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Deeming fee 'excessive,' county sues Oregon City

An ongoing disagreement between Oregon City, West Linn and Clackamas County regarding franchise fees took a dramatic turn last week, as Clackamas County’s Tri-City Service District filed a lawsuit against Oregon City.

The lawsuit, filed June 11 in the Oregon circuit court, alleges that new franchise fees leveled by Oregon City are unlawful forms of taxation from which the Tri-City Service District is exempt by Oregon law.

“Clackamas County believes Oregon City’s fee is excessive and represents an unreasonable burden for customers in the Tri-City Service District,” Clackamas County Administrator Donald Krupp said in a statement. “The county also believes Oregon City’s fee is legally questionable and is pursuing legal action against the city to eliminate or reduce the impact of the fee on district customers.”

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 a percentage of the gross revenue generated by those facilities — whichever is greater.

“The charges imposed on Tri-City ... bear no rational relationship to the costs that those Tri-City utility facilities which are located within, under, or above the city’s rights of way impose on (Oregon City),” Clackamas County attorney Stephen L. Madjour wrote in the complaint.

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 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.

The fees add up to an estimated $110,000 charged to West Linn.

The South Fork Water Board serves as a wholesale water provider for West Linn and Oregon City, while the Oregon City-based Tri-City Service District treats wastewater for West Linn, Oregon City and Gladstone.

In May, West Linn Mayor John Kovash joined with Gladstone Mayor Wade Byers and Clackamas County Commission Chair John Ludlow to co-sign a letter formally requesting that the Tri-City Service District fee either be significantly reduced or waived entirely. That request was denied May 22 in a response letter from Oregon City Mayor Doug Neeley.

“As in previous communications, no argument has been forthcoming that distinguishes the county or its Tri-City Service District from the many other right of way users in Oregon City, both private and public,” Neeley wrote in the letter. “The amount of the fee is clearly in line with common market rates charged by other cities throughout Oregon and in other parts of the country.”

Neeley also noted that the issue with right of way usage first came to light three years ago, when Clackamas County installed fiber optic cables in Oregon City without a franchise license.

“The unnecessary conflict that resulted ... highlighted a compelling need for change in Oregon City’s management of its right of way,” Neeley wrote.

The ordinance passed in November was meant to solve that problem, requiring franchise fees for any utility placed in city right of way. In his letter, Neeley pointed out that West Linn also charges outside entities for utility usage — including a neighboring city in Lake Oswego.

However, Jordan noted that West Linn’s protocol is significantly different.

“When you’re starting to charge another public body, that’s a different thing,” Jordan said. “They’re trying to compare this to the fee we’re charging Lake Oswego (for the Lake Oswego-Tigard Water Partnership project), but it’s not the same. Lake Oswego is installing a pipeline that’s double in size of the current one and will take up lots of public space.

“Plus, that was negotiated by both parties.”

As the lawsuit moves forward, West Linn also consulted this week with State Senator Richard Devlin and Rep. Julie Parrish (R-West Linn) regarding possible legislative options.



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