Northwest Natural Gas Co. v. City of Gresham

No. 27 May 5, 2016 309
IN THE SUPREME COURT OF THE
STATE OF OREGON
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,
Petitioner on Review.
v.
CITY OF GRESHAM,
a municipality and public body
within the state of Oregon,
Defendant-Appellant,
Respondent on Review.
(SC S062535 (Control))
NORTHWEST NATURAL GAS COMPANY,
an Oregon corporation;
and Portland General Electric Company,
an Oregon corporation,
Plaintiffs-Respondents,
Petitioners on Review,
and
ROCKWOOD WATER
PEOPLE’S UTILITY DISTRICT,
Intervenor-Respondent,
v.
CITY OF GRESHAM,
a municipality and public body
within the state of Oregon,
Defendant-Appellant,
Respondent on Review.
(SC S062556)
(CC 1107-08422; CA A150990)
310 Northwest Natural Gas Co. v. City of Gresham
On review from the Court of Appeals.*
Argued and submitted May 11, 2015.
Bruce L. Campbell, Miller, Nash, Graham & Dunn,
LLP, Portland, argued the cause and filed the brief for peti-
tioners on review Portland General Electric Company and
Northwest Natural Gas Company. With him on the brief
was Jeffrey G. Condit.
Casey M. Nokes, Cable Huston, LLP, Portland, argued the
cause and filed the brief for petitioner on review Rockwood
Water People’s Utility District. With him on the brief were
Tommy A. Brooks and Clark I. Balfour.
David R. Ris, City Attorney, Gresham, argued the cause
and filed the brief for respondent on review.
Lisa Rackner, McDowell Rackner & Gibson PC, Portland,
filed the brief for amici curiae Avista, Idaho Power, and
PacifiCorp. With her on the brief was Ruth Harper.
Katherine Thomas, League of Oregon Cities, Salem, filed
the brief for amicus curiae League of Oregon Cities. With
her on the brief was Sean O’Day.
Before Balmer, Chief Justice, and Kistler, Walters,
Landau, Baldwin, Brewer, and Nakamoto, Justices.**
BALDWIN, J.
The decision of the Court of Appeals is affirmed in part
and reversed in part. The judgment of the trial court is
affirmed in part and reversed in part, and remanded for
entry of declaratory judgment in favor of Rockwood Water
People’s Utility District.
______________
** Appeal from Multnomah County Circuit Court, Stephen K. Bushong,
Judge. 264 Or App 34, 330 P3d 65 (2014).
**  Linder, J., retired December 31, 2015, and did not participate in the deci-
sion of this case.
Cite as 359 Or 309 (2016) 311
Case Summary: Petitioners Northwest Natural Gas Company, Portland
General Electric Company and Rockwood Water People’s Utility District seek
review of a decision of the Court of Appeals upholding the validity of a seven
percent licensing fee charged by respondent City of Gresham for use of its pub-
lic rights-of-way. Petitioners contend that the licensing fee is invalid under ORS
221.450, which limits the amount a city can impose as a “privilege tax” for utilities’
use of its rights-of-way to five percent. Petitioner Rockwood alternatively argues
that licensing fee, to the extent that it exceeded five percent, was an impermis-
sible intergovernmental tax not authorized by statute. The City responds that
it had home rule authority to enact the ordinances authorizing the fee and that
ORS 221.450 does not preempt its enactments, and that it had explicit statutory
authority to impose the fee on Rockwood. Held: ORS 221.450 authorizes a city to
impose a privilege tax of up to five percent on utilities using its rights-of-way if
the utilities are operating without a franchise. The utilities in this case all were
operating without franchises, and the challenged fee qualified as a privilege tax.
The City has home rule authority, however, to enact ordinances imposing fees, so
long as its enactments are not incompatible with state legislative policy, either
because both cannot operate concurrently or because the legislature did not mean
its law to be exclusive. The text, context and legislative history of ORS 221.450 do
not indicate that the legislature intended the limited grant of authority to impose
privilege taxes for use of rights-of-way found in that statute to preempt a city’s
home-rule authority to impose privilege taxes in a different amount. The City
was incorrect, however, that it had explicit statutory authority to impose the tax
on Rockwood which, like the City, is a type of municipal corporation.
The decision of the Court of Appeals is affirmed in part and reversed in part,
and the case is remanded for entry of declaratory judgment in favor of Rockwood.
312 Northwest Natural Gas Co. v. City of Gresham
BALDWIN, J.
Plaintiffs Rockwood Water People’s Utility District
(Rockwood PUD), Northwest Natural Gas Company
(NW Natural) and Portland General Electric Company
(PGE) seek review of a Court of Appeals decision uphold-
ing the validity of municipal enactments by respondent
City of Gresham (the city) that increased the licensing fee
that each utility was required to pay from five percent to
seven percent of the utility’s gross revenues earned within
the City. Plaintiffs, collectively “the utilities,” sought a dec-
laration that the enactments were void and unenforceable
because they conflicted with the provisions of ORS 221.450.1
Alternatively, Rockwood PUD argued that it, as a people’s
utility district, could not be taxed more than five percent
by a city without explicit statutory authority. On cross-
motions for summary judgment, the trial court agreed with
plaintiffs that the enactments violated ORS 221.450, and
did not reach Rockwood PUD’s alternative argument. On
appeal, the Court of Appeals reversed, holding that the fee
increase was not preempted by ORS 221.450 because the
utilities were not operating “without a franchise” and that
a city’s home-rule authority to impose taxes or fees on a
utility is not affected by a utility’s municipal corporation
status. Northwest Natural Gas Co. v. City of Gresham, 264
Or App 34, 330 P3d 65 (2014). Plaintiffs sought review in
this court.
We hold both that the license fee imposed by the
City was a “privilege tax” and that the affected utilities
were operating “without a franchise” within the meaning of
ORS 221.450. We also hold that the City was not preempted
by ORS 221.450 from imposing the seven percent privilege
tax on NW Natural and PGE, but that the City did not have
express statutory authority to impose a tax in excess of five
percent on Rockwood PUD under ORS 221.450. For the rea-
sons explained below, we affirm, in part, the decision of the
Court of Appeals on other grounds, and reverse in part.
1
ORS 221.450, set out in more detail below, allows a city to “levy and collect
a privilege tax” from a utility if the utility “is operating for a period of 30 days
within the city without a franchise[.]” The privilege tax may not exceed “five
percent of the gross revenues” of the utility earned within the city.
Cite as 359 Or 309 (2016) 313
I. BACKGROUND
The record on summary judgment in this case con-
sists of exhibits and stipulated facts, which we describe to
provide the historical backdrop to the present controversy.
The factual background is fairly straightforward, although,
as described below, the legal landscape is somewhat more
complex. Prior to 2002, NW Natural operated within the
City pursuant to a negotiated franchise agreement. In
2002, NW Natural obtained a 10-year utility license. PGE
operated within the City pursuant to a negotiated fran-
chise agreement until 1992, under a 10-year utility license
between 1992 and 2002, and thereafter, under a new
10-year utility license. Rockwood PUD operated in the City
under a 10-year utility license beginning in 2001, which
was extended an additional 10 years in 2011. From 2002
until 2011, and pursuant to City ordinance and resolution,
NW Natural and PGE paid license fees that consisted of five
percent of their gross revenues from operations within the
City. Beginning in 2003, and pursuant to City ordinance
and resolution, Rockwood PUD paid license fees that con-
sisted of five percent of its user fees. These fees are in addi-
tion to permit fees that the utilities pay when they need to
do specific work within the City’s rights-of-way.
In May 2011, while each of the utilities was operat-
ing under a license, the City adopted a resolution to increase
the license fees from five percent to seven percent, primar-
ily to avoid service reductions in the fire and police depart-
ments. The City informed the utilities that the new fees
would be effective on July 1, 2011.
Plaintiffs then filed this action for declaratory judg-
ment, seeking a declaration that the City’s resolution was
preempted by state law, which they contended capped the
City’s license fee at five percent because the fee was, in effect,
a “privilege tax” under ORS 221.450. As noted, Rockwood
PUD also argued that the City could not charge the addi-
tional fee because it lacked specific statutory authority to do
so. The City responded that ORS 221.450 did not preempt
its home-rule authority to establish a seven-percent license
fee, and that in any event the license fee was not a “privilege
tax” and thus ORS 221.450 did not limit it in the manner
314 Northwest Natural Gas Co. v. City of Gresham
suggested by plaintiffs. The trial court agreed with plain-
tiffs on their first argument, and consequently did not reach
Rockwood PUD’s second argument. The trial court reasoned
that the utilities were operating with a license and “without
a franchise” for purposes of ORS 221.450, that, under this
court’s case law, a license fee of this sort is, in fact, a “priv-
ilege tax,” and therefore that ORS 221.450 preempted the
City’s ordinance to the extent it sought to impose a privilege
tax of more than five percent.
The City appealed, and the Court of Appeals dis-
agreed with the trial court’s analysis. In particular, although
it acknowledged that the plaintiffs stipulated that they
all were operating under licenses rather than franchises,
the Court of Appeals concluded that the utilities nonethe-
less were not operating “without a franchise” within the
meaning of that phrase as used in ORS 221.450. Northwest
Natural Gas Co., 264 Or App at 42, 48. The Court of Appeals
therefore did not address the questions of whether the city
had home-rule authority to enact the ordinance or whether
the license fee in question was a “privilege tax,” given its
conclusion that in any event ORS 221.450 would not limit
the City’s ability to charge the fee because the utilities were
not operating “without a franchise.”2
The utilities sought review of the Court of
Appeals’ decision. The parties reprise the various argu-
ments they made in the trial court and in the Court of
Appeals. Northwest Natural and PGE contend that the
trial court correctly concluded that the City’s license fee
is a “privilege tax” for purposes of ORS 221.450, and that
the Court of Appeals erred in interpreting the phrase
“without a franchise” as used in that statute. They con-
tend that, historically, a “franchise” in this context is an
agreement between a city and a utility, and that paying a
2
The Court of Appeals, in a footnote, rejected without discussion Rockwood
PUD’s alternative argument that the City lacked authority to impose the fee
against people’s utility districts, citing its decision in Rogue Valley Sewer Services
v. City of Phoenix, 262 Or App 183, 329 P3d 1 (2014). Northwest Natural Gas Co.,
264 Or App at 39 n 3. As discussed below, we have since affirmed that court’s
decision in Rogue Valley Sewer Services v. City of Phoenix, 357 Or 437, 353 P3d
581 (2015). The implications of that decision as to the present case are discussed
below. See 359 Or at 331, 347-348.
Cite as 359 Or 309 (2016) 315
unilaterally-imposed license fee does not create a “fran-
chise.” Rockwood PUD reiterates those arguments, and
also repeats its alternative argument that the City lacked
statutory authority to tax a people’s utility district at a
rate greater than five percent. Amici curiae appearing
on behalf of the utilities argue that, as a matter of public
policy, the Court of Appeals’ result in this case will cause
hardship on utility customers, as the utilities will simply
pass on the percentage of the fees charged by the City to
the users in the city on a pro rata basis, and thus contend
that the fees amount to a “stealth tax” on utility customers
that the City would not have been able to impose directly.
See 359 Or at 333 n 15 (discussing manner in which util-
ities pass on fees to consumers).
The City, in turn, argues that it had home-rule
authority to enact the license fee and that the legislature,
in enacting ORS 221.450, did not demonstrate a clear inten-
tion to preempt such local fees. It further argues that the
fee in question is not a “privilege tax” and that the Court
of Appeals correctly concluded that the utilities in this
case were not operating “without a franchise” because the
licenses were a form of franchise. The City also asserts
that ORS 221.420(2)(a) provides statutory authority for its
imposition of a license fee on a PUD. Finally, in response
to amici curiae’s policy arguments, the City notes that
the fees were established by ordinance through a political
process and that constituents that oppose the fees may do
so by taking part in that political process. Amicus curiae
League of Oregon Cities also argues on the City’s behalf
that the Court of Appeals’ analysis was correct, and that
ORS 221.450 was never intended by the legislature to limit
a city’s ability to obtain compensation from utilities in the
manner suggested by the utilities.
We first examine whether the license fee was a
“privilege tax” for purposes of ORS 221.450 and whether
the affected utilities were operating “without a franchise”
within the meaning of those statutory terms. We then
address whether the City was preempted by ORS 221.450
from imposing the seven percent license fee on NW Natural
and PGE and whether the amount of the fee in excess of five
percent was an invalid intergovernmental tax on Rockwood
316 Northwest Natural Gas Co. v. City of Gresham
PUD under ORS 221.450. We begin with a brief discussion
of the applicable ordinances and statutes.
II. ANALYSIS
A.  The Ordinances and Statutes
We first set forth the pertinent portions of the City’s
code. As an initial matter, it contains definitions of both the
terms “franchise” and “license.” It defines “franchise” as
“[a]n ordinance or agreement between the city and a fran-
chisee which grants a privilege to use public rights-of-way
within the city for a dedicated purpose and for specific com-
pensation.” GRC 6.30.030. It defines “license” as “[a]n ordi-
nance or other document which grants, on a non-exclusive
basis, permission to the licensee to use public rights-of-way
within the city for a specified and dedicated purpose.” Id.
GRC 6.30.070 provides:
“(1)  License. A license shall be required of any util-
ity that occupies public rights-of-way whether such use is
by placing utility facilities in the public rights-of-way, by
using utility facilities owned or operated by other utilities,
or by attaching or locating utility facilities to, on, upon, or
within the utility facilities of another. * * * No person shall
operate a utility * * * that occupies a public right-of-way
without a license.
“* * * * *
“(6)  Rights granted. No license granted pursuant to
this ordinance shall convey any right, title or interest in
the public rights-of-way, but shall be deemed a grant to use
and occupy the public rights-of-way for limited purposes
and term, and upon the conditions stated in the license.
The person granted the license shall have no property
interest or other right in the license except as provided by
this ordinance. A license granted pursuant to this ordi-
nance is not a contract.
“* * * * *
“(9)  Additional Terms and Conditions. The manager
and applicant may negotiate additional terms and condi-
tions to clarify, enhance, expand or waive the provisions of
this ordinance. The additional terms and conditions may
conflict with the terms of GRC Articles 6.30 and 6.35 with
Cite as 359 Or 309 (2016) 317
the review and approval of council. Such agreement shall
be in writing and signed by both the city and applicant.” [3]
GRC 6.30.110 provides:
“(1)  License Fee.
“(a)  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.
“* * * * *
“(6)  Privilege Tax.
“(a)  Any utility that operates without a license for a
period of 30 days or more within the city and uses public
rights-of-way in the city for other than travel, shall pay a
privilege tax in the amount set by council resolution for the
use of those public rights-of-way.”
Resolution 3056, adopted by the City in May 2011, increased
the license fee authorized by GRC 6.30110(1)(a) from five to
seven percent. That resolution indicated that the fees would
primarily be used to fund “core city-wide services such as
Police, Fire and Parks,” and that a smaller portion would be
used for streetlights.
Thus, the Gresham ordinances contemplate that
any utility that uses its rights-of-way will obtain a license to
do so, that the city will establish the amount of the license
fees by resolution, and that utilities that operate without a
license in the city’s rights-of-way will pay a privilege tax in
an amount set by resolution. Pursuant to those enactments,
the city established a license fee of seven percent.
The utilities argue that license fees in excess of
five percent are prohibited by state statute, and that, to
3
It does not appear that the PGE or Rockwood PUD licenses at issue in this
case contained any additional terms pursuant to this provision. The Northwest
Natural license stated some additional terms made pursuant to this provision
but those provisions did not pertain to license fees.
318 Northwest Natural Gas Co. v. City of Gresham
the extent that the City’s fee exceeds five percent, it is pre-
empted by statute. The current versions of the pertinent
statutes are as follows. As an initial matter, ORS 221.410(1)
provides that, “[e]xcept as limited by express provision or
necessary implication of general law, a city may take all
action necessary or convenient for the government of its
local affairs.” In addition, ORS 221.415 provides:
“Recognizing the independent basis of legislative
authority granted to cities in this state by municipal char-
ters, the Legislative Assembly intends by ORS 221.415,
221.420, 221.450 and 261.305 [concerning general powers
of people’s utility districts] to reaffirm the authority of cit-
ies to regulate use of municipally owned rights of way and
to impose charges upon publicly owned suppliers of electri-
cal energy, as well as privately owned suppliers for the use
of such rights of way.”
ORS 221.420(2) indicates that a city “may”
“(a)  Determine by contract or prescribe by ordinance
or otherwise, the terms and conditions, including payment
of charges and fees, upon which any public utility * * * [or]
people’s utility district * * * 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.
“* * * * *
“(d)  Provide for a penalty for noncompliance with the
provisions of any charter provision, ordinance or resolution
adopted by the city in furtherance of the powers specified
in this subsection.”
ORS 221.450 provides:
“Except as provided in ORS 221.655 [concerning priv-
ilege taxes on distribution utilities], the 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 priv-
ilege 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 high-
ways, or all of them, in such city for other than travel on
Cite as 359 Or 309 (2016) 319
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 per-
cent 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 com-
merce 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 franchise.”
The utilities do not argue that ORS 221.450 fully
preempts the City’s licensing provisions. That position is
consistent with our determination in Rogue Valley Sewer
Services, 357 Or at 455, that “ORS 221.420 and ORS 221.450
do not create a statutory scheme that prevents the state law
and local ordinance from operating concurrently.” The utili-
ties argue that, for the most part, the ordinances are consis-
tent with the statute—that both can operate concurrently—
but that the resolution increasing the license fee under ORS
6.30.110 from five to seven percent is preempted because the
license fee is a type of “privilege tax” and the City is limited
to charging a “privilege tax” 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.
B.  ORS 221.450
We first examine what the legislature meant when
it used the terms “privilege tax” and “without a license.”
When interpreting a statute, our goal is to discern legisla-
tive intent. State v. Gaines, 346 Or 160, 171, 206 P3d 1042
(2009). The meanings of most of the terms of ORS 221.450
are clear, when viewed in context. ORS 221.450 authorizes a
city to levy and collect a “privilege tax” from a utility under
certain conditions—that the utility “is operating for a period
of 30 days within the city without a franchise,” and that the
utility is “actually using” the city’s streets, alleys, highways,
etc., for “other than travel.” The “privilege tax” is “for the use
of those public streets, alleys or highways.” It may be levied
“for each year, or part of each year,” that the utility operates
320 Northwest Natural Gas Co. v. City of Gresham
“without a franchise.” Thus, what a city can do (levy a tax in
specific circumstances) and against whom (a utility without
a franchise) are clear from the text. We now turn to what
the legislature meant by its use of the terms “privilege tax,”
and “without a franhise.”
To interpret a statute, we look to the text and to
how the terms are used in context. As noted, ORS 221.420
indicates that a city may “[d]etermine by contract or pre-
scribe by ordinance or otherwise, the terms and conditions,
including payment of charges and fees, upon which any util-
ity * * * may be permitted to occupy” its streets. That statute
originated in 1911, as part of a comprehensive bill regulat-
ing utilities. See Or Laws 1911, ch 279, § 61(1).4 The 1911
enactment created a commission “to regulate telegraph,
telephone, street railroad, heat, light, water, and power
plants so that a safe and adequate service may be rendered
to the public at reasonable and sufficient rates.” Woodburn v.
Public Service Commission, 82 Or 114, 118, 161 P 391 (1916).
Because existing municipal franchise agreements at the
time of that enactment often set rates to be charged for util-
ity services, questions arose concerning whether the utilities
could charge only the rates established by the commission or
other rates set by their municipal franchise agreements. In
Woodburn, the court rejected the city of Woodburn’s argu-
ment that its home-rule authority permitted it to establish
telephone rates by way of its franchise agreement, conclud-
ing that home-rule authority did not include “any subjects
except those ‘that are purely local and municipal in charac-
ter.’ ” Id. at 124 (citations omitted). The court concluded that
“[t]he right to regulate rates is a matter of general concern,
and does not pertain solely to local municipal affairs.” Id. at
125 (citation omitted); see also Portland v. Public Services
Commission, 89 Or 325, 334-35, 173 P 1178 (1918) (rejecting
similar argument, holding that neither the city’s original
charter granted by the legislature nor its home-rule author-
ity later granted by Article XI, section 2, of the Oregon
Constitution, gave it authority to set utility rates). Similarly,
despite the enactment of the home-rule provision of the
4
The text in the 1911 statute used the language “determine by contract,
ordinance or otherwise.” In 1931, it was changed to “determine by contract or
prescribe by ordinance or otherwise.” Or Laws 1931, ch 103, § 8.
Cite as 359 Or 309 (2016) 321
constitution, this court had, at least in some circumstances,
continued to follow the general common-law principle that
a city had no inherent power to tax. See, e.g., Portland v.
Portland Ry., L. & P. Co., 80 Or 271, 297, 156 P 1058 (1916)
(city lacked authority to enact ordinance imposing tax on
gross receipts of corporations selling electricity).5
ORS 221.450 was originally enacted in 1931, and
no legislative history exists to enlighten us on its original
purpose. It constituted the first section of the following
enactment:
“Section 1.  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. Should such util-
ity fail or neglect to pay such tax the city or town levying
the same may begin any suit or action or proceeding in any
court of the state of Oregon to collect the same.
“Section 2.  That all poles, posts, towers, wires, con-
duits, mains, pipes, rails, tracks, ties, railways, pole lines,
telegraph, telephone or electric transmission lines, or struc-
tures or equipment of any kind, placed in, on, upon, over,
under or beneath any public highway, street or alley of this
state or any municipal corporation, under or by virtue of
any grant, privilege or franchise, shall be removed by the
owners or owner of the same within one year after the expi-
ration of the grant, privilege or franchise, which permitted
the erection or installation of the same, unless further time
be granted by the municipal corporation having authority
so to do, and if not removed within one year after the ter-
mination or expiration of the franchise or such further time
as may be granted by any such municipal corporation, all
and every part thereof shall be forfeited and escheated to
the municipal corporation wherein situated, and where any
5
It was not until Jarvill v. City of Eugene, 289 Or 157, 169, 613 P2d 1, cert
den., 449 US 1013 (1980), that this court fully recognized that home-rule author-
ity included authority to tax. See US West Communications v. City of Eugene,
336 Or 181, 186 n 8, 81 P3d 702 (2003) (discussing this evolution of home-rule
analysis).
322 Northwest Natural Gas Co. v. City of Gresham
such franchise has expired prior hereto or prior to the time
this act shall take effect, then the time for removal shall
run from the date this act becomes effective.
“Section 3.  Any and all franchises, privileges or per-
mits for the use of the public highways, streets or alleys
hereafter granted by any municipal corporation shall not
be granted for a longer term than 20 years, and shall be
subject to the provisions of section 2 of this act.”6
Or Laws 1931, ch 234.
Thus, as originally enacted, it is clear that the stat-
ute did not place an upper limit on what a city could charge
a utility for use of its streets—rather, it authorized cities
to impose a privilege tax that was “not less than” five per-
cent. As enacted, then, the statute could not have had the
effect that the utilities now urge—it did not embody a public
policy of curtailing taxes by municipalities, because it set
no upper limit on the amount of the privilege tax. Or Laws
1931, ch 234, § 1.
The context of the statute includes “other provi-
sions of the same statute and other related statutes.” PGE
v. Bureau of Labor and Industries, 317 Or 606, 611, 859 P2d
1143 (1993). Context also includes statutes enacted simulta-
neously as well as prior versions of the same statute. State
v. McDowell, 352 Or 27, 30-31, 279 P3d 198 (2012). The
context provided by sections 2 and 3, while not definitive,
does support our conclusion that section 1 (ORS 221.450)
was not originally for the purpose of placing limits on the
ability of cities to charge utilities for the use of its streets. In
light of the case law discussed above, there is no reason to
think that the legislature believed that the cities had home-
rule authority to impose a privilege tax; rather, the more
likely intention of the legislature in enacting section 1was
to authorize cities to impose a privilege tax. The final sen-
tence of section 1 related to a city’s efforts to collect taxes
imposed; section 2 related to a utility’s duty to remove vari-
ous items from the public streets of a city “after expiration of
6
Also in 1931, the statute that later was codified at ORS 221.420 was
amended, as part of a larger enactment that created the Public Utilities
Commission. The text continued to make reference to a city’s ability to “deter-
mine by contract or prescribe by ordinance or otherwise” the various terms on
which utilities could use the streets. Or Laws 1931, ch 204, § 1.
Cite as 359 Or 309 (2016) 323
the grant, privilege or franchise,” and provided for forfeiture
of those items to the city if not removed. All of those provi-
sions appear to have been directed toward providing a city
with a remedy in situations where a utility had no franchise
but was continuing to utilize the city’s streets.7
It bears noting that section 1, which ultimately
became ORS 221.450, used the term “without a franchise,”
while section 2 made reference to expiration of a “grant,
privilege or franchise,” and section 3 made reference to “all
franchises, privileges or permits.” (Emphases added.) It is
generally presumed that when the legislature uses the same
term through an enactment, it intended that term to have
the same meaning. State v. Shaw, 338 Or 586, 603, 113 P3d
898 (2005). Further, “in the absence of evidence to the con-
trary, we ordinarily assume that the legislature uses terms
in related statutes consistently.” State v. Cloutier, 351 Or 68,
99, 261 P3d 1234 (2011). Another corollary of that maxim of
construction is that, if the legislature uses different terms
in related statutes, it likely intended them to have different
meanings. Dept. of Transportation v. Stallcup, 341 Or 93,
101, 138 P3d 9 (2006). And finally, inclusio unius est exclusio
alterius—the inclusion of one is the exclusion of the other—
appears to have some bearing here. In light of those maxims,
it would be difficult—although not impossible—to conclude
that the legislature chose to use the single word “franchise”
in section 1 to convey an extremely broad meaning, encom-
passing, as the Court of Appeals held in this case, any “gov-
ernmental grant of a special privilege,” Northwest Natural
Gas Co., 264 Or App at 47, but in the other two sections
of the same legislation, included the term “franchise” with
7
Amicus Oregon League of Cities speculates that the legislation may have
been a result of a dispute wherein a utility continued to use Portland streets
after the expiration of its franchise in 1927. City of Portland v. Pacific Telephone
& Telegraph Co., 5 F Supp 79 (1933). That explanation seems plausible in light of
the context. The question presented in that case was, in some ways, the obverse
of the question presented here. In that case, after a utility had continued to use
its rights-of-way without a franchise, the city sought to collect the privilege tax
authorized by then-newly enacted ORS 221.450, and the utility responded by
arguing that the home-rule provision of the Oregon Constitution divested the leg-
islature of authority to enact the 1931 statute. The court rejected that argument,
concluding that home-rule authority pertained solely to local municipal matters,
and the constitutional provision did not “withdraw from the legislative assembly
the power to pass laws general in their operation and character, or which relate
to municipal highways and affect their public use.” Id. at 80.
324 Northwest Natural Gas Co. v. City of Gresham
“grant” and “privilege” in section 2, and with “privileges”
and “permits” in section 3. That is, if “franchise” was meant
to convey so broad of a meaning to include any government
“grant” or “privilege” or “permit,” it would seem unlikely that
the legislature would have felt the need to include “grant,”
and “privilege” and “permit” in addition to “franchise” in the
other sections of the act.
In 1933, the legislature changed the “one year” period
in the statute to 30 days, and also changed “not less than five
percent” to “not exceeding five percent.” Or Laws 1933, ch 24,
§ 1; ch 466, § 1. At that point, by making the five percent
a maximum rather than a minimum, it is at least possible
that the legislature then intended to curtail the amount of
fees that cities could charge utilities for use of rights-of-way.
It bears noting, however, that sections 2 and 3 of the same
enactment continued to refer, respectively, to “grant, privi-
lege or franchise” and “franchises, privileges or permits.” Or
Laws 1933, ch 466 §§ 2, 3.8 We have no legislative history to
further guide us with respect to the 1933 changes.
C.  “Privilege Tax”
The term “privilege tax” has long been used in
various legal contexts, including the context of municipal
utility franchises. The parties offer a number of definitions,
focusing on how that term was used when the statute was
originally enacted. A “privilege tax” generally is a “tax on
the privilege of carrying on a business for which a license
or franchise is required.” Black’s Law Dictionary, 1422 (3d
ed 1933). That broad of a definition is not particularly help-
ful, because whether something is considered a “privilege
tax” depends largely on the context in which the term is
used. For example, that dictionary definition would not fit
well in the present circumstance, as one thing is clear about
ORS 221.450—the “privilege tax” at issue there may be lev-
ied only against utilities operating “without a franchise,”
not against utilities operating with a franchise. The term
8
Although ORS 221.450 has undergone several changes since the 1930s, those
changes did not directly affect how the terms “privilege tax” and “without a fran-
chise” were used in the statute. A 1987 change in ORS 221.420 and ORS 221.450
which added people’s utility districts to the utilities covered, see Oregon Laws 1987,
chapter 245, sections 2 and 3, is discussed below. 359 Or at 331-333, 339-342.
Cite as 359 Or 309 (2016) 325
“privilege tax” is generic enough that it often must be evalu-
ated specifically in light of its context. See, e.g., Pacific First
Federal v. Dept. of Rev., 308 Or 332, 779 P2d 1033 (1989)
(corporate excise tax considered a privilege tax); Multnomah
Kennel Club v. Dept. of Rev., 295 Or 279, 286-87, 666 P2d
1327 (1983) (statute imposing license fee in lieu of “all other
licenses and privilege taxes” did not preclude county from
imposing business income tax, because it was not a license
fee or privilege tax); Houck & Sons v. Ellis, 229 Or 21, 29,
336 P2d 166 (1961) (license fee considered a “privilege tax”).
The utilities cite Northwest Auto Co. v. Hurlburt,
104 Or 398, 408, 207 P 161 (1922) for the proposition that
“privilege tax” under Oregon law includes license fees:
“The courts in speaking of financial exactions of the
character herein discussed have sometimes called them
‘licenses,’ and sometimes ‘privilege taxes.’ Again, they are
sometimes spoken of as ‘license fees’ or ‘license taxes’; but,
by whatever name they may be called, they partake of the
nature of a tax in many respects, and the designation given
in the statute is immaterial, the courts being interested
in the substance rather than in the name. In Briedwell v.
Henderson, [99 Or 506, 195 P 575 (1921)], we held it to be
properly called a privilege tax, the result of this tax being
substantially a license, a certificate that the person pay-
ing the sum required was permitted to use a particular car
upon the highway for the whole or what time might remain
of the current year.”
Northwest Auto Co. stands for the unremarkable proposition
that, regardless of how something is labeled, it may function
as a “privilege tax,” and that the labeling of something as
a license fee does not preclude it from being considered a
privilege tax.9 It does not follow, however, that everything
9
In Northwest Auto Co., an auto dealer argued that it should be exempt
from paying personal property tax on autos in its inventory, on the ground that
when they sold, their new owners would need to pay license fees that, under state
statute, were “in lieu of all other taxes and licenses, except municipal license
fees.” 104 Or at 404. After examining the pertinent statutes (which did not actu-
ally contain the term “privilege tax”) the court concluded that the licensing fee
scheme did not preclude taxation of the automobiles in the dealer’s inventory.
Id. at 413. We think Northwest Auto Co. supports the general conclusion that
the determination of the nature of a challenged tax or fee depends largely on
context—it provides no definitive answer as to what is or is not a “privilege tax”
or a “license fee.”
326 Northwest Natural Gas Co. v. City of Gresham
designated as a license fee is a “privilege tax,” regardless
of the context in which those terms are used. See, e.g., US
West Communications v. City of Eugene, 336 Or 181, 187, 81
P3d 702 (2003) (“ORS 221.515 limits only the city’s ability
to recover a privilege tax for the use of public rights-of-way”
but does not limit a city’s ability to impose other license and
registration fees or taxes on telecommunications carrier).10
The legislature’s use of the term “privilege tax” in
the present context is unremarkable, as that term often is
used in the context of a “tax on the privilege of carrying
on a business for which a license or franchise is required,”
Black’s Law Dictionary at 1422, and ORS 221.450 specifi-
cally concerns a utility’s use of the “streets, alleys or high-
ways” of a city—a use for which a license or franchise gener-
ally is required. See, e.g., ORS 221.420(2); GRC 6.30.070(1).
“Privilege tax” could, therefore, encompass both franchise
fees and license fees for the use of city streets within its
meaning—except that we know from the inclusion of the
words “without a franchise” in the statute that the legis-
lature did not intend to encompass franchise fees, because
it authorized the privilege tax only with respect to utilities
operating without a franchise.11 However, nothing in the
text, context, and history of the statute, or in the treatises
or case law described above, indicates that the legislature
10
Although the issue presented in US West Communications bears some gen-
eral similarity to the issue raised here, ORS 221.515—at issue in that case—dif-
fers significantly from ORS 221.450 in both origin and wording. For example,
ORS 221.515 specifies that an entity that pays the “privilege tax” authorized
by that statute for use of a city’s public rights-of-way “shall not be required to
pay any additional tax or fee on the gross revenues that are the measure of the
privilege tax.” We held that ORS 221.515 did not preempt the challenged fee at
issue in that case, because the fee was not imposed for the use of the city’s public
rights-of-way. 336 Or at 187.
11
We note that in Rogue Valley Sewer Services, 357 Or at 447, we held that
a five percent franchise fee imposed on a sanitary authority was not, in fact, an
“intergovernmental tax,” and that a city had home-rule authority to impose such
a fee. We based our conclusion that it was not a tax on the nature of the charge—
it was to be used to cover the costs associated with the sewer service’s use of
the rights-of-way and maintenance and repair of city-owned facilities within the
rights-of-way, rather than “for general public purposes or to raise revenue for
such purposes.” That aspect of the Rogue Valley Sewer Services opinion is dis-
cussed in more detail below. See 359 Or at 347-348. For purposes of our present
discussion, we simply note that whether or not something is an “intergovernmen-
tal tax” does not answer the question of what the legislature meant by “privilege
tax” in ORS 221.450.
Cite as 359 Or 309 (2016) 327
would have intended a city’s imposition of the type of fee at
issue here on a utility for use of the city’s public rights-of-
way to be considered anything other than a “privilege tax”
as that term is used in ORS 221.450. That is, it appears to
fall within the standard legal definition of “privilege tax”—a
tax on “the privilege of carrying on a business for which a
license or franchise is required.” Black’s Law Dictionary at
1422. We therefore conclude that the fee at issue here is the
type of charge the legislature intended to be considered a
“privilege tax” for purposes of ORS 221.450, if it is imposed
on a utility that is operating “without a franchise.”
D.  “Without a Franchise”
That leads us to the second part of our inquiry:
What did the legislature intend when it used the phrase
“without a franchise”? “Franchise” has a fairly well-defined
meaning within the context of municipal law. In its deci-
sion, the Court of Appeals quoted and relied on an extremely
broad definition of franchise:
“ ‘[F]ranchises are special privileges conferred by the gov-
ernment on individuals, and which do not belong to the cit-
izens of the country generally of common right.’ Elliott v.
City of Eugene et al., 135 Or 108, 113, 294 P 358 (1930). See
also John Bouvier, 2 Bouvier’s Law Dictionary and Concise
Encyclopedia 1299 (3d ed 1914) (defining franchise as ‘[a]
special privilege conferred by government on individuals,
and which does not belong to the citizens of the country
generally by common right’); Black’s Law Dictionary 515
(1889) (using same definition and adding, ‘[i]n this country,
it is a privilege of a public nature, which cannot be exer-
cised without a legislative grant’).”
Northwest Natural Gas Co., 264 Or App at 44-45. However,
the 1914 Bouvier text also indicated that there were differ-
ences between English common law and American law, and
that American “franchises spring from contracts between
the sovereign power and private citizens, made upon a valu-
able consideration, for purposes of public benefit as well as
of individual advantage.” 2 Bouvier’s Law Dictionary at 1299
(citing 4 Thomp. Corp. § 5335 (emphasis added)).
That definition is similar to one found in another
early dictionary, defining a franchise as:
328 Northwest Natural Gas Co. v. City of Gresham
“A species of incorporeal hereditament[12] springing from a
contract between the state and a private citizen or citizens,
made upon valuable consideration, for purposes of public
benefit as well as individual advantage.”
James A. Ballentine, Law Dictionary with Pronunciations
525 (1930) (emphasis added). In McQuillin’s treatise on
municipal law, the author states:
“The term franchise as it is ordinarily used in the deci-
sions and by text writers, and as used in this chapter,
means the right granted by the state or a municipality to
an existing corporation to do certain things that a corpo-
ration or individual otherwise cannot do, such as the right
to use a street or alley for a commercial or street railroad
track, or to erect thereon poles or string wires for telegraph,
telephone, or electric light purposes, or to use the street or
alley underneath the surface for water pipes, gas pipes, or
other conduits.
Eugene McQuillin, 12 The Law of Municipal Corporations
§ 34:3, 24 (3d ed 2006) (McQuillin). The treatise goes on to
note that, under the law of some jurisdictions, a city’s grant
of such privileges may be considered a mere license, but in
most jurisdictions are considered franchises. Id., § 34:4 at
25; 34:6 at 31-32. It further provides:
“When the right to use the streets is granted and accepted
and all conditions imposed incident to the right performed,
it ceases to be a mere license and becomes a valid contract
* * *. However, until an ordinance granting a franchise is
accepted, the franchise lacks the essential elements of a
contract. It is a mere proposition.”
Id. § 34:5 (emphasis added). Thus, the view expressed in
McQuillin is that the type of arrangement whereby a city
allows a utility to use its streets for purposes of providing
utility services is generally known as a franchise, although
it might be a mere license. In sum, the more prevalent use
of the term “franchise” is to describe a type of agreement
between a municipality and a utility—something that is
granted and accepted—that ceases to be a mere license and
becomes a valid contract.
12
An incorporeal hereditament is “a right issuing out of a corporate thing
(whether real or personal) or concerning, or annexed to, or exercised within, the
same.” James A. Ballentine, Law Dictionary with Pronunciations 628 (1930).
Cite as 359 Or 309 (2016) 329
The Court of Appeals in this case looked to much
of the same source materials, and noted, based in part
on the case law discussed below, that under Oregon
law (and consistent with the majority rule described in
McQuillin),
“permission given by municipal ordinance to a private cor-
poration 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.”
Northwest Natural Gas Co., 264 Or App at 45 (quoting
Western Union Tel. Co. v. Hurlburt, 83 Or 633, 638, 163 P
1170 (1917)). However, it went on to conclude, nonetheless,
that if “franchise” was meant to refer only to a traditional
contractual arrangement, “then ORS 221.420 would not
also have referred to ordinances ‘or otherwise’ as means by
which a city could prescribe the terms and conditions under
which a public utility could occupy city streets.” Northwest
Natural Gas Co., 264 Or App at 47. The Court of Appeals’
analysis suggests that “franchise” has a broader meaning
than “contract” because cities may make arrangements with
utilities not only through contracts but by ordinance and
otherwise pursuant to ORS 221.420. Therefore, it reasoned,
“without a franchise” as used in ORS 221.450 means, in
essence, without an arrangement with the city by contract,
ordinance or otherwise—including a licensing arrangement
such as that set forth in the Gresham ordinances described
above. That reasoning seems to assume that if “franchise”
means something broader than a traditional “contract” and
is something that can be achieved by way of an ordinance,
then it necessarily must encompass the type of ordinances
at issue here, setting forth a licensing fee scheme. While the
Court of Appeals’ premise seems undoubtedly correct—a
franchise is not always created by way of a traditional
contract—its conclusion that a “franchise” is created by way
of ordinances authorizing a city to issue licenses requires
closer examination.
It is clear, from Oregon cases as well as numerous
cases discussed in McQuillin, that franchises can be cre-
ated by ordinance instead of by a traditional contract. It is
330 Northwest Natural Gas Co. v. City of Gresham
less clear that ordinances that establish generic licensing
schemes, such as the one at issue here, necessarily create
a franchise whenever a license is issued. Historically, it
was a common practice for a municipality to enact an ordi-
nance granting a franchise to a specific utility, which, as
noted above, became a contract when accepted by the utility.
See, e.g., Hillsboro v. Public Service Commission, 97 Or 320,
324-25, 187 P2d 617 (1920) (city enacted an ordinance
granting a franchise, and “when the franchise was granted
by the city and accepted by the public service corporation,
it was a valid contract”); Newsom v. City of Rainier, 94 Or
199, 202, 185 P 296 (1919) (concerning a “franchise embod-
ied in” an ordinance that specifically related to the provision
of water services by the defendant and contained provisions
for termination); Benbow v. The James Johns, 56 Or 554,
556, 108 P 634 (1910) (discussing a city ordinance granting
a franchise to a ferry transportation company, reserving to
the city a percentage of the earnings). In fact, it is not clear
that any of the municipal franchises discussed in pre-1931
Oregon cases were created by a licensing scheme such as the
one at issue in this case, as opposed to ordinances or reso-
lutions that granted a specific franchise to a specific utility
company by way of agreement.13
Finally, our prior case law, while not specifically
addressing the meaning of franchise, does state that ORS
221.450 concerns franchise agreements, thus indicating a
narrower view of “franchise” than that taken by the Court
of Appeals. In US West Communications, 336 Or 181, we
addressed related but substantially different statutes con-
cerning a city’s imposition of a privilege tax on a telecommu-
nications carrier. In doing so, we observed:
“If 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 permit-
ted to occupy the streets, highways or other public prop-
erty 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.”
13
The record in this case discloses that prior franchise agreements between
some of the utilities and the City of Gresham were achieved by ordinance, as well.
Cite as 359 Or 309 (2016) 331
Id. at 183 n 1 (brackets in original; emphasis added).
Although the parties recognize that that statement is dic-
tum, the utilities argue that it nonetheless evinces a sound
understanding of the manner in which the statutes were
meant to work.
That statement from US West Communications,
although dictum, was implicitly endorsed in our recent deci-
sion in Rogue Valley Sewer Services. Rogue Valley Sewer
Services primarily concerned an issue somewhat similar to
that raised by Rockwood PUD in its alternative argument—
whether a city could impose a “franchise fee” on a provider of
sewer services. The plaintiff in that case, unlike the utilities
in the present case, was not among the utilities specifically
included in ORS 221.420(2)(a) and ORS 221.450. The plain-
tiff argued that ORS 221.420 and ORS 221.450 established
the exclusive basis on which a city could impose fees on util-
ities for use of rights-of-way and therefore the city’s “fran-
chise fee” was preempted. We stated:
“[T]he legislature has provided a framework for cities to col-
lect 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 utilities have not entered
into an agreement for a different fee arrangement, the leg-
islature provides for a five percent fee. ORS 221.450.”
Rogue Valley Sewer Services, 357 Or at 450 (emphasis added).
We concluded that nothing in those statutes indi-
cated a legislative intent to preempt a city’s imposition of a
franchise fee on a provider of sewer services. In the course of
addressing the plaintiff’s argument, we quoted from the leg-
islative history of a 1987 amendment to ORS 221.45014 that
sheds some light on the legislative intent of ORS 221.450:
“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,
14
The 1987 amendments to the statute are discussed more fully below. 359
Or at 339-342.
332 Northwest Natural Gas Co. v. City of Gresham
“ ‘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, Apr 22, 1987, Tape 122, Side B (state-
ment of Larry Shaw).”
Rogue Valley Sewer Services, 357 Or at 452 (brackets and
ellipses in Rogue Valley Sewer Services; emphasis added).
That legislative history, although scarcely defini-
tive, does suggest several things. First, it suggests that the
legislative intent we have gleaned regarding the initial 1931
enactment—that it was not to establish what a city could
charge to utilities for use of rights-of-way but to assist cit-
ies in negotiating agreements with utilities for their use of
rights-of-way—had not altered over the course of half a cen-
tury. That is, the assumption of Shaw’s testimony was that
a five percent “penalty” privilege tax created a sufficient
incentive for utilities to work out franchise agreements with
the cities they served. Second, the broad phrase “franchise
regulation ordinance or agreement,” used by Shaw in his
testimony quoted above, does not suggest an extremely nar-
row view of the term “franchise” as meaning a traditional
“contract,” but it does suggest, particularly given that it
was used with the terms “negotiate” and “mutually regu-
late it together,” what our case law has suggested: The word
“franchise” as used in ORS 221.450 refers to an agreement.
See Rogue Valley Sewer Services, 357 Or at 450; US West
Communications, 336 Or at 183 n 1.
On the other hand, another statement made by
Shaw to the 1987 committee considering the amendments
to ORS 221.450 could support a conclusion that Shaw did
not make any distinction between a fee imposed through a
negotiated franchise agreement and a licensing fee. As we
noted in Rogue Valley Sewer Services, the 1987 amendments
came about because
“the legislature was reacting to the then-recent circuit
court decision in Columbia River People’s Utility District
Cite as 359 Or 309 (2016) 333
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.’ ”
357 Or at 456 n 4. The 1987 legislation amended ORS
261.305, governing PUDs, and added a provision specifi-
cally allowing them to enter into franchise agreements with
cities, as well as adding PUDs to ORS 221.420 and ORS
221.450. Shaw was the attorney who represented St. Helens
in the underlying litigation. He explained some of the back-
ground of the dispute to the committee as follows:
“[U]nder the arrangement before this lawsuit * * * both
private utility companies that sell electricity and PUDs
that sell electricity pay the same three and a half percent
of gross revenue franchise type of fee, whatever you call it.
And that amount as determined in a 1967 ruling by the
PUC commissioner to decide what would be a fair amount.
“And one city, I believe Portland, charges a five percent
licensing fee and therefore, as a result of that, PUC commis-
sion has to consider the one and a half percent additional
as a tax, and the three and a half percent is considered a
franchise fee.”
Tape Recording, House Committee on Environment and
Energy, HB 3021, Apr 22, 1987, Tape 122, Side B (statement
of Larry Shaw) (emphasis added).15 Thus, although Shaw
spoke to the committee at one point about franchises as
negotiated agreements, he also appeared to draw no distinc-
tion, at least for purposes of describing the PUC’s treatment
of fees charged by cities to utilities, between franchise fees
and licensing fees. That legislative history is, ultimately, not
particularly helpful here, both because the legislature was
not considering any nuanced difference between franchises
and licenses at that point, and because it does not point
15
The PUC order to which Shaw was referring may be what is currently
codified at OAR 860-022-0040(1), (6). It provides that “all business or occupation
taxes, license, franchise or operating permit fees, or other similar exactions” on
certain utilities are allowed as operating expenses for rate-making purposes to
the extent that they do not exceed 3.5 percent, and to the extent such fees exceed
3.5 percent “such excess amount shall be charged pro rata to energy customers
within said city and shall be separately stated on the regular billings to such
customers.”
334 Northwest Natural Gas Co. v. City of Gresham
definitively toward a broader or narrower view of what the
term “franchise” was meant to cover in ORS 221.450.
As the city urges and as the Court of Appeals held,
the term “franchise” sometimes may carry an extremely
broad meaning of any “special privileges” conferred by a
government entity that do not belong to the citizens in gen-
eral. Northwest Natural Gas Co., 264 Or App at 44. Under
that broad definition, a utility operating under a license
might be said to have such a “special privilege.” On the
other hand, we believe that the weight of the authority cited
above supports a conclusion that the term often is used more
narrowly to describe negotiated agreements between a gov-
ernment entity and another entity, for their mutual advan-
tage. 359 Or at 326 (quoting 2 Bouvier’s Law Dictionary
1299, Ballentine’s Law Dictionary with Pronunciations at
525). Such a negotiated agreement may take the form of a
contract or an ordinance granting a franchise that, when
accepted by the utility, essentially functions as a contract.
See, e.g., McQuillin, 12 The Law of Municipal Corporations
§ 34:5; Newsom, 94 Or at 202. Moreover, when the legisla-
ture originally enacted ORS 221.450, it used the word “fran-
chise” alone in that statute, but in the two related statutes
that were part of the same enactment, it used the phrases
“grant, privilege or franchise,” and “franchises, privileges
or permits.” Or Laws 1931, ch 234, §§ 2, 3. Had the legis-
lature intended the word “franchise” to mean any “special
privilege,” as the Court of Appeals held, it seems unlikely
that it would have felt the need to include the word “priv-
ilege” (or “grant” or “permit” for that matter) in the other
subsections of the act. Additionally, as noted, in both of the
cases in which this court has touched on the meaning of
ORS 221.450, we have indicated that it concerns franchise
agreements. Rogue Valley Sewer Services, 357 Or at 450; US
West Communications, 336 Or at 183 n 1.
It appears that the statute was intended to encour-
age utilities to negotiate franchises with cities, or be penal-
ized by having to pay a non-negotiated “privilege tax.” The
text read in context, as well as our case law, both point to the
conclusion that the legislature, in using the term “without
a franchise” in ORS 221.450, was referring to a negotiated
franchise agreement. In sum, we conclude that the Court of
Cite as 359 Or 309 (2016) 335
Appeals erred in reading “franchise” so broadly as to encom-
pass the type of license fee established by GRC 6.30.110 and
implemented by Gresham Resolution 3056.16
To summarize: (1) As to the meaning of “privilege
tax” as used in ORS 221.450, we conclude that the “license
fee” established by the City to raise revenues primarily to
fund city-wide services such as police and fire departments,
falls within the purview of a “privilege tax” as that term is
generally used in municipal law and has specifically been
used in Oregon law; (2) As to the meaning of “without a
franchise” as used in ORS 221.450, we conclude that the leg-
islature used the term “franchise” to describe a negotiated
agreement between a utility and a city that functions as a
contract. Neither the text of ORS 221.450 viewed in context
or Oregon case law suggests that “franchise,” as used in this
context, should be read so broadly as to encompass a licens-
ing scheme that involves the unilateral imposition of fees.
E. Preemption
As noted, the issues presented also concern whether
the City’s authority to impose a seven percent privilege tax
on the utilities in this case is preempted by the provisions
of ORS 221.450. These issues implicate the home-rule provi-
sion of the Oregon Constitution. As we recently stated:
“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
district as to all local, special and municipal legislation of
16
We also note that, although it does not reflect on the legislature’s intent in
using the term “franchise” in ORS 221.450, the Gresham ordinances that under-
lie this dispute do not define a license and a franchise as the same thing. See GRC
6.30.030 (defining “franchise” as an ordinance or agreement granting al privilege
to use a public right-of-way for “specific compensation” and defining “license” as
an “ordinance or other document that grants permission for the licensee to use
public rights-of-way for a specified purpose).
336 Northwest Natural Gas Co. v. City of Gresham
every character in or for their municipality or district.’ Or
Const, Art IV, § 1(5).”
Rogue Valley Sewer Services, 357 Or at 445. The purpose of
the home-rule provision is to “allow the people of the locality
to decide upon the organization of their government and the
scope of its powers under its charter without having to obtain
statutory authorization from the legislature.” LaGrande/
Astoria v. PERB, 281 Or 137, 142, 576 P2d 1204, adh’d to on
recons., 284 Or 173, 586 P2d 765 (1978). Municipal enact-
ments, however, must be compatible with state law. To make
that determination,
“the first inquiry must be whether the local rule in truth
is incompatible with the [state] legislative policy, either
because both cannot operate concurrently or because the
legislature meant its law to be exclusive. It is reasonable
to interpret local enactments, if possible, to be intended to
function consistently with state laws, and equally reason-
able to assume that the legislature does not mean to dis-
place local civil or administrative regulation of local condi-
tions by statewide law unless that intention is apparent.”
LaGrande/Astoria, 281 Or at 148-49. As for the latter deter-
mination, a statute will displace a local ordinance only
“where the text, context, and legislative history of the stat-
ute ‘unambiguously expresses an intention to preclude local
governments from regulating’ in the same area as that gov-
erned by the statute.” Rogue Valley Sewer Services, 357 Or
at 450-51 (quoting Gunderson, LLC v. City of Portland, 352
Or 648, 663, 290 P3d 803 (2012) (emphasis in Rogue Valley
Sewer Services)).
Because the analysis of the home rule question dif-
fers as to the private utilities and Rockwood PUD, we first
set forth the general home rule analysis concerning ORS
221.450, then turn to Rockwood PUD’s alternative argu-
ment that the license fee, to the extent that it exceeds five
percent, is nonetheless an impermissible intergovernmental
tax for which no statutory authority exists.
If ORS 221.450 was intended to have a preemptive
effect on cities’ imposition of “privilege taxes” in the form
of license fees of this sort, then the utilities—and the trial
court—would be correct that, to the extent that Resolution
Cite as 359 Or 309 (2016) 337
3056 imposes such a fee in excess of five percent, it exceeds
the City’s home-rule authority and is invalid. See LaGrande/
Astoria, 281 Or at 148-49. We now turn to whether ORS
221.450 has such a preemptive effect. We reiterate the test
as stated in LaGrande/Astoria: “The first inquiry must
be whether the local rule in truth is incompatible with the
[state] legislative policy, either because both cannot operate
concurrently or because the legislature meant its law to be
exclusive.” Id. We must discern an unambiguous expression
of legislative intent to preclude local legislation on the mat-
ter. Rogue Valley Sewer Services, 357 Or at 450-51.
As described above, both the comprehensive regula-
tion of public utilities by state law and the ability of cities to
adopt charters establishing their home-rule authority came
about early in the last century in Oregon. Although there
was a significant amount of litigation in that era concern-
ing the respective authority of cities and the state to set the
rates for public utilities, see 359 Or at 320-321, those cases
do not provide definitive guidance as to the issue presented
here; that is so because (1) the 1911 utilities legislation had
specifically provided (in what is now ORS 221.420(2)) that
cities had the ability to charge fees for a utility’s use of the
city’s rights-of-way, thus removing that issue as a poten-
tial bone of contention; and (2) cities were generally under-
stood not to have home-rule authority to enact taxes on the
receipts of utilities unless specifically permitted to do so by
the state legislature.
With that background in mind, we revisit the 1931
enactment of ORS 221.450. With respect to the home rule
question, there would seem to be three possibilities concern-
ing the original legislative intent of this statute. First, it
might be—consistent with the utilities’ view—that the leg-
islature intended the statute to have a preemptive effect
on otherwise-permissible municipal legislation, requiring
a “floor” minimum five percent privilege tax. That inter-
pretation is, frankly, so unlikely as to be unworkable with
respect to the original 1931 enactment. As noted, the legis-
lation “authorized” cities to leverage the privilege tax “in an
amount of not less than 5 per cent annually.” The use of the
term “authorized” is inconsistent with the notion that the
legislature was, instead, trying to enact a restriction rather
338 Northwest Natural Gas Co. v. City of Gresham
than an authorization. And while, in the abstract, it might
be possible to theorize that the legislature was concerned
that cities, having home-rule authority to charge privilege
taxes, should be prevented from charging such taxes in
amounts less than five percent, we can think of no feasible
reason why it would do so.
Second, the legislature could have understood that
home-rule cities already had authority to impose privilege
taxes, but enacted the legislation in order to permit non-
home-rule cities to do so, or to allow home-rule cities to do
so even if their charters did not specifically grant them such
authority. That view is, at least, consistent with the lan-
guage of the enactment that the legislature was “authoriz-
ing” cities to do something they otherwise could not do. That
view, however, is undermined by the broad language that
“[t]he city council or other governing body of every incorpo-
rated city and town in Oregon hereby is authorized” to levy
such privilege taxes. (Emphasis added.) The language of
the enactment did not suggest that the legislature intended
ORS 221.450 to apply to a subset of cities, depending on the
nature of their charters, but intended to “authorize” a privi-
lege tax that could be levied by “every” city.
The third possibility, and in our view the most plau-
sible one in light of the textual difficulties with the prior two
approaches and in light of the history described above, is
that the 1931 legislature believed, given the early case law
and its prior comprehensive legislation concerning regula-
tion of utilities, that the legislature (but not the cities) had
the ability to authorize cities’ imposition of privilege taxes
on utilities. In sum, the legislature did not consider what,
if any, preemptive effect its enactment would have on cities’
home-rule authority because it understood, based on the law
as it existed at that time, that the cities’ home-rule authority
did not extend to the regulation of utilities. See, e.g., Coates
v. Marion County, 96 Or 334, 339, 189 P 903 (1920) (presum-
ing that, when a legislature enacts a statute, it does so “with
full knowledge of the existing condition of the law and with
reference to it.”).
Little can be discerned about the 1933 amendment
that changed the five percent from a “floor” to a “ceiling,”
Cite as 359 Or 309 (2016) 339
other than that the change made the theory that the leg-
islature intended to preempt local enactments somewhat
more plausible. However, the statute continued to be framed
in terms of an authorization rather than a restriction. We
conclude that that authorization is not an unambiguous
expression of an intent to “preclude local governments from
regulating in the same area as that governed by the stat-
ute” Rogue Valley Sewer Services, 357 Or at 450-51.
We now return to the 1987 amendments to ORS
221.450, which, as noted, made substantive changes to the
statute in order to address pending litigation concerning
the ability of cities to collect fees from PUDs. As a prelim-
inary matter, we note that it was the 1987 enactment that
added ORS 221.415 to the context in which we evaluate ORS
221.450. Or Laws 1987, ch 245, § 1. In particular, we reit-
erate that, in ORS 221.415, the legislature “[r]ecogniz[ed]
the independent basis of legislative authority granted to cit-
ies” in their charters, and intended its enactment, including
the revisions to ORS 221.420 and ORS 221.450, “to reaffirm
the authority of cities to regulate use of municipally owned
rights of way[.]” (Emphasis added.) In ORS 221.415, then,
we find the first explicit indication that the legislature may
have viewed a city’s ability to collect fees for the use of its
rights-of-way as stemming from their municipal charters
rather than from state law.
Again, as of 1987, this court’s approach to home
rule questions had changed significantly from what it had
been in the early 1900s. That is, LaGrande/Astoria had laid
out the modern preemption analysis and Jarvill had clari-
fied the nature of cities’ home-rule authority with respect to
the imposition of taxes. We reiterate the context for the 1987
amendments as well: Although ORS 221.420 and 221.450
had remained virtually unchanged for half a century, the
regulation of utilities had changed, and PUDs, which are a
type of municipal corporation, had become more common.
The specific issue that the legislature addressed in the 1987
legislation that amended ORS 221.450 did not concern privi-
lege taxes, but rather concerned a broader question whether
cities could charge any fees at all for PUD’s use of rights-of-
way. See 359 Or at 331-32 (describing litigation underlying
340 Northwest Natural Gas Co. v. City of Gresham
1987 statutory amendments); Rogue Valley Sewer Services,
357 Or at 452 (same).
The 1987 legislation, which was introduced by
Representative Bruce Hugo, was considered by the House
Committee on Environment and Energy on April 22, 1987,
when the committee held a public hearing and work ses-
sion, and again in a work session on April 29, 1987. At the
April 22 session, Representative Hugo told the committee
that, although PUDs had been paying franchise-type fees to
cities for many years pursuant to intergovernmental agree-
ments, the trial court ruling in the St. Helens case called
into question the abilities of cities to collect such fees and
that in the wake of that ruling, numerous PUDs through-
out the state had stopped paying such fees. Tape Recording,
House Committee on Environment and Energy, HB 3021,
Apr 22, 1987, Tape 122, Side B (statement of Rep. Hugo).
Also during that hearing, Shaw explained to the committee
that, although the litigation was ongoing—apparently an
appeal of the circuit court decision was pending—the legis-
lature should not await the outcome of the litigation because
the amount of revenue at stake for the cities was significant.
Id. (statement of Larry Shaw). There was some discussion
as to whether, or to what extent, such legislation should be
retroactive. Shaw opined that, “if you took out retroactivity,
the, this bill would only affect prospective payment and the
lawsuit would affect the home rule issues and the—and the
retroactive payment, and it may or may not be settled by
this bill.” Id. A representative for the Oregon People’s Utility
District Association opposed the bill, stating that it was an
“attempt to intervene in the orderly process of the court and
would have the legislature preempt the Court of Appeals.”
Tape Recording, House Committee on Environment and
Energy, HB 3021, Apr 22, 1987, Tape 123, Side B(statement
of Marion Hemphill). A representative from the League of
Oregon Cities indicated that the bill would “reaffirm” the
ability of the cities to charge fees for the use of rights-of-way.
Id. (statement of Phillip Fell). And finally, a representative
of Oregon Rural Electric Cooperative Association, (electrical
cooperatives were included along with PUDs in the proposed
amendments) indicated that the cooperatives did not oppose
the bill, adding that because “the bill does not propose to
Cite as 359 Or 309 (2016) 341
increase the maximum allowable tax rate, ORECA sees no
substantive change to the way we do business.” Id. (state-
ment of Sara Baker-Sifford). To summarize, some suggested
that enacting the legislation might not affect the pursuit of
the lawsuit concerning the “home rule” question, whereas
others suggested it would effectively “preempt” the ongoing
litigation. The witnesses also had varying opinions as to the
extent the legislation “reaffirmed” cities’ pre-existing rights.
And at least one witness, Baker-Sifford, believed that some
pre-existing law (it is unclear whether she was referring to
ORS 221.450) governed the maximum rate that a city could
charge for use of its rights-of-way and that the proposed leg-
islation did not affect that law.
In the subsequent work session on the bill, as the
committee was amending the draft legislation to remove
proposed retroactivity provisions, Representative Ron
Eachus asked what effect the legislation would have on the
pending litigation. Mr. Hemphill, on behalf of the Oregon
PUD Association, indicated that there had been discussions
that the appeal would be dismissed if the bill were to be
enacted, but Mr. Shaw, on behalf of St. Helens, indicated
that, although the appeal would have been mooted by ret-
roactive legislation, it was not clear that the bill as then
drafted would do so. Tape Recording, House Committee on
Environment and Energy, HB 3021, Apr 29, 1987, Tape 138,
Side A. The following exchange then took place:
“REP EACHUS:  If the bill passed without the retroac-
tive, it would still clarify the question of—clarify part of
the question. It would make it permissive. It would be clear
that you could do this.
“REP HUGO:  Right.
“REP EACHUS:  You’re not prohibited from it. Doesn’t say
you have to do it, but you can do it.
“Question then that remains is status of the current
lawsuit. * * * If the bill passes, if the lawsuit is pursued, is
there anything else that lawsuit would affect, other than
the retroactive nature?”
Shaw indicated that the lawsuit “could be a land-
mark home rule case if it’s carried forward,” and went on
342 Northwest Natural Gas Co. v. City of Gresham
to discuss some of the details of the underlying case that
would need to be addressed in any negotiated settlement.
Id. Representative Eachus then asked whether, if “you get
a final determination on the lawsuit, does the lawsuit then
have any effect on the impact of the legislation? Is there any
[issue] in the lawsuit that would, if it is finally decided, set
up a situation different than what we had anticipated when
we passed this bill?” Id. Shaw indicated that it would not,
and Hemphill opined that the case would be mooted. Id. A
discussion ensued:
“REP HUGO:  The home rule issue says that a city has
the right to levy a franchise fee. This bill says that the city
or the governing body may levy or collect. So if the cities
want to go ahead and pursue the home rule thing, they’ve
just left this track and gone on another spur. They’re on
something a little, quite a bit, bigger. What this simply says
is that the cities may levy a fee.
“REP EACHUS:  Well, I guess that’s what I’m trying to
figure out, is if we say they may, and then the court case
that says they have a right to, is there a difference?
“REP HUGO:  Absolutely.
“REP EACHUS:  And does that mean that the court case
has gone further, much further, than we did here, which
is why if the purpose of this bill is to, is to really settle
the issue and be permissive, and we don’t drop the lawsuit,
then, then we’re saying that, I’m not sure that that’s what
we want to do. What we would be saying is it may. If we
agree it’s may, and were going to leave it up to the court to
decide whether it’s more than may. And—
“REP HUGO:  I think that’s correct, Representative
Eachus. What my intention was it to clarify a city does
have the right, under this language, may levy, and that’s
as far as I wanted to go with it. If they want to pursue the
same in court on a home rule issue that says the city has
the right to, that’s up to them. But I think that issue stands
aside from this bill. The home rule issue is a little broader.”
Id.We find nothing in the text of ORS 221.450 as
amended in 1987, nor in the context (particularly the
enactment of ORS 221.415 acknowledging cities’ home-rule
Cite as 359 Or 309 (2016) 343
authority with respect to its rights-of-way), nor in the legis-
lative history, that demonstrates an unambiguous expres-
sion of legislative intent to preclude local legislation with
respect to charges for use of rights-of-way. Accord Rogue
Valley Sewer Services, 357 Or at 453 (declining to view legis-
lative history of the 1987 amendments to ORS 221.420 and
ORS 221.450 as establishing by “negative implication” that
a city could not impose a fee not specifically authorized by
those statutes). Rather, to the extent that the legislature
considered the matter at all—and we acknowledge that lit-
tle, if any, of the above-quoted legislative history related to
privilege taxes under ORS 221.450, as most of the focus was
on franchise fees—we have the words of the bill’s sponsor
that he did not intend the legislation to have any impact on
the home-rule issue presented in the underlying litigation.17
To summarize: The home-rule provisions of the
Oregon Constitution were adopted in 1906, and very shortly
thereafter—in 1911—the legislature enacted comprehen-
sive regulation of utilities. That 1911 legislation, although
removing utility rate-setting from the purview of cities, spe-
cifically allowed cities to require “payment of charges and
fees” from utilities for the use of city rights-of-way. Or Laws
1911, ch 279, § 61(1). In 1931, the legislature added a pro-
vision authorizing a city to levy a privilege tax on a utility
for the use of its public rights-of-way if the utility was oper-
ating in the cities without a franchise (now codified at ORS
221.450). Or Laws 1931, ch 234, § 1. And in 1987, the leg-
islature, when amending ORS 221.450, “[r]ecogniz[ed] the
independent basis of legislative authority granted by cities
in this state by municipal charters, * * * [and] reaffirm[ed]
the authority of cities to regulate use of municipally owned
rights of way[.]” Or Laws 1987, ch 245, § 1.
We return now to the test from LaGrande/Astoria
concerning preemption: “whether the local rule in truth
is incompatible with the legislative policy, either because
both cannot operate concurrently or because the legislature
17
It is unclear what ultimately happened with respect to the litigation that
prompted the 1987 amendments, although no appeal ultimately was pursued.
We note, however, that the home-rule issue presented in that case was in many
respects quite similar to the issue this court recently decided in Rogue Valley
Sewer Services.
344 Northwest Natural Gas Co. v. City of Gresham
meant its law to be exclusive.” 281 Or at 148-49. The utilities
argue, and the trial court agreed, that the imposition of a
seven percent privilege tax for use of the City’s public rights-
of-way is incompatible with legislative policy because it can-
not operate concurrently with the five percent privilege tax
authorized by ORS 221.450. The difficulty with the utilities’
argument is that it premised on an assumption that ORS
221.450 acts as a general limitation on a city’s authority,
rather than a grant of limited authority.
The legislature’s apparent intent in enacting this
statute in 1931, and more clearly its intent in 1987 when it
amended the statute, was to ensure that cities had author-
ity to deal with recompense for utilities’ use of cities’ rights-
of-way on a local level. There is no indication that the leg-
islature intended to circumscribe cities’ authority. The
statute is an authorization, not a restriction: The fact that
the privilege tax authorized by the statute cannot exceed
five percent does not necessarily mean that a privilege tax
levied pursuant to other authority—such as a city’s home-
rule authority—is subject to the same limitation. To be
sure, the five percent limitation can be viewed as a restric-
tion, but it is a restriction that applies to what is autho-
rized by the statute. Whether it should be interpreted to
be a broader restriction that also would serve to preempt
local legislation based on a different source of authority is
a question of legislative intent. And, as discussed above, we
have been unable to discern any basis for concluding that
the legislature had any such intent to preempt. To interpret
the statute as a restriction on a city’s home-rule authority
would require us to ignore the very reason for the statute’s
existence.
In LaGrande/Astoria, this court drew a distinction
between laws that concerned the structure and procedure of
municipalities, noting that such must be justified by a need
“to safeguard the interests of person or entities affected by
the procedures of local government.” In contrast, a state law
that embodies substantive social, economic, or regulatory
objectives will
“prevail over contrary policies preferred by some local gov-
ernments if it is clearly intended to do so, unless the law
Cite as 359 Or 309 (2016) 345
is shown to be irreconcilable with the local community’s
freedom to choose its own political form. In that case, such
a state law must yield to those particulars necessary to
preserve that freedom of local organization.”
Id. at 156. It is not disputed that regulation of public utilities
is a legitimate, substantive regulatory objective that is prop-
erly a subject of state law (and the City does not argue other-
wise). As explained above, however, the intent of the legis-
lature in enacting ORS 221.450, insofar as we have been
able to determine, was not to provide either a substantive
regulation of utility services or a limitation on cities’ ability
to charge for use of rights-of-way on a state-wide level, but
to ensure that municipalities had the ability to be compen-
sated, at least at some minimal level, when such utilities
used the cities’ public rights-of-way.
A local enactment such as the Gresham resolution
at issue here is not incompatible or in conflict with the leg-
islative policy embodied in ORS 221.450. The City had a
legitimate local concern—the funding of its fire and police
departments—that it chose to meet by enacting a resolu-
tion that increased the license fee paid by utilities to use
its rights-of-way. Moreover, the primary impact of that local
enactment is, as amici have noted, see 359 Or at 315, that
the increased license fees, while collected by the utilities,
can simply be passed on by the utilities to the citizens of
Gresham that use those utilities’ services. It is a local enact-
ment addressing a local concern, with a local impact. Thus,
it is precisely the type of enactment that historically has
come within a city’s home-rule authority.
In sum, the legislature intended to ensure that
municipalities could be compensated for use of their rights-
of-way, initially by recognizing their abilities to charge fees
for the use of rights-of-way and later by authorizing a privi-
lege tax. However, the statute authorizing the privilege tax
is not, under the test from LaGrande/Astoria, necessarily
“incompatible” with a local enactment establishing a differ-
ent rate. And indeed, not only is there no indication that the
“legislature meant its law to be exclusive,” 281 Or at 149, but
the text of ORS 221.415 recognizing the independent basis of
the “authority of cities to regulate use of municipally owned
346 Northwest Natural Gas Co. v. City of Gresham
rights of way,” and the legislative history of the 1987 amend-
ments quoted above, indicate that the legislature did not, in
fact, intend its law to be exclusive. We reiterate, when ORS
221.450 was originally enacted and amended in the 1930s,
the legislature did not unambiguously express an intent to
displace local legislation because it had no cause to consider
that issue: the law at that point strongly suggested that mat-
ters concerning regulation of utilities was a subject of state,
not local, regulation. That is, the legislature believed it was
conferring on cities the authority to impose privilege taxes
in a particular situation, but it does not follow that in doing
so, the legislature was attempting to impose a restriction on
cities that otherwise would not have existed. Moreover, the
enactment of ORS 221.415, and the legislative history cited
above, indicate that the legislature did recognize that cit-
ies at least arguably had home-rule authority to enact local
legislation concerning municipal rights-of-way and did not
intend to restrict it.
Given the text, context, and legislative history of
ORS 221.450, we are unable to conclude that the legislature
intended its enactment to be the exclusive means by which
a city could charge privilege taxes or license fees to utili-
ties using its rights-of-way.18 That conclusion disposes of the
arguments offered by the private utilities as to the validity
of the Gresham ordinances. The trial court erred in con-
cluding that ORS 221.450 has a preemptive effect on those
ordinances as they applied to the private utilities.
F.  Intergovernmental Taxation
Rockwood PUD argues, as did the plaintiff in Rogue
Valley Sewer Services, that as a general matter, a municipal-
ity such as a city lacks authority to tax another municipality
18
We acknowledge that there is some broad language in Rogue Valley Sewer
Services that could be read to suggest otherwise. In that case, we stated:
“[T]he 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 utilities have not
entered into an agreement for a different fee arrangement, the legislature
provides for a five percent fee. ORS 221.450.”
357 Or at 450. That statement, while accurate, should not be understood to mean
that those statutes are the sole authority for a city’s collection of a privilege tax
from private utilities for their use of rights-of-way.
Cite as 359 Or 309 (2016) 347
such as a PUD, in the absence of express statutory authority
to do so. Rockwood PUD acknowledges that ORS 221.450
provides express statutory authority to collect a privilege
tax for use of the city streets, but asserts that such a tax
cannot exceed the five percent limitation found in that stat-
ute. Thus, it argues, the Gresham resolution at issue in this
case, that raised a privilege tax for use of city streets from
five to seven percent, was an impermissible intergovern-
mental tax. As explained below, we agree.
As did the plaintiffs in Rogue Valley Sewer Services,
Rockwood PUD relies primarily on our holdings in three
cases: Cent. Lincoln P.U.D. v. State Tax Com., 221 Or 398,
351 P2d 694 (1960); Portland v. Multnomah County, 135 Or
469, 296 P 48 (1931); and Portland v. Welch et al., 126 Or
293, 269 P 868 (1928). We discussed those cases in Rogue
Valley Sewer Services, observing that “ ‘[t]he intention to
tax a municipality is not to be inferred, but must be clearly
manifested by an affirmative legislative declaration.’ ” 357
Or at 466 (quoting Cent. Lincoln P.U.D., 221 Or at 406).
The rationale for limiting the ability of the state to tax
another governmental entity was explained in Portland v.
Multnomah County, 135 Or at 472: “It would be analogous to
taking money out of one pocket and putting it into another.”
See also id. at 471 (“It is clear that the state, in the exercise
of its sovereign power, may tax property belonging to it or
to any of the subordinate branches of the government, but,
unless there is a clear legislative declaration of its intention
so to do, such property is not taxable.”); Portland v. Welch,
126 Or at 293 (“Under our system of taxation, public rev-
enues are derived from the taxation of property privately
owned and, in the absence of an express legislative decla-
ration to that effect, it is unreasonable to suppose that the
legislature intended that property belonging to the public
should be taxed. No benefit to the public could arise from
such taxation.”).
We rejected the plaintiff’s argument in Rogue
Valley Sewer Services that the fee at issue in that case ran
afoul of that general rule because we concluded that the fee
at issue was not, in fact, an intergovernmental tax. We dis-
tinguished between a “tax” and a “fee” based on whether
348 Northwest Natural Gas Co. v. City of Gresham
the “charge is expended for general public purposes, or used
for the regulation or benefit of the parties upon whom the
assessment is imposed.” Rogue Valley Sewer Services, 357 Or
at 447, quoting McCann v. Rosenblum, 355 Or 256, 261-62,
323 P3d 955 (2014). We concluded:
“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 regulatory
purposes.’ The money collected from the franchise fee is to
be used to cover ‘the full costs and full impacts associated
with [RVS’s] use, occupation, and other activities’ in the
city’s rights-of-way, including ‘the additional oversight and
associated costs incurred from City administration, main-
tenance and repair of City-owned facilities within City
right-of-ways, special services performed by the City, and
office and field-related costs.’ ”
Rogue Valley Sewer Services, 357 Or at 447. Here, by con-
trast, although the challenged “license fee” is labeled a “fee”
rather than a tax, it differs from the fee at issue in Rogue
Valley Sewer Services because rather than being assessed to
cover the costs associated with Rockwood PUD’s use of the
City’s streets, it is to be “expended for general public pur-
poses.” Id. The “license fee” in this case could be allocated
pursuant to GRC 6.30.110 “to specific funds, projects or pro-
grams of the city,” which conceivably could qualify as either
taxes or fees, depending on the circumstances. However,
Resolution 3056, which increased the license fee authorized
by GRC 6.30110(1)(a) from five to seven percent, specified
that the revenues generated would be used to fund “core
city-wide services such as Police, Fire and Parks,” and that
a smaller portion would be used for streetlights. We thus
conclude that the license fee at issue here, as authorized by
Resolution 3056, constitutes a “tax” rather than a “fee,” in
light of its primary purpose to fund core city-wide services
such as police, park and fire services.
The City does not challenge Rockwood PUD’s asser-
tion of a general rule of law requiring explicit legislative
Cite as 359 Or 309 (2016) 349
authority for intergovernmental taxation, but instead
argues that there is, in fact, statutory authority for its
assessment of the tax on Rockwood PUD.19 In particular,
it cites ORS 221.415, enacted in 1987 (as described above)
and ORS 261.305, relating to PUDs, which was amended
at the same time that ORS 221.415 was enacted. The City
posits that ORS 221.415, by “reaffirming” cities’ home-rule
authority with respect to regulation of its rights-of-way,
provided an express legislative declaration of intention to
allow imposition of intergovernmental taxes. We disagree.
ORS 221.415 does not grant express statutory authority to
impose an intergovernmental tax. The most that it does is
reaffirm whatever home rule authority a city has and, in
this case, as noted, we do not reach issues that have not
been adequately briefed concerning whether a City’s home
rule authority could extend to the imposition of such a tax.
See 359 Or at 349 n 19. Nor does the text of ORS 261.305,
as amended by the 1987 legislature, express a clear legisla-
tive intent to permit intergovernmental taxation of PUDs
by cities. Rather, that statute, which sets forth the various
powers of PUDs, was amended to specify that PUDs had
the authority to enter into franchise agreements, inter-
governmental agreements and contracts with cities and to
pay fees under such agreements. Or Laws 1987, ch 247, § 4.
ORS 261.305 says nothing about taxation. Rather, the only
provision in the 1987 legislation that pertained to a city’s
ability to impose a tax on a PUD was ORS 221.450. Thus,
in one respect, the City is correct that the 1987 legislation
provided express authority for it to impose a “privilege tax”
19
The City also asserts in its brief that it is incorporating by reference argu-
ments made in portions of briefs filed by the City of Phoenix and amicus curiae
in Rogue Valley Sewer Services. But see ORAP 5.77 (“A party may join or adopt
a brief submitted in the same case or consolidated case but shall not join or
adopt a brief in another case.”). Some of those arguments were addressed by
this court in Rogue Valley Sewer Services but, as explained above, our decision
in that case does not aid the City here because of the differences between the
“fee” in that case and the “tax” in this one. Because the City neither describes
other arguments briefed in Rogue Valley Sewer Services nor attempts to explain
how they might apply in the present case, we conclude that those arguments are
not properly before the court in this case. See PGE v. Ebasco Services, Inc., 353
Or 849, 857 n 7, 306 P3d 628 (2013) (where brief made only passing reference
to issue, and did not develop any argument on it, the court declined to consider
it). Thus, we do not address broader issues concerning how home-rule authority
might interact with the principles enunciated in the intergovernmental taxation
cases.
350 Northwest Natural Gas Co. v. City of Gresham
on a PUD. However, that express authority was embodied
in ORS 221.450, which contains an explicit limitation on
the amount of the privilege tax that could be assessed—“an
amount not exceeding five percent of the gross revenues
of the [PUD] currently earned within the boundary of the
city.” In sum, we conclude that there is no statutory author-
ity for imposition of a “privilege tax” by the city on a PUD in
excess of the amount expressly authorized by ORS 221.450.
Accordingly, Resolution 3056, which increased the “license
fee” authorized by GRC 6.30110(1)(a) from five to seven per-
cent, as applied to Rockwood PUD, exceeded by two percent
the amount that a city could levy as a privilege tax against
a PUD pursuant to ORS 221.450.
III. CONCLUSION
By enacting ORS 221.450, the legislature autho-
rized cities to impose privilege taxes on utilities operating
without a franchise for use of city rights-of-way, but in doing
so, the legislature did not unambiguously express an intent
to preempt cities from enacting license fees for the use of
rights-of-way—even license fees that fall within the defini-
tion of “privilege tax.” We therefore conclude that the City
of Gresham’s license fee ordinance and resolution were, as
a general matter, within its home-rule authority. However,
because the “privilege tax” also constituted an “intergovern-
mental tax” with respect to Rockwood PUD, and the City
relies on ORS 221.450 as express statutory authority for
that tax, the City’s resolution was invalid as to Rockwood
PUD because it did not comport with the five-percent lim-
itation specified in that statute.
The judgment of the Court of Appeals is affirmed in
part and reversed in part. The judgment of the circuit court
is reversed in part and remanded for entry of judgment in
favor of Rockwood PUD.