450. The city urges us to construe ORS 221.450 to apply only when a utility does not have the city’s permission to use the public rights-of-way, either because the city and utility cannot agree on franchise terms or because the city elects not to set terms and conditions by ordinance. However, in making that argument, the city posits that a “franchise” is created by contract, whereas a “license” is created by ordinance, such that those two terms maintain a distinct meaning — viz., one creates a contract between the parties and the other does not.
Plaintiffs, for their part, contend that a franchise can be created only through a negotiated contract between the parties. See Rose City Transit v. City of Portland, 18 Or App 369, 381, 525 P2d 1325 (1974), aff’d as modified, 271 Or 588, 533 P2d 339 (1975) (quoting with approval from 12 McQuillin Municipal Corporations § 34.06 (3d ed 1970), that, when the right to use the streets is granted and accepted, the conditions of the grant become binding, “the same as the terms of any other contract”). Because a franchise creates a binding contract, plaintiffs conversely reason that a franchise can be created only by a negotiated contract. Plaintiffs assert that, in contrast, the city’s licensing scheme is unilaterally imposed on plaintiffs by ordinance and is subject to unilateral modification by the city. Thus, they conclude that a utility license such as the city’s cannot be a franchise under ORS 221.450. Additionally, plaintiffs urge us to reject the conclusion that a utility license and a franchise are equivalent because that conclusion could trigger unintended
Before turning to our analysis, we note that the trial court touched in its letter opinion on the term “without a franchise from the city,” using it to inform its analysis of what the legislature meant by the term “privilege tax.” In doing so, the court appeared to conclude that a “franchise,” as that term is used in ORS 221.450, could exist only as a result of a “franchise agreement,” that is, a fully negotiated and executed contract between the city and the utility that the utility is free to reject. Thus, the trial court took the same view of the statute as do plaintiffs.
Because the term that we must construe — “without a franchise” — was enacted in 1931 and has not been meaningfully amended since then, we must determine the 1931 legislature’s intention when it enacted the statute. See, e.g., Blanchana, LLC v. Bureau of Labor and Industries, 354 Or 676, 688, 318 P3d 735 (2014). “[I]n construing statutes that were enacted many years ago, we consult dictionaries that were in use at the time. Moreover, if a word has a well-defined legal meaning, we give the word that meaning in construing the statute.” Id. (citations omitted). We also presume “that the legislature enacts statutes in light of existing judicial decisions that have a direct bearing upon those statutes.” Weber and Weber, 337 Or 55, 67, 91 P3d 706 (2004).
The term “franchise” had a well-established legal meaning in 1931. “[Franchises are special privileges conferred by the government on individuals, and which do not belong to the citizens of the country generally of common right.” Elliott v. City of Eugene et al., 135 Or 108, 113, 294 P 358 (1930).
In Western Union, a case decided in 1917, the Oregon Supreme Court addressed whether a city could levy a tax against the special franchise that the city had granted to Western Union to occupy the public rights-of-way in the city. Before it could address that question, the court had to decide whether the grant to Western Union was a franchise or a license. By way of answer, the court adopted the general rule that “a grant by a municipality to a corporation of the right to use the streets for water, gas, transportation, or other public service purpose * * * constitute [s] a franchise and not a mere license.” 83 Or at 637-38. The court also announced the corollary principle that “a permission given by municipal ordinance to a private corporation to exercise some special privilege within the city, pursuant to an express delegation of legislative authority, is a grant by the state whereby the right conferred becomes a franchise and not a license.” Id. at 638.
Similarly, in Elliot, a question before the court was whether the city’s contract with Bray Bros., which gave Bray Bros, the exclusive right to collect and haul garbage in the city for three years, was a franchise. The court concluded that the contract was a franchise because “[t]he hauling of garbage is everywhere regarded as peculiarly subject to
With regard to utilities occupying the public rights-of-way in a city pursuant to city permission, it was well understood by 1931 that such permission could only be by franchise from the city (as delegated to the city from the state).
As set out above, ORS 221.420 has provided since 1931 that cities have the power to “determine by contract or prescribe by ordinance or otherwise” the terms and conditions under which public utilities may occupy the streets, highways, and other public property within a city. Or Laws 1931, ch 103, § 8; ORS 221.420. If the trial court were correct that the legislature intended that a franchise could be
We recognize that the Supreme Court said in a footnote in US West Communications v. City of Eugene, 336 Or 181, 81 P3d 702 (2003), that,
“[i]f certain conditions are met, a city either may enter into a franchise agreement that determines the ‘charges and fees upon which any public utility * * * may be permitted to occupy the streets, highways or other public property within such city,’ ORS 221.420(2), or may impose a privilege tax ‘for the [utility’s] use of [the] streets, alleys or highways’ within the city, ORS 221.450.”
Id. at 183 n 1 (alterations in original). The court’s footnote suggests that the statutes operate as plaintiffs contend, that is, that a franchise can be created only by a “franchise agreement,” and, otherwise, the utility is operating “without a franchise” and is subject to the terms of ORS 221.450.
However, that statement in US West is inapplicable dicta because the case was not concerned with the construction or application of ORS 221.420 or ORS 221.450 but, rather, with the construction of a different statute, ORS 221.515, in the context of a telecommunications provider that was indisputably operating under a negotiated franchise agreement with the city. See 336 Or at 183-84. In making that statement, the court had not sought to construe ORS 221.450 or to determine the meaning of the term “franchise” in it. Moreover, in Northwest Natural Gas Co. v.
We turn to whether plaintiffs were operating “without a franchise from the city” for purposes of ORS 221.450, making the statute applicable to the city’s resolution that increased its utility-license fee to seven percent. Under the city’s Utility Licensing Ordinance, each plaintiff is required to obtain a license from the city to occupy the public rights-of-way in the city. GRC 6.30.070. Each plaintiff applied for a license and then accepted and signed the terms of the license granted by the city. Under the Utility Licensing Ordinance, plaintiffs could negotiate with the city for terms other than the standard terms specified in the ordinance, id., and some of plaintiffs’ licenses did contain such different terms.
The licenses issued by the city to each plaintiff under the city’s Utility Licensing Ordinance are franchises, as that term is used in ORS 221.450. It is by those licenses that the city granted to each plaintiff the special privilege of occupying the public rights-of-way within the city and set the terms, conditions, charges, and fees with which each utility is required to comply in exchange for that privilege. Because plaintiffs were operating under a franchise from the city, through the city’s Utility Licensing Ordinance, ORS 221.450 does not apply and cannot preempt the city’s resolution increasing its utility-license fee to seven percent.
Under a city’s broad home-rule authority, a city can choose the manner in which it requires a utility to obtain its permission — viz., its franchise — to occupy the public rights-of-way, and that authority includes the authority to require the utility to pay fees, negotiated or not, unless preempted by state or federal law. Here, ORS 221.450 has no application because the plaintiff utilities asked for and obtained a franchise from the city.
Reversed and remanded.
ORS 221.450 provides, as relevant:
“[T]he city council or other governing body of every incorporated city may levy and collect a privilege tax from Oregon Community Power and from every electric cooperative, people’s utility district, privately owned public*38 utility, telecommunications carrier as defined in ORS 133.721 or heating company. The privilege tax may be collected only if the entity is operating for a period of 30 days within the city without a franchise from the city and actually using the streets, alleys or highways, or all of them, in such city for other than travel on such streets or highways. The privilege tax shall be for the use of those public streets, alleys or highways, or all of them, in such city in an amount not exceeding five percent of the gross revenues of the cooperative, utility, district or company currently earned within the boundary of the city.”
As the judgment reflects, the city sought a declaration on the validity of the city’s fee, which the judgment identifies as a claim that the court dismissed. Apart from the conclusion that the court erred in entering the declaratory judgment that it did, we note that dismissal of the city’s claim for declaratory relief
On appeal, Rockwood does dispute that that principle applies to the city’s authority to impose a fee against people’s utility districts, such as Rockwood, and does so by reprising its alternative argument that the trial court did not reach. Essentially, Rockwood contends that, because Rockwood is a municipal corporation, the city must have a specific and express statutory grant of authority to impose a fee against it. We recently rejected the identical argument in Rogue Valley Sewer Services v. City of Phoenix, 262 Or App 183, 190-91, 329 P3d 1 (2014), concluding that a city’s home-rule authority to impose taxes or fees on a utility is not affected by the utility’s status as a municipal corporation. Accordingly, we reject Rockwood’s alternative argument without further discussion.
We recognize that the current version of ORS 221.450 differs somewhat from the earlier versions. In 2007, the legislature split the pertinent text of the statute, which was previously á single, run-on sentence, into three separate sentences, which, with proper grammar, required additional minor changes to the text. See Or Laws 2007, ch 807, § 41. The 2007 amendment was part of the Senate amendments to the bill that created the Oregon Community Power statutes. See Senate Amendments to Senate Bill 443, Committee on Business, Transportation, and Workforce Development (May 21, 2007). The Senate amendments to ORS 221.450 were enacted without explanation or comment in the legislative history and, based on the bill as a whole, appear to have been made solely to include Oregon Community Power as a listed utility. “The fact that the legislature altered the wording of a statute does not always mean that it intended to alter the substantive effect of the statute.” Pete’s Mountain Homeowners v. Ore. Water Resources, 236 Or App 507, 521, 238 P3d 395 (2010); see also Jones v. General Motors Corp., 325 Or 404, 419, 939 P2d 608 (1997) (legislative alteration of the wording of ORCP 47 did not alter the substantive effect of the rule). Based on our review of the text of the 2007 changes, in context, along with the legislative history of the bill enacting them, we conclude that the legislature did not intend to alter the substantive effect of the statute.
See also Oregon v. Portland Gen. Elec. Co., 52 Or 502, 526, 95 P 722, on reh’g, 98 P 160 (1908) (“A franchise is (1) an incorporeal hereditament; and (2) a privilege or authority vested in certain persons by grant of the State to exercise powers to do and perform acts which, without such grant, they could not do or perform.”); Western Union Tel. Co. v. Hurlburt, 83 Or 633, 638, 163 P 1170 (1917) (“[A] permission given by municipal ordinance to a private corporation to exercise some special privilege within the city, pursuant to an express delegation of legislative authority, is a grant by the state whereby the right conferred becomes a franchise and not a license.”); Whitbeck v. Funk, 140 Or 70, 73-74, 12 P2d 1019 (1932) (“A franchise is a special privilege granted by the government to a person
Also demonstrating that principle is the later case of Anthony et al. v. Veatch et al., 189 Or 462, 220 P2d 493, on reh’g, 221 P2d 575 (1950). There, the court relied on Elliot to conclude that the state requirement to obtain fixed-gear fishing licenses did not confer a franchise on the license holder because the right to fish is “one common to all citizens of Oregon.” Id. at 477-78.
We note that a city could determine that its permission will not be required for a utility to operate within the city’s rights-of-way when the utility has obtained operating authority from another governmental source, such as the state. Operating in that manner could be preferable for cities that do not have the resources or desire to create and enforce a regulatory scheme for utilities operating within their rights-of-way. In such cases, a utility would be operating without a franchise from the city and, hence, would be subject to a privilege tax imposed under ORS 221.450.
Reference
- Full Case Name
- NORTHWEST NATURAL GAS COMPANY, an Oregon corporation and Portland General Electric Company, an Oregon corporation, Plaintiffs-Respondents, and ROCKWOOD WATER PEOPLE'S UTILITY DISTRICT, Intervenor-Respondent v. CITY OF GRESHAM, a municipality and public body within the state of Oregon
- Cited By
- 3 cases
- Status
- Published