Rogue Valley Sewer Services v. City of Phoenix

No. 25 July 16, 2015 437
IN THE SUPREME COURT OF THE
STATE OF OREGON
ROGUE VALLEY SEWER SERVICES,
an Oregon municipality,
Petitioner on Review,
v.
CITY OF PHOENIX,
an Oregon municipality,
Respondent on Review.
(CC 103450E2; CA A148968; SC S062277)
On review from the Court of Appeals.*
Argued and submitted February 15, 2015.
Tommy A. Brooks, Cable Huston, LLP, Portland, argued
the cause and filed the briefs for petitioner on review. With
him on the brief were Casey M. Nokes and Clark I. Balfour.
J. Ryan Kirchoff, James Holmbeck Kirchoff, LLC, Grants
Pass, argued the cause and filed the brief for respondent
on review. With him on the brief was Kurt H. Knudsen,
Jacksonville.
C. Robert Steringer, Harrang Long Gary Rudnick P.C.,
Portland, filed the brief for amici curiae Clackamas River
Water and Special Districts Association of Oregon.
Harry Auerbach, Chief Deputy City Attorney, Portland,
argued the cause for amicus curiae League of Oregon Cities.
Chad A. Jacobs, Beery, Elsner & Hammond, LLP, Portland,
filed the brief for amicus curiae League of Oregon Cities.
With him on the brief were Harry Auerbach, Portland, and
Sean E. O’Day, Salem.
H. M. Zamudio, Huycke O’Connor Jarvis, LLP., Medford,
filed the brief for amicus curiae City of Central Point.
______________
*  Appeal from Jackson County Circuit Court, G. Philip Arnold, Judge. 262
Or App 183, 329 P3d 1 (2014).
438 Rogue Valley Sewer Services v. City of Phoenix
Before Balmer, Chief Justice, and Kistler, Walters,
Linder, Landau, and Baldwin, Justices,**
BALMER, C. J.
The decision of the Court of Appeals and the judgment of
the circuit court are affirmed.
Case Summary: The City of Phoenix, a home-rule city, passed an ordinance
imposing a five-percent franchise fee on Rogue Valley Sewer Services (RVS). The
trial court ruled that the ordinance was valid, and the Court of Appeals affirmed.
Held: (1) The ordinance provided for a fee, rather than a tax, and therefore any
principle forbidding intergovernmental taxation did not apply; (2) RVS’s status
as a type of local government under Oregon law did not prevent the city from
passing the ordinance, because the ordinance did not impose a duty on or impair
the power of another governmental entity; (3) applying the normal home-rule
analysis, the ordinance was authorized by the city charter and not preempted by
state statute; and (4) RVS failed to properly raise the issue of the reasonableness
of the fee.
The decision of the Court of Appeals and the judgment of the circuit court
are affirmed.
______________
**  Brewer, J., did not participate in the consideration or decision of this case.
Cite as 357 Or 437 (2015) 439
BALMER, C. J.
In this declaratory judgment action, we consider
whether a home-rule city can impose a five-percent fran-
chise fee on a sanitary authority with overlapping jurisdic-
tion. The trial court concluded that the city had authority to
impose the fee at issue in this case, but declined to reach an
additional question whether the amount of the fee was rea-
sonable, because that issue was not presented by the plead-
ings. The Court of Appeals affirmed, concluding that the
city had authority to enact the ordinance providing for the
fee and that the sanitary authority’s argument about rea-
sonableness was unpreserved. Rogue Valley Sewer Services
v. City of Phoenix, 262 Or App 183, 202, 329 P3d 1 (2014).
On review, we conclude that the home-rule doctrine is the
proper framework for analyzing the fee at issue in this case
and that, under that framework, the imposition of the fee
was within the authority granted to the city by its charter
and was not preempted by state law. We also conclude that
the sanitary authority failed to raise the issue of the reason-
ableness. We therefore affirm.
I. BACKGROUND
Rogue Valley Sewer Services (RVS) owns, operates,
and manages equipment for the transmission of sewage. As
a “sanitary authority” organized under ORS chapter 450,
RVS is a type of local government entity called a local service
district. See ORS 174.116(2)(r) (“[A]s used in the statutes
of this state[,] ‘local service district’ [includes a] sanitary
authority * * * organized under ORS 450.600 to 450.989.”).
Local service districts are municipal corporations and local
governments. See ORS 198.605 (“Local service districts, as
defined by ORS 174.116, are municipal corporations.”); ORS
174.116(1)(a) (“[A]s used in the statutes of this state[,] ‘local
government’ means all cities, counties and local service dis-
tricts located in this state[.]”).
Since 2004, RVS has provided sewer services to res-
idents of the City of Phoenix (city)—also a local government
under Oregon law, ORS 174.116(1)(a)—although the rela-
tionship between RVS and the city has changed over time. In
2004, the city and RVS entered into an intergovernmental
440 Rogue Valley Sewer Services v. City of Phoenix
agreement that established the services that RVS would
provide and the rates that RVS would charge. At that time,
the city was not within the political boundaries of RVS. RVS
notes that, under that 2004 contract, it had the right—but
not the obligation—to use the city’s facilities to provide
sewer services.
In 2006, a ballot measure asked voters of the city
whether the city should be annexed into the service area of
RVS. The ballot indicated to voters that the City Council
and the RVS Board of Directors had already “unanimously
adopted resolutions supporting this annexation” and that
“service rates will not be increased as a result of this annex-
ation.” (Emphasis in original, underscoring omitted.) The
voters’ pamphlet statements with respect to the ballot mea-
sure did not mention whether the city would or could impose
a franchise fee or tax on RVS. The residents of the city voted
to annex the city into the service area of RVS. As a result,
RVS became obligated to provide sewer services to the resi-
dents of the city because, for the purposes of sewer services,
the residents were now within RVS’s jurisdiction.
In 2009, the city held a special election, and the
voters approved a home-rule city charter. The charter pro-
vides that the city “has all powers that the constitutions,
statutes, and common law of the United States and of this
state now or hereafter expressly or impliedly grant or allow,”
and that the charter is to “be liberally construed so the city
may exercise fully all powers possible under this charter
and under United States and Oregon law.” City of Phoenix
Charter, § 4-5.
In 2010, the city passed Ordinance No. 928 (the
ordinance) imposing a “franchise fee in an amount equal to
five percent (5%) of the annual Gross Revenue of RVS * * *
in addition to taxes or fees, if any, owed to the City.”1 The
1
Ordinance No. 928 defines “Gross Revenue” as “any revenue, as determined
in accordance with generally accepted accounting principles, received by RVS[ ]
from the operation of its business,” with a few items of revenue excluded. Later,
in 2010, to “clarify an issue that has been raised in pending litigation between
RVS[ ] and the City,” the city modified the ordinance to clarify that the fee is
applicable solely to gross revenue “received by RVS[ ] from the operation of its
business within the City limits.” Ordinance No. 931, Sept 7, 2010. For clarity, we
refer to “the ordinance,” although both Ordinance No. 928 and Ordinance No. 931
are at issue in this case.
Cite as 357 Or 437 (2015) 441
ordinance directed RVS to pay the fee on a monthly basis
starting the first month after adoption of the ordinance.
The ordinance declares 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.” The ordinance elaborates that it
was passed for the purposes of “maintenance and operation
of the public rights of way” and “recoupment of the full costs
and full impacts associated with the use, occupation, and
other activities and effects by sanitary authorities and other
utilities on the public rights of ways.” The ordinance cites
costs, including “additional oversight and associated costs
incurred from City administration, maintenance and repair
of City-owned facilities within City right-of-ways, special
services performed by the City, and office and field-related
costs.” Overall, the ordinance declares that there is a “direct
relationship between the fee charged and the burden pro-
duced by the fee payer, RVS[ ].”
RVS projected that the five-percent franchise fee, as
assessed on the gross revenues that RVS received from res-
idents of the city, would have totaled approximately $30,741
per year. RVS calculated that, “to be fair to all other custom-
ers” living outside the city, it would have to raise its rates for
single-family residences in the city from $15.90 per month
to $16.70 per month.
RVS filed a complaint in circuit court seeking a
declaratory judgment and an injunction. Specifically, RVS
asked the court to:
“1.  Declar[e] whether the ordinance * * * is valid and
whether RVS is required to collect and pay over the fee
described in said ordinance.
“2.  Grant an injunction prohibiting [the city] from col-
lecting the franchise fee * * *.
“3.  For other such relief as the court may deem
equitable.”
In the trial court, as part of cross-motions for summary
judgment discussed further below, the city reaffirmed the
442 Rogue Valley Sewer Services v. City of Phoenix
factual assertions set out in the ordinance. The city claimed
that it incurs a variety of costs due to the direct impact of
RVS’s operations in city streets. Although the direct costs
of the paving and construction work are borne by RVS, the
city argued that there are additional short-term and long-
term impacts that the city bears. Short-term impacts are
associated primarily with coordination and include review
of plans, inspection during construction, locating utilities,
processing encroachment permits, providing water from
city fire hydrants for flushing sewer lines, and designing
other city utility contracts to avoid RVS facilities. Long-
term impacts include costs of maintenance and repair of the
streets. Whenever a street surface is cut, a slight differential
settlement of the repaired surface is expected, and the joint
between the surfaces is more likely to be an entry point for
water. Over time, the city Public Works Department expects
to fill cracks and make minor repairs on cut streets, until it
becomes necessary to conduct a complete asphalt overlay of
the street. The city also asserted that, as a direct impact of
its relationship with RVS, it incurs general administrative
expenses, such as the costs of general administration and
oversight, budgeting, coordination of services, interactions
with the public, and other expenses. Together, the city esti-
mated that the cost of those impacts for 2009 was $29,425.
As such, the city asserted that the five-percent franchise
fee—at around $30,000 per year—was a reasonable esti-
mate of the annual cost to the city. Additionally, the city
pointed out that the five-percent fee was consistent with
franchise fees that it imposes on other utilities operating in
city streets, including the local gas, telephone, power, and
cable television companies.
For its part, RVS disputed the existence of any
direct relationship between the franchise fee and the costs
that RVS’s operations impose on the city. RVS argued that
the costs that the city identified are part of the normal oper-
ations of a city public works department—such as receiving
phone calls from citizens—and therefore are not caused by
RVS’s operations, while other alleged costs are negligible or
nonexistent. RVS asserted that, when it proposes a project
within the city, it first submits a plan to the city’s Public
Cite as 357 Or 437 (2015) 443
Works Department for review and comment, and generally
receives a phone call or brief letter in response. The city typ-
ically observes any paving work to ensure that it meets the
city’s standards, but, as noted, RVS bears the cost of the
paving and construction work associated with its projects.
At the time of summary judgment, only one project in the
city had required any street cutting or repaving, and only
one was planned for the upcoming year. RVS also argued
that the costs of its operations in the city are covered by var-
ious fees that the city charges—for example, a right-of-way
encroachment fee charged to cover the cost of plan review
for projects that impact the right-of-way.
Further, in its motion for summary judgment, RVS
argued that the city’s home-rule authority to impose a fran-
chise fee was preempted by state law because franchise fees
are controlled by state statute. RVS also stated in its brief—
although in the “Background Facts” section rather than as
a legal argument—that, “even assuming that [the city] has
authority to impose a franchise fee on RVS, the Ordinance
as worded relies upon an improper interpretation of Oregon
statutes, is too broadly written and has no rational basis
to support the rate.” The city filed a cross-motion for sum-
mary judgment, arguing that it had authority to enact the
ordinance and that the fee “represents a reasonable esti-
mate of the annual cost to the City of the many impacts of
RVS identified in the Ordinance,” and concluding that “[t]he
5% fee is reasonable by all standards.”
The trial court articulated the issue presented as
“whether or not the City * * * under its home rule charter
can charge a franchise fee on sewer operations provided by
[RVS].” The court found that “the analysis of the [city] in
its motion and in its response to [RVS’s] motion is correct in
that it has the authority to impose the fee.” Therefore, the
court granted the city’s motion for summary judgment and
denied RVS’s motion for summary judgment.
The city then submitted a proposed general judg-
ment. RVS objected to the proposed judgment on the ground
that the trial court’s order resolved only the issue whether
the city had authority to charge the fee, but did not resolve
444 Rogue Valley Sewer Services v. City of Phoenix
the issue of the reasonableness of the fee. RVS argued that
a question of fact existed as to the reasonableness of the fee
that precluded summary judgment and pointed to “compet-
ing affidavits” on the issue. RVS suggested that a limited
judgment—addressing only the issue of the city’s authority
to impose the assessment—would be more appropriate. In
response, the city argued that the amount of the fee should
be left to the discretion of the city and was not at issue in the
case.
The trial court overruled RVS’s objection to the
proposed general judgment, concluding that “there [was]
nothing left for the Court to adjudicate” because “nothing
in the complaint [or in RVS’s motion for summary judgment
suggested that] RVS[ ] also challenged the reasonableness of
the fee in the event [the city’s] authority was upheld.” In so
holding, the court concluded:
“To be sure, in arguing the ordinance is too broad, RVS
cited the amount of the fee, but any such argument is sub-
sumed within the argument about the propriety of the
ordinance (assuming [the city] had the authority to enact
it), and the Court’s decision upholding [the city]’s author-
ity to impose the fee, the content of the ordinance, and the
imposition of the fee, disposed of RVS’ argument about the
amount of the fee.”
The court entered a general judgment in the city’s favor.
RVS appealed, arguing that “the trial court erred
in concluding that the city was authorized to impose the
five percent franchise fee, and, alternatively, that the court
erred in granting summary judgment because genuine
issues of material fact exist regarding calculation of the
fee.” Rogue Valley, 262 Or App at 187. As to the first argu-
ment, the Court of Appeals concluded that RVS’s status as
a local government did not circumscribe the city’s authority
as a home-rule municipality and that the city’s home-rule
authority to enact the fee was not preempted by state law.
Id. at 188, 199. As to the second argument, the Court of
Appeals concluded that RVS had not preserved its argument
regarding the reasonableness of the amount of the fee and
rejected RVS’s argument that the parties had tried the issue
by consent. Id. at 201-02. RVS petitioned for review in this
court, and we allowed the petition.
Cite as 357 Or 437 (2015) 445
II. ANALYSIS
Ordinarily, when a “petitioner[’s] arguments impli-
cate the authority of [a] city, we begin with * * * the author-
ity of such local governments” under the “home-rule” provi-
sions of the Oregon constitution. Gunderson, LLC v. City of
Portland, 352 Or 648, 658-59, 290 P3d 803 (2012). “ ‘Home
rule’ itself is not a constitutional term, and the actual consti-
tutional terms differ from state to state. But ‘home rule’ has
been described as the ‘political symbol’ for the objectives of
local authority.” LaGrande/Astoria v. PERB, 281 Or 137, 140
n 2, 576 P2d 1204, adh’d to on recons, 284 Or 173, 586 P2d
765 (1978). Home rule is the authority granted to Oregon’s
cities by Article XI, section 2, and Article IV, section 1(5), of
the Oregon Constitution—adopted by initiative petition in
1906—to regulate to the extent provided in their charters.
Article XI, section 2, provides, in part, “The legal voters of
every city and town are hereby granted power to enact and
amend their municipal charter, subject to the Constitution
and criminal laws of the State of Oregon[.]” In the same
1906 election, voters “reserved” initiative and referendum
powers “to the qualified voters of each municipality and dis-
trict as to all local, special and municipal legislation of every
character in or for their municipality or district.” Or Const,
Art IV, § 1(5).
RVS argues, however, that the home-rule analysis
does not apply—or does not apply in the same way—in the
context of a fee or tax that one governmental entity imposes
on another and that the Court of Appeals erred in conclud-
ing that RVS’s status as a local government has no impact
on the city’s home-rule authority. As noted above, RVS is
a sanitary authority, and the legislature has expressed its
intention that sanitary authorities be considered municipal
corporations and a type of local government under Oregon
law. For those reasons, RVS claims, the trial court erred in
granting the city’s motion for summary judgment based on
its home-rule authority. We review the trial court’s rulings
on summary judgment “to determine whether ‘there is no
genuine issue as to any material fact’ and whether ‘the mov-
ing party is entitled to prevail as a matter of law.’ ” Bagley v.
Mt. Bachelor, Inc., 356 Or 543, 545, 340 P3d 27 (2014) (citing
ORCP 47 C).
446 Rogue Valley Sewer Services v. City of Phoenix
A.  Intergovernmental Taxation
RVS first argues that this is not a “home rule”
case because it involves “intergovernmental taxation.” RVS
argues that the city must first have unmistakable, express
statutory authority before it can impose taxes or fees on
another local government. RVS draws that rule from three
of this court’s cases: Portland v. Multnomah County, 135 Or
469, 296 P. 48 (1931); Portland v. Welch et al., 126 Or 293,
269 P. 868 (1928); and Cent. Lincoln PUD v. State Tax Com.,
221 Or 398, 351 P2d 694 (1960). The city responds that this
case concerns a fee, rather than a tax, and therefore that
that case law is inapplicable.
All three of the cases upon which RVS relies concern
the imposition of a tax. In Welch, a city had offered land for
sale, but had not yet sold that land, and this court held that
the county in which the land was located could not impose
otherwise applicable property taxes on that land. 126 Or at
294-97. In Multnomah County, the opposite occurred: the
property was in private ownership on “tax day” when taxes
were assessed, but a city bought the property before any tax
had been levied. 135 Or at 470. This court held the property
was nonetheless “clearly exempt from taxation.” Id. at 473.
In Central Lincoln, this court held that plaintiff, a people’s
utility district (PUD), was subject to a utility corporation
excise tax. 221 Or at 401, 407. However, the court concluded
that its interpretation of the statute at issue did not nec-
essarily extend the tax to municipal corporations because
“[t]he intention to tax a municipality is not to be inferred,
but must be clearly manifested by an affirmative legislative
declaration.” Id. at 406. In that case, a clear legislative dec-
laration of the intention to tax PUDs existed, because PUDs
were specifically included in the statute. Id.
“A tax is any contribution imposed by government
upon individuals, for the use and service of the state. A fee,
by contrast, is imposed on persons who apply for or receive
a government service that directly benefits them.” McCann
v. Rosenblum, 355 Or 256, 261, 323 P3d 955 (2014) (inter-
nal quotation and citation omitted). In McCann, this court
quoted Qwest Corp. v. City of Surprise, 434 F3d 1176, 1183
(9th Cir 2006), in support of the rule that the distinction
Cite as 357 Or 437 (2015) 447
between a tax and a fee is whether the “charge is expended
for general public purposes, or used for the regulation or ben-
efit of the parties upon whom the assessment is imposed.”
McCann, 355 Or at 261-62. Thus, the ballot measure at issue
in that case, which would have imposed a markup on whole-
sale alcohol sales, was properly labeled a “tax,” because the
revenues generated by the markup would be distributed to
the state’s general fund, as well as to the general funds of
cities and counties, and would be available for general gov-
ernment use. Id. at 261-62; see also Dennehy v. Dept. of Rev.,
305 Or 595, 605-06, 756 P2d 13 (1988) (state statute did
not contravene constitutional limits on property taxation,
because “[u]rban renewal financing is not a single, state-
wide tax to fund public structures or services unrelated to
the source of funding”; rather, it “places the cost of urban
renewal on the property that benefits from the expenditure
of the funds so raised”).
A fee, then, is imposed on particular parties and
is used to regulate or benefit those parties rather than
being used for general public purposes or to raise revenue
for such purposes. In this case, the ordinance applies to
one particular party only, RVS, and the ordinance directs
that the city will “allocate money collected from RVS only
for costs and reimbursement connected with proper regula-
tory purposes.” The money collected from the franchise fee
is to be used to cover “the full costs and full impacts asso-
ciated with [RVS’s] use, occupation, and other activities”
in the city’s rights-of-ways, including “the additional over-
sight and associated costs incurred from City administra-
tion, maintenance and repair of City-owned facilities within
City right-of-ways, special services performed by the City,
and office and field-related costs.” Although RVS expresses
skepticism as to whether the fee actually will be directed
towards regulatory purposes related to sanitary services, as
the city claims, nothing in the record indicates that the fee
will be used for general government purposes, rather than
for appropriate regulatory purposes.
In sum, the record establishes that the city will use
the money collected from the franchise fee to regulate and
benefit the party from whom the fee is collected and to cover
448 Rogue Valley Sewer Services v. City of Phoenix
costs directly imposed on the city by that party. That “dis-
tribution scheme” and the “uses to which that money [can]
be put” demonstrate that the ordinance provides for the col-
lection of a fee, rather than a tax. McCann, 355 Or at 262
(wholesale alcohol markup properly labeled a “tax,” because
not “used to provide services that directly benefit whole-
salers” but, rather, distributed to state, cities, and counties
for general government use). Because we conclude that the
ordinance provides for the collection of a fee, and not a tax,
RVS’s arguments based on the prohibition of intergovern-
mental taxation discussed in some of our cases are inappo-
site here.2
B.  Regulation of Other Public Entities
RVS next argues that the city cannot justify the
franchise fee based on its home-rule authority because reg-
ulation of another governmental entity is different from
regulation of private entities under the city’s home-rule
powers. To allow regulation of other government entities,
RVS argues, would create a hierarchy among local govern-
ments that has no support in the law and would allow a city
to exercise authority beyond its boundaries. It contends that
such “extramural” or “extramunicipal” activity is not within
the scope of a city’s home-rule powers and is impermissible
unless authorized expressly by statute.
RVS is correct that this court has recognized some
limits on a local government’s authority to compel or coerce
another government to take some affirmative action. See
2
At oral argument, RVS also argued that the ordinance cannot be said to
provide for a “use fee” because such fees are charged in exchange for some service,
right, or privilege. RVS claims that the city had already transferred the right to
use the right-of-way to RVS by consenting to the annexation. See ORS 450.815(7)
(a sanitary authority has the power to “[l]ay its sewers and drains in any public
street, highway or road in the county, and for this purpose enter upon it and
make all necessary and proper excavations, restoring it to its proper condition”).
That is, RVS argues, no benefit is conferred on RVS in exchange for the franchise
fee, and therefore the ordinance cannot be characterized as a fee. We disagree.
As noted, a fee is “used for the regulation or benefit of the [assessed] parties.”
McCann, 355 Or at 262. Although there may be circumstances where the terms of
conferring the benefit on an assessed party precludes the later imposition of a fee
in the name of regulation, that is not the situation in this case. Even if we were
to accept RVS’s argument that authority to use the right-of-way was transferred
with the annexation, the ordinance provides for a fee for “regulation” of RVS;
there is no requirement that the ordinance also confer some additional benefit.
Cite as 357 Or 437 (2015) 449
City of Eugene v. Roberts, 305 Or 641, 649-650, 756 P2d 630
(1988) (home rule did not provide city with authority “to
compel action by state and county officials” to put an advi-
sory question on the state primary election ballot); DeFazio
v. WPPSS, 296 Or 550, 582, 679 P2d 1316 (1984) (cities lack
authority to “assert coercive authority over persons or prop-
erty outside [their] boundaries”). For example, in Kiernan
v. Portland, 57 Or 454, 111 P. 379, recons den, 57 Or 454,
112 P. 402 (1910), dismissed for lack of jurisdiction, 223 U.S.
151, 32 S. Ct. 231, 56 L. Ed. 386 (1912), the City of Portland
amended its charter to provide for construction of the
Broadway Bridge and that, “upon completion of the bridge[,]
the executive board shall surrender and deliver the posses-
sion thereof to the county court of Multnomah County.” Id.
at 462. This court held that it was “beyond the power of the
[C]ity [of Portland] to impose the care and maintenance
of a public bridge upon Multnomah County without the
county authorities[’] consent thereto.” Id. at 463. That was
so because Portland was attempting to compel Multnomah
County to assume a new governmental function—bridge
maintenance—and local governments cannot interfere with
another government’s exercise of its own governmental
power and functions. See also Orval Etter, Municipal Home
Rule On and Off: “Unconstitutional Law in Oregon” Now and
Then 103 (Sourcebook ed 1991) (describing Kiernan as “the
first ruling that home rule does not enable a city to change a
power or duty of a governmental entity other than the city”);
Letter of Advice dated December 24, 1985, to Senator Ken
Jernstedt (OP-5863) (concluding that city could impose an
excise tax or municipal surcharge on bridge tolls, but could
not compel the port to collect a tax on tolls because “a munic-
ipality, absent statutory authority, may not impose a duty
upon any other political subdivision or agency of the state to
collect municipal taxes”).
Those principles, however, do not go so far as to pro-
hibit the city’s fee in this case. While City of Eugene and
Kiernan demonstrate that a city cannot, on the basis of its
home-rule authority, impose a duty on or impair a power of
another governmental entity, nothing in those cases would
prevent a city from exercising the same kind of regulatory
authority over specific services provided by another local
450 Rogue Valley Sewer Services v. City of Phoenix
government entity on the same basis as services provided
within the city by a private business. In this case, the fran-
chise fee of five percent of RVS’s revenue places RVS on an
equal footing with other utilities operating within the city.
As discussed further below, the legislature has provided a
framework for cities to collect a franchise fee from utilities,
both public and private, operating within their rights-of-
way. See ORS 221.420; ORS 221.450. Where cities and util-
ities have not entered into an agreement for a different fee
arrangement, the legislature provides for a five-percent fee.
ORS 221.450. Although RVS correctly points to limits on
the home-rule doctrine that prohibit local governments from
compelling affirmative conduct by other government enti-
ties, the limitations that it has identified do not restrict the
city’s authority to pass the ordinance at issue in this case.
C.  Home Rule
Under a city’s home-rule authority, “the validity of
local action depends, first, on whether it is authorized by the
local charter or by a statute[, and] second, on whether it con-
travenes state or federal law.” LaGrande/Astoria, 281 Or at
142. The parties do not contend that the ordinance was not
authorized by the city’s charter, which provides that the “city
has all powers that the constitutions, statutes, and common
law of the United States and of this state now or hereafter
expressly or impliedly grant or allow” and that the charter
is to “be liberally construed so the city may exercise fully all
powers possible under this charter and under United States
and Oregon law.” City of Phoenix Charter, § 4-5. Therefore,
we must determine “whether the local rule in truth is incom-
patible with the legislative policy, either because both can-
not operate concurrently or because the legislature meant
its law to be exclusive.” LaGrande/Astoria, 281 Or at 148.
In making that determination, we assume that “the
legislature does not mean to displace local civil or admin-
istrative regulation of local conditions by a statewide law
unless that intention is apparent.” LaGrande/Astoria, 281
Or at 148-49 (footnote omitted). A state statute will displace
the local rule where the text, context, and legislative his-
tory of the statute “unambiguously expresses an intention
to preclude local governments from regulating” in the same
Cite as 357 Or 437 (2015) 451
area as that governed by the statute. Gunderson, 352 Or at
663 (emphasis added); see also US West Communications v.
City of Eugene, 336 Or 181, 186, 81 P3d 702 (2003) (applying
standard statutory interpretation methodology to a question
of home-rule city’s authority to impose fee on telecommuni-
cations company).
RVS argues that ORS 221.420 and ORS 221.450
establish a comprehensive, statewide scheme that the legis-
lature intended to be the exclusive basis for city imposition
of fees upon utilities for using public rights-of-way. The city
responds that those statutes do not address sanitary author-
ities and, therefore, the legislature has not unambiguously
expressed any intention to preempt the ordinance at issue
here.
ORS 221.420(2)(a) provides that a city may:
“Determine by contract or prescribe by ordinance or other-
wise, the terms and conditions, including payment of
charges and fees, upon which any public utility, electric
cooperative, people’s utility district or heating company, or
Oregon Community Power, may be permitted to occupy the
streets, highways or other public property within such city
and exclude or eject any public utility or heating company
therefrom.”
RVS, as a sanitary authority organized under ORS
chapter 450, is not a “public utility” under ORS 221.420.
ORS 221.420(1)(a) provides that “public utility” is to be given
the meaning provided in ORS 757.005, which defines “public
utility” to include only those entities furnishing “heat, light,
water or power.” ORS 757.005(1)(a)(A). RVS does not provide
heat, light, water or power; it provides sanitation services.
Therefore, ORS 221.420(2)(a) does not affirmatively provide
authority for the city to impose the fee at issue in this case,
but neither does it, standing alone, unambiguously preclude
the city from imposing the fee.
RVS also points to ORS 221.450, which provides:
“[E]very incorporated city may levy and collect a privilege
tax from Oregon Community Power and from every elec-
tric cooperative, people’s utility district, privately owned
public utility, telecommunications carrier as defined in
ORS 133.721 or heating company. The privilege tax may
452 Rogue Valley Sewer Services v. City of Phoenix
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. However,
the gross revenues earned in interstate commerce or on
the business of the United States Government shall be
exempt from the provisions of this section. The privilege
tax authorized in this section shall be for each year, or part
of each year, such utility, cooperative, district or company,
or Oregon Community Power, operates without a fran-
chise.”
(Emphasis added.) Like ORS 221.420, ORS 221.450 does not
explicitly apply to sanitary authorities like RVS.
Read together, RVS argues, ORS 221.420 and ORS
221.450 provide statutory authority that, for the enumer-
ated entities to which they apply, permits a city to either
enter into a franchise agreement with a utility or impose a
privilege tax in lieu of negotiating a franchise agreement.
The legislative history of House Bill (HB) 3021—the 1987
revision to ORS 221.420 and ORS 221.450—suggests that
the legislature was told that the statutes would operate so
that ORS 221.450 functioned as a “penalty clause,” such
that,
“if * * * [y]ou, as a private utility * * * don’t sit down and
negotiate a franchise regulation ordinance or agreement so
that we’re working together, then you’re going to pay more.
You’re going to pay five percent. If you come in and get a
franchise, and you sit down at the table * * * and we mutu-
ally regulate it together, basically, then [you pay less].”
Tape Recording, House Committee on Environment and
Energy, HB 3021, April 22, 1987, Tape 122, Side B (state-
ment of Larry Shaw).
RVS argues, therefore, that the legislature intended
to occupy the field and preempt cities from imposing fees
on public utilities other than through the comprehensive
scheme established by ORS 221.420 and ORS 221.450. In
Cite as 357 Or 437 (2015) 453
particular, RVS argues that the legislature intended the
list of utility service providers in ORS 221.420(2)(a) to be
construed as an exclusive list of utility service providers
that a city may target for such charges and fees—and that
all other nonenumerated entities cannot be charged simi-
lar charges or fees. Put differently, from those affirmative
statutory authorizations of privilege taxes that a city may
charge for certain utilities operating within the city, RVS
draws the negative implication that a city may not impose
such taxes or fees on other utilities.
Even if ORS 221.420 and ORS 221.450 establish a
comprehensive scheme as to municipal regulation of some
entities—an issue that we do not decide—that conclusion
would not preclude the city’s fee in this case. RVS essen-
tially argues that, because sanitary authorities are not
specifically enumerated in ORS 221.420, the legislature
intended to exempt sanitary authorities from franchise fees.
Although RVS does not explicitly use the Latin term, that
argument invokes the logic of expressio unius est exclusio
alterius, literally “the expression of one is the exclusion of
others.” See Black’s Law Dictionary 701 (10th ed 2014) (“A
canon of construction holding that to express or include one
thing implies the exclusion of the other, or of the alternative.
For example, the rule that ‘each citizen is entitled to vote’
implies that noncitizens are not entitled to vote.”). Expessio
unius arguments are most powerful when there is reason
to conclude that a list of enumerated terms was intended to
be exhaustive. See Colby v. Gunson, 224 Or App 666, 671,
199 P3d 350 (2008) (“the expressio unius guide to legisla-
tive intent corroborates, rather than supplies, meaning to a
statute”).
To show that the legislature intended the list to be
exhaustive, RVS points to legislative history from HB 3021
relating to a proposal to add certain publically owned utili-
ties to the lists of already-enumerated privately owned enti-
ties in ORS 221.420 and ORS 221.450. In the hearings on
HB 3021, a representative wondered whether the bill would
apply to telephone cooperatives and was told it would not
“affect” entities that fell outside the definition of “public
utility.” Tape Recording, House Committee on Environment
and Energy, HB 3021, April 22, 1987, Tape 122, Side B
454 Rogue Valley Sewer Services v. City of Phoenix
(statement of Larry Shaw). From that slim legislative his-
tory, RVS concludes that the franchise fee at issue here is
invalid because, if the statutes were not intended to apply
to telephone cooperatives, they also were not intended to be
applied to other nonenumerated public entities.
A party that challenges a home-rule city’s author-
ity as preempted by state law is required to show that the
legislature “unambiguously” expressed its intent—a high
bar to overcome. Gunderson, 352 Or at 663. As noted above,
in the context of the home-rule doctrine, we begin with
the assumption “that the legislature does not mean to dis-
place local civil or administrative regulation of local condi-
tions by a statewide law unless that intention is apparent.”
LaGrande/Astoria, 281 Or at 148-49. Only where the legis-
lature “unambiguously expresses an intention to preclude
local governments from regulating” in the same area gov-
erned by an applicable statute can that presumption against
preemption be overcome. Gunderson, 352 Or at 663 (empha-
sis added); cf. State ex rel Haley v. City of Troutdale, 281 Or
203, 211, 576 P2d 1238 (1978) (because any legislative intent
to preempt local action exceeding state “minimum” construc-
tion standards was “not unambiguously expressed[,] local
requirements compatible with compliance with the state’s
standards are not preempted”).
The legislative history of HB 3021 does not rise to
the level of “unambiguously” expressing legislative intent to
occupy the field. See State v. Gaines, 346 Or 160, 172-73 n 9,
206 P3d 1042 (2009) (reliance on “the beliefs of a single leg-
islator or witness” is “fraught with the potential for miscon-
struction”). Notably, the legislature has expressly preempted
local regulation of certain areas of law by using the word
“preempt” itself. See ORS 731.840(4) (“[t]he State of Oregon
hereby preempts the field,” and “[n]o county, city, district,
or other political subdivision or agency in this state shall so
regulate”); ORS 203.090 (“The[se] provisions * * * preempt
any laws of the political subdivisions of this state relating
to the regulation of private security providers.”). In other
statutes, it has expressed its disapproval of conflicting local
laws in equally clear terms. See ORS 461.030(1) (“no local
authority shall enact any ordinances, rules or regulations
Cite as 357 Or 437 (2015) 455
in conflict with the provisions hereof”). However, we see no
reason to imply such broad preemption of the entire field of
utility regulation from the explicit authorization of regula-
tion of certain other utilities.
Further, ORS 221.420 and ORS 221.450 do not cre-
ate a statutory scheme that prevents the state law and local
ordinance from operating concurrently. LaGrande/Astoria,
281 Or at 148. Rather, the state regulates less extensively
than the local ordinance, and leaves it to cities to enact rea-
sonable conditions of consent for sanitary authorities. See
ORS 450.815(7); cf. State ex rel Haley, 281 Or at 205, 211
(state building code providing for single wall construction
did not indicate that legislature intended to prevent cities
from enacting additional safeguards—such as requiring
double wall construction—and at minimum such an inten-
tion was not “unambiguously expressed”); Thunderbird
Mobile Club v. City of Wilsonville, 234 Or App 457, 474, 228
P3d 650 (2010), rev den, 348 Or 524, 236 P3d 152 (2010)
(“Under LaGrande/Astoria, * * * the occupation of a field of
regulation by the state has no necessary preemptive effect
* * *. Instead, a local law is preempted only to the extent
that it ‘cannot operate concurrently’ with state law, i.e., the
operation of local law makes it impossible to comply with a
state statute.”).
That conclusion is strengthened by two other
expressions of the legislature’s intent. First, in HB 3021
the legislature provided that, by enacting ORS 221.420 and
ORS 221.450, it was simply “reaffirm[ing] the authority of
cities to regulate use of municipally owned rights of way”
and that it “recognize[ed] the independent basis of legisla-
tive authority granted to cities in this state by municipal
charters.” ORS 221.415 (emphasis added).3 That is, the leg-
islature apparently thought that HB 3021 was not neces-
sary to provide cities with authority to impose taxes and
fees because they already possessed that authority. Rather,
the legislature passed that bill in response to a then-recent
3
Although ORS 221.415 goes on to also affirm the authority of cities to
“impose charges upon publicly owned suppliers of electrical energy, as well as
privately owned suppliers,” we do not read that subordinate clause as negating
the broader affirmation of the authority of cities to regulate their rights-of-way.
456 Rogue Valley Sewer Services v. City of Phoenix
circuit court decision that had held to the contrary with
respect to a people’s utility district.4
Second, in a different statute, the legislature appears
to have anticipated the kind of fee at issue in this case
and provided that such conditions on the use of the public
rights-of-way by a sanitary authority are appropriate. ORS
450.815(7), in defining the powers of a sanitary authority,
provides that a sanitary authority may:
“Lay its sewers and drains in any public street, highway or
road in the county, and for this purpose enter upon it and
make all necessary and proper excavations, restoring it to
its proper condition. However, the consent of the proper city,
county or state authorities, as the case may be, shall first be
obtained and the conditions of such consent complied with.”
(Emphasis added.) The legislature apparently intended
that use of public rights-of-way by a sanitary authority be
contingent upon its compliance with reasonable conditions
imposed by a city.
Because neither ORS 221.420 nor ORS 221.450
unambiguously express a legislative intent to preempt local
4
Specifically, the legislature was reacting to the then-recent circuit court
decision in Columbia River People’s Utility District v. City of St. Helens et al, No.
85-2236 (Columbia County Circuit Court, July 15, 1986). In that case, the circuit
court held that “the legislature has declared by inference that People’s Utility
Districts are not subject to franchise fees (excise taxes) such as defendant cities
desire to impose.” Id. at 3. The legislature passed HB 3021 “just [as] a legisla-
tive emergency fix for the problem [presented by the circuit court case] and [did
not go] beyond that.” Tape Recording, House Committee on Environment and
Energy, HB 3021, April 22, 1987, Tape 122, Side B (statement of Larry Shaw).
Specifically, the legislature was told that the “bill only affects electrical utilities”
and that other entities, such as telephone cooperatives, were “not affected by this
bill at all.” Id. Because Columbia River was pending before the Court of Appeals
at the time, a representative noted that, if the cities wanted to continue their
appeal “on a home rule issue that says that the city has the right to [impose a
fee]—that’s up to them—but that issue stands aside from this bill. The home
rule issue is a little broader, I think, than what we are dealing with here.” Tape
Recording, Senate Agriculture and Natural Resources Committee, HB 3021,
April 29, 1987, Tape 138, Side A (statement of Rep Bruce Hugo). Therefore, it
appears that the legislature did not intend HB 3021 to impact the home-rule
authority of cities, but, instead, merely to clarify that such a fee could be imposed
on People’s Utility Districts. See also ORS 221.415 (“Recognizing the independent
basis of legislative authority granted to cities in this state by municipal charters,
the Legislative Assembly intends * * * to reaffirm the authority of cities to regu-
late use of municipally owned rights of way and to impose charges upon publicly
owned suppliers of electrical energy, as well as privately owned suppliers for the
use of such rights of way.”).
Cite as 357 Or 437 (2015) 457
action, and also because the statutes and legislative history
suggest that the legislature in fact did not intend to preempt
local governments from imposing such conditions on the use
of their rights-of-way by sanitary authorities, we conclude
that the franchise fee at issue in this case is not preempted
by state law.
D.  Reasonableness of the Fee
Finally, RVS argues that the Court of Appeals
erred in ruling that its argument challenging the reason-
ableness of the franchise fee was not preserved. RVS asks
that we remand the case to the trial court to resolve mate-
rial questions of fact relating to the amount of the fee that
may be imposed. See Eugene Theatre et al. v. Eugene et al.,
194 Or 603, 613, 243 P2d 1060 (1952) (fee “far in excess of
what might be deemed reasonably necessary for purposes
of regulation” is invalid). The city responds that the issue is
unpreserved because RVS’s complaint did not state a sep-
arate claim for relief regarding the amount of the fee and
RVS’s motion for summary judgment focused on whether
the city had authority to impose the fee, not whether the fee
was reasonable. On that basis, the city argues that the trial
court and the Court of Appeals properly declined to reach
the issue whether the amount of the fee was reasonable.
Even if the affidavits and cross-motions for sum-
mary judgment in this case “might provide a basis for an
amendment to the pleadings to make it an issue,” a court
may not “award relief outside the issues of the case.” Heintz v.
Sinner et ux, 232 Or 529, 533, 376 P2d 478 (1962). As noted,
RVS did not seek a declaration that the fee was unreason-
able in amount. Rather, RVS’s complaint asked the court to:
“1.  Declar[e] whether the ordinance * * * is valid and
whether RVS is required to collect and pay over the fee
described in said ordinance.
“2.  Grant an injunction prohibiting [the city] from col-
lecting the franchise fee * * *.
“3.  For other such relief as the court may deem
equitable.”
Moreover, RVS did not seek to amend its complaint during
or after the summary judgment proceedings.
458 Rogue Valley Sewer Services v. City of Phoenix
Here, as the trial court stated, “nothing in the
complaint * * * challenged the reasonableness of the fee, in
the event [the city’s] authority was upheld.” This court has
explained that
“a decree or judgment must be responsive to the issues
framed by the pleadings and a trial court has no authority
to render a decision on issues not presented for determina-
tion. In absence of amendment of the pleadings, evidence
received without objection will not provide a basis for such
a decree.”
Brown v. Brown, 206 Or App 239, 248, 136 P3d 745 (2006),
rev den, 341 Or 449 (2006) (internal quotation and cita-
tion omitted); see also Central Oregon Fabricators, Inc. v.
Hudspeth, 159 Or App 391, 403, 977 P2d 416, rev den, 329
Or 10, 334 P2d 119 (1999) (trial court erred in granting
relief on unpleaded theory, where plaintiffs never sought
leave to amend pleadings). Because RVS did not move to
amend the pleadings, it was not error for the trial court to
overrule RVS’s objection to the proposed judgment.5 We con-
clude that the trial court correctly declined to rule on an
issue not properly before it.
III. CONCLUSION
We hold that the city was authorized, under its
home-rule authority, to adopt the ordinance at issue in this
case. The franchise fee that the ordinance prescribes is not
preempted by state law. RVS did not present the issue of the
5
Although RVS acknowledges that its complaint did not state a separate
claim for relief regarding the amount of the fee, and that it did not otherwise
amend its pleading, it nevertheless argues that that issue was tried by consent
during the summary judgment proceedings. Under ORCP 23 B, “When issues
not raised by the pleadings are tried by express or implied consent of the parties,
they shall be treated in all respects as if they had been raised in the pleadings.”
ORCP 23 B (emphasis added); Navas v. City of Springfield, 122 Or App 196, 201,
857 P2d 867 (1993) (“Generally, a trial court has no authority to render a decision
on an issue not framed by the pleadings. * * * ORCP 23 B states a limited excep-
tion to this rule: if the parties expressly or impliedly consent, they may try issues
not raised in the pleadings.”). Here, the amount of the fee was discussed in the
summary judgment proceedings in connection with characterizing the ordinance
as a tax or fee, but not in seeking a declaration as to whether the amount of a fee
was reasonable. We therefore agree with the Court of Appeals that the issue of
the reasonableness of the fee was not tried by express or implied consent of the
parties. Rogue Valley, 262 Or App at 201.
Cite as 357 Or 437 (2015) 459
reasonableness of the amount of the fee to the trial court in
its pleadings.
The decision of the Court of Appeals and the judg-
ment of the circuit court are affirmed.