Rogue Valley Sewer Services v. City of Phoenix

No. 25 July 16, 2015 437

IN THE SUPREME COURT OF THE

STATE OF OREGON

ROGUE VALLEY SEWER SERVICES,

an Oregon municipality,

Petitioner on Review,

v.

CITY OF PHOENIX,

an Oregon municipality,

Respondent on Review.

(CC 103450E2; CA A148968; SC S062277)

On review from the Court of Appeals.*

Argued and submitted February 15, 2015.

Tommy A. Brooks, Cable Huston, LLP, Portland, argued

the cause and filed the briefs for petitioner on review. With

him on the brief were Casey M. Nokes and Clark I. Balfour.

J. Ryan Kirchoff, James Holmbeck Kirchoff, LLC, Grants

Pass, argued the cause and filed the brief for respondent

on review. With him on the brief was Kurt H. Knudsen,

Jacksonville.

C. Robert Steringer, Harrang Long Gary Rudnick P.C.,

Portland, filed the brief for amici curiae Clackamas River

Water and Special Districts Association of Oregon.

Harry Auerbach, Chief Deputy City Attorney, Portland,

argued the cause for amicus curiae League of Oregon Cities.

Chad A. Jacobs, Beery, Elsner & Hammond, LLP, Portland,

filed the brief for amicus curiae League of Oregon Cities.

With him on the brief were Harry Auerbach, Portland, and

Sean E. O’Day, Salem.

H. M. Zamudio, Huycke O’Connor Jarvis, LLP., Medford,

filed the brief for amicus curiae City of Central Point.

______________

*  Appeal from Jackson County Circuit Court, G. Philip Arnold, Judge. 262

Or App 183, 329 P3d 1 (2014).

438 Rogue Valley Sewer Services v. City of Phoenix

Before Balmer, Chief Justice, and Kistler, Walters,

Linder, Landau, and Baldwin, Justices,**

BALMER, C. J.

The decision of the Court of Appeals and the judgment of

the circuit court are affirmed.

Case Summary: The City of Phoenix, a home-rule city, passed an ordinance

imposing a five-percent franchise fee on Rogue Valley Sewer Services (RVS). The

trial court ruled that the ordinance was valid, and the Court of Appeals affirmed.

Held: (1) The ordinance provided for a fee, rather than a tax, and therefore any

principle forbidding intergovernmental taxation did not apply; (2) RVS’s status

as a type of local government under Oregon law did not prevent the city from

passing the ordinance, because the ordinance did not impose a duty on or impair

the power of another governmental entity; (3) applying the normal home-rule

analysis, the ordinance was authorized by the city charter and not preempted by

state statute; and (4) RVS failed to properly raise the issue of the reasonableness

of the fee.

The decision of the Court of Appeals and the judgment of the circuit court

are affirmed.

______________

**  Brewer, J., did not participate in the consideration or decision of this case.

Cite as 357 Or 437 (2015) 439

BALMER, C. J.

In this declaratory judgment action, we consider

whether a home-rule city can impose a five percent fran-

chise fee on a sanitary authority with overlapping jurisdic-

tion. The trial court concluded that the city had authority to

impose the fee at issue in this case, but declined to reach an

additional question whether the amount of the fee was rea-

sonable, because that issue was not presented by the plead-

ings. The Court of Appeals affirmed, concluding that the

city had authority to enact the ordinance providing for the

fee and that the sanitary authority’s argument about rea-

sonableness was unpreserved. Rogue Valley Sewer Services

v. City of Phoenix, 262 Or App 183, 202, 329 P3d 1 (2014).

On review, we conclude that the home-rule doctrine is the

proper framework for analyzing the fee at issue in this case

and that, under that framework, the imposition of the fee

was within the authority granted to the city by its charter

and was not preempted by state law. We also conclude that

the sanitary authority failed to raise the issue of the reason-

ableness. We therefore affirm.

I. BACKGROUND

Rogue Valley Sewer Services (RVS) owns, operates,

and manages equipment for the transmission of sewage. As

a “sanitary authority” organized under ORS chapter 450,

RVS is a type of local government entity called a local service

district. See ORS 174.116(2)(r) (“[A]s used in the statutes

of this state[,] ‘local service district’ [includes a] sanitary

authority * * * organized under ORS 450.600 to 450.989.”).

Local service districts are municipal corporations and local

governments. See ORS 198.605 (“Local service districts, as

defined by ORS 174.116, are municipal corporations.”); ORS

174.116(1)(a) (“[A]s used in the statutes of this state[,] ‘local

government’ means all cities, counties and local service dis-

tricts located in this state[.]”).

Since 2004, RVS has provided sewer services to res-

idents of the City of Phoenix (city)—also a local government

under Oregon law, ORS 174.116(1)(a)—although the rela-

tionship between RVS and the city has changed over time. In

2004, the city and RVS entered into an intergovernmental

440 Rogue Valley Sewer Services v. City of Phoenix

agreement that established the services that RVS would

provide and the rates that RVS would charge. At that time,

the city was not within the political boundaries of RVS. RVS

notes that, under that 2004 contract, it had the right—but

not the obligation—to use the city’s facilities to provide

sewer services.

In 2006, a ballot measure asked voters of the city

whether the city should be annexed into the service area of

RVS. The ballot indicated to voters that the City Council

and the RVS Board of Directors had already “unanimously

adopted resolutions supporting this annexation” and that

“service rates will not be increased as a result of this annex-

ation.” (Emphasis in original, underscoring omitted.) The

voters’ pamphlet statements with respect to the ballot mea-

sure did not mention whether the city would or could impose

a franchise fee or tax on RVS. The residents of the city voted

to annex the city into the service area of RVS. As a result,

RVS became obligated to provide sewer services to the resi-

dents of the city because, for the purposes of sewer services,

the residents were now within RVS’s jurisdiction.

In 2009, the city held a special election, and the

voters approved a home-rule city charter. The charter pro-

vides that the city “has all powers that the constitutions,

statutes, and common law of the United States and of this

state now or hereafter expressly or impliedly grant or allow,”

and that the charter is to “be liberally construed so the city

may exercise fully all powers possible under this charter

and under United States and Oregon law.” City of Phoenix

Charter, § 4-5.

In 2010, the city passed Ordinance No. 928 (the

ordinance) imposing a “franchise fee in an amount equal to

five percent (5%) of the annual Gross Revenue of RVS * * *

in addition to taxes or fees, if any, owed to the City.”1 The

1

Ordinance No. 928 defines “Gross Revenue” as “any revenue, as determined

in accordance with generally accepted accounting principles, received by RVS[ ]

from the operation of its business,” with a few items of revenue excluded. Later,

in 2010, to “clarify an issue that has been raised in pending litigation between

RVS[ ] and the City,” the city modified the ordinance to clarify that the fee is

applicable solely to gross revenue “received by RVS[ ] from the operation of its

business within the City limits.” Ordinance No. 931, Sept 7, 2010. For clarity, we

refer to “the ordinance,” although both Ordinance No. 928 and Ordinance No. 931

are at issue in this case.

Cite as 357 Or 437 (2015) 441

ordinance directed RVS to pay the fee on a monthly basis

starting the first month after adoption of the ordinance.

The ordinance declares that the “primary purpose

of the collection of a franchise fee from RVS is to regulate

and reimburse the City for its costs associated with RVS,

and not to raise revenue.” The ordinance elaborates that it

was passed for the purposes of “maintenance and operation

of the public rights of way” and “recoupment of the full costs

and full impacts associated with the use, occupation, and

other activities and effects by sanitary authorities and other

utilities on the public rights of ways.” The ordinance cites

costs, including “additional oversight and associated costs

incurred from City administration, maintenance and repair

of City-owned facilities within City right-of-ways, special

services performed by the City, and office and field-related

costs.” Overall, the ordinance declares that there is a “direct

relationship between the fee charged and the burden pro-

duced by the fee payer, RVS[ ].”

RVS projected that the five percent franchise fee, as

assessed on the gross revenues that RVS received from res-

idents of the city, would have totaled approximately $30,741

per year. RVS calculated that, “to be fair to all other custom-

ers” living outside the city, it would have to raise its rates for

single-family residences in the city from $15.90 per month

to $16.70 per month.

RVS filed a complaint in circuit court seeking a

declaratory judgment and an injunction. Specifically, RVS

asked the court to:

“1.  Declar[e] whether the ordinance * * * is valid and

whether RVS is required to collect and pay over the fee

described in said ordinance.

“2.  Grant an injunction prohibiting [the city] from col-

lecting the franchise fee * * *.

“3.  For other such relief as the court may deem

equitable.”

In the trial court, as part of cross-motions for summary

judgment discussed further below, the city reaffirmed the

442 Rogue Valley Sewer Services v. City of Phoenix

factual assertions set out in the ordinance. The city claimed

that it incurs a variety of costs due to the direct impact of

RVS’s operations in city streets. Although the direct costs

of the paving and construction work are borne by RVS, the

city argued that there are additional short-term and long-

term impacts that the city bears. Short-term impacts are

associated primarily with coordination and include review

of plans, inspection during construction, locating utilities,

processing encroachment permits, providing water from

city fire hydrants for flushing sewer lines, and designing

other city utility contracts to avoid RVS facilities. Long-

term impacts include costs of maintenance and repair of the

streets. Whenever a street surface is cut, a slight differential

settlement of the repaired surface is expected, and the joint

between the surfaces is more likely to be an entry point for

water. Over time, the city Public Works Department expects

to fill cracks and make minor repairs on cut streets, until it

becomes necessary to conduct a complete asphalt overlay of

the street. The city also asserted that, as a direct impact of

its relationship with RVS, it incurs general administrative

expenses, such as the costs of general administration and

oversight, budgeting, coordination of services, interactions

with the public, and other expenses. Together, the city esti-

mated that the cost of those impacts for 2009 was $29,425.

As such, the city asserted that the five percent franchise

fee—at around $30,000 per year—was a reasonable esti-

mate of the annual cost to the city. Additionally, the city

pointed out that the five percent fee was consistent with

franchise fees that it imposes on other utilities operating in

city streets, including the local gas, telephone, power, and

cable television companies.

For its part, RVS disputed the existence of any

direct relationship between the franchise fee and the costs

that RVS’s operations impose on the city. RVS argued that

the costs that the city identified are part of the normal oper-

ations of a city public works department—such as receiving

phone calls from citizens—and therefore are not caused by

RVS’s operations, while other alleged costs are negligible or

nonexistent. RVS asserted that, when it proposes a project

within the city, it first submits a plan to the city’s Public

Cite as 357 Or 437 (2015) 443

Works Department for review and comment, and generally

receives a phone call or brief letter in response. The city typ-

ically observes any paving work to ensure that it meets the

city’s standards, but, as noted, RVS bears the cost of the

paving and construction work associated with its projects.

At the time of summary judgment, only one project in the

city had required any street cutting or repaving, and only

one was planned for the upcoming year. RVS also argued

that the costs of its operations in the city are covered by var-

ious fees that the city charges—for example, a right-of-way

encroachment fee charged to cover the cost of plan review

for projects that impact the right-of-way.

Further, in its motion for summary judgment, RVS

argued that the city’s home-rule authority to impose a fran-

chise fee was preempted by state law because franchise fees

are controlled by state statute. RVS also stated in its brief—

although in the “Background Facts” section rather than as

a legal argument—that, “even assuming that [the city] has

authority to impose a franchise fee on RVS, the Ordinance

as worded relies upon an improper interpretation of Oregon

statutes, is too broadly written and has no rational basis

to support the rate.” The city filed a cross-motion for sum-

mary judgment, arguing that it had authority to enact the

ordinance and that the fee “represents a reasonable esti-

mate of the annual cost to the City of the many impacts of

RVS identified in the Ordinance,” and concluding that “[t]he

5% fee is reasonable by all standards.”

The trial court articulated the issue presented as

“whether or not the City * * * under its home rule charter

can charge a franchise fee on sewer operations provided by

[RVS].” The court found that “the analysis of the [city] in

its motion and in its response to [RVS’s] motion is correct in

that it has the authority to impose the fee.” Therefore, the

court granted the city’s motion for summary judgment and

denied RVS’s motion for summary judgment.

The city then submitted a proposed general judg-

ment. RVS objected to the proposed judgment on the ground

that the trial court’s order resolved only the issue whether

the city had authority to charge the fee, but did not resolve

444 Rogue Valley Sewer Services v. City of Phoenix

the issue of the reasonableness of the fee. RVS argued that

a question of fact existed as to the reasonableness of the fee

that precluded summary judgment and pointed to “compet-

ing affidavits” on the issue. RVS suggested that a limited

judgment—addressing only the issue of the city’s authority

to impose the assessment—would be more appropriate. In

response, the city argued that the amount of the fee should

be left to the discretion of the city and was not at issue in the

case.

The trial court overruled RVS’s objection to the

proposed general judgment, concluding that “there [was]

nothing left for the Court to adjudicate” because “nothing

in the complaint [or in RVS’s motion for summary judgment

suggested that] RVS[ ] also challenged the reasonableness of

the fee in the event [the city’s] authority was upheld.” In so

holding, the court concluded:

“To be sure, in arguing the ordinance is too broad, RVS

cited the amount of the fee, but any such argument is sub-

sumed within the argument about the propriety of the ordi-

nance (assuming [the city] had the authority to enact it),

and the Court’s decision upholding [the city]’s authority to

impose the fee, the content of the ordinance, and the impo-

sition of the fee, disposed of RVS’[s] argument about the

amount of the fee.”

The court entered a general judgment in the city’s favor.

RVS appealed, arguing that “the trial court erred

in concluding that the city was authorized to impose the

five percent franchise fee, and, alternatively, that the court

erred in granting summary judgment because genuine

issues of material fact exist regarding calculation of the

fee.” Rogue Valley, 262 Or App at 187. As to the first argu-

ment, the Court of Appeals concluded that RVS’s status as

a local government did not circumscribe the city’s authority

as a home-rule municipality and that the city’s home-rule

authority to enact the fee was not preempted by state law.

Id. at 188, 199. As to the second argument, the Court of

Appeals concluded that RVS had not preserved its argument

regarding the reasonableness of the amount of the fee and

rejected RVS’s argument that the parties had tried the issue

by consent. Id. at 201-02. RVS petitioned for review in this

court, and we allowed the petition.

Cite as 357 Or 437 (2015) 445

II. ANALYSIS

Ordinarily, when a “petitioner[’s] arguments impli-

cate the authority of [a] city, we begin with * * * the author-

ity of such local governments” under the “home-rule” provi-

sions of the Oregon constitution. Gunderson, LLC v. City of

Portland, 352 Or 648, 658-59, 290 P3d 803 (2012). “ ‘Home

rule’ itself is not a constitutional term, and the actual consti-

tutional terms differ from state to state. But ‘home rule’ has

been described as the ‘political symbol’ for the objectives of

local authority.” LaGrande/Astoria v. PERB, 281 Or 137, 140

n 2, 576 P2d 1204, adh’d to on recons, 284 Or 173, 586 P2d

765 (1978). Home rule is the authority granted to Oregon’s

cities by Article XI, section 2, and Article IV, section 1(5), of

the Oregon Constitution—adopted by initiative petition in

1906—to regulate to the extent provided in their charters.

Article XI, section 2, provides, in part, “The legal voters of

every city and town are hereby granted power to enact and

amend their municipal charter, subject to the Constitution

and criminal laws of the State of Oregon[.]” In the same

1906 election, voters “reserved” initiative and referendum

powers “to the qualified voters of each municipality and dis-

trict as to all local, special and municipal legislation of every

character in or for their municipality or district.” Or Const,

Art IV, § 1(5).

RVS argues, however, that the home-rule analysis

does not apply—or does not apply in the same way—in the

context of a fee or tax that one governmental entity imposes

on another and that the Court of Appeals erred in conclud-

ing that RVS’s status as a local government has no impact

on the city’s home-rule authority. As noted above, RVS is

a sanitary authority, and the legislature has expressed its

intention that sanitary authorities be considered municipal

corporations and a type of local government under Oregon

law. For those reasons, RVS claims, the trial court erred in

granting the city’s motion for summary judgment based on

its home-rule authority. We review the trial court’s rulings

on summary judgment “to determine whether ‘there is no

genuine issue as to any material fact’ and whether ‘the mov-

ing party is entitled to prevail as a matter of law.’ ” Bagley v.

Mt. Bachelor, Inc., 356 Or 543, 545, 340 P3d 27 (2014) (citing

ORCP 47 C).

446 Rogue Valley Sewer Services v. City of Phoenix

A.  Intergovernmental Taxation

RVS first argues that this is not a “home rule”

case because it involves “intergovernmental taxation.” RVS

argues that the city must first have unmistakable, express

statutory authority before it can impose taxes or fees on

another local government. RVS draws that rule from three

of this court’s cases: Portland v. Multnomah County, 135 Or

469, 296 P 48 (1931); Portland v. Welch et al., 126 Or 293,

269 P 868 (1928); and Cent. Lincoln PUD v. State Tax Com.,

221 Or 398, 351 P2d 694 (1960). The city responds that this

case concerns a fee, rather than a tax, and therefore that

that case law is inapplicable.

All three of the cases upon which RVS relies concern

the imposition of a tax. In Welch, a city had offered land for

sale, but had not yet sold that land, and this court held that

the county in which the land was located could not impose

otherwise applicable property taxes on that land. 126 Or at

294-97. In Multnomah County, the opposite occurred: the

property was in private ownership on “tax day” when taxes

were assessed, but a city bought the property before any tax

had been levied. 135 Or at 470. This court held the property

was nonetheless “clearly exempt from taxation.” Id. at 473.

In Central Lincoln, this court held that plaintiff, a people’s

utility district (PUD), was subject to a utility corporation

excise tax. 221 Or at 401, 407. However, the court concluded

that its interpretation of the statute at issue did not nec-

essarily extend the tax to municipal corporations because

“[t]he intention to tax a municipality is not to be inferred,

but must be clearly manifested by an affirmative legislative

declaration.” Id. at 406. In that case, a clear legislative dec-

laration of the intention to tax PUDs existed, because PUDs

were specifically included in the statute. Id.

“A tax is any contribution imposed by government

upon individuals, for the use and service of the state. A fee,

by contrast, is imposed on persons who apply for or receive

a government service that directly benefits them.” McCann

v. Rosenblum, 355 Or 256, 261, 323 P3d 955 (2014) (inter-

nal quotation and citation omitted). In McCann, this court

quoted Qwest Corp. v. City of Surprise, 434 F3d 1176, 1183

(9th Cir 2006), in support of the rule that the distinction

Cite as 357 Or 437 (2015) 447

between a tax and a fee is whether the “charge is expended

for general public purposes, or used for the regulation or ben-

efit of the parties upon whom the assessment is imposed.”

McCann, 355 Or at 261-62. Thus, the ballot measure at issue

in that case, which would have imposed a markup on whole-

sale alcohol sales, was properly labeled a “tax,” because the

revenues generated by the markup would be distributed to

the state’s general fund, as well as to the general funds of

cities and counties, and would be available for general gov-

ernment use. Id. at 261-62; see also Dennehy v. Dept. of Rev.,

305 Or 595, 605-06, 756 P2d 13 (1988) (state statute did

not contravene constitutional limits on property taxation,

because “[u]rban renewal financing is not a single, state-

wide tax to fund public structures or services unrelated to

the source of funding”; rather, it “places the cost of urban

renewal on the property that benefits from the expenditure

of the funds so raised”).

A fee, then, is imposed on particular parties and is

used to regulate or benefit those parties rather than being

used for general public purposes or to raise revenue for such

purposes. In this case, the ordinance applies to one particu-

lar 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, maintenance and repair

of City-owned facilities within City right-of-ways, special

services performed by the City, and office and field-related

costs.” Although RVS expresses skepticism as to whether the

fee actually will be directed towards regulatory purposes

related to sanitary services, as the city claims, nothing in

the record indicates that the fee will be used for general gov-

ernment purposes, rather than for appropriate regulatory

purposes.

In sum, the record establishes that the city will use

the money collected from the franchise fee to regulate and

benefit the party from whom the fee is collected and to cover

448 Rogue Valley Sewer Services v. City of Phoenix

costs directly imposed on the city by that party. That “dis-

tribution scheme” and the “uses to which that money [can]

be put” demonstrate that the ordinance provides for the col-

lection of a fee, rather than a tax. McCann, 355 Or at 262

(wholesale alcohol markup properly labeled a “tax,” because

not “used to provide services that directly benefit whole-

salers” but, rather, distributed to state, cities, and counties

for general government use). Because we conclude that the

ordinance provides for the collection of a fee, and not a tax,

RVS’s arguments based on the prohibition of intergovern-

mental taxation discussed in some of our cases are inappo-

site here.2

B.  Regulation of Other Public Entities

RVS next argues that the city cannot justify the

franchise fee based on its home-rule authority because reg-

ulation of another governmental entity is different from

regulation of private entities under the city’s home-rule

powers. To allow regulation of other government entities,

RVS argues, would create a hierarchy among local govern-

ments that has no support in the law and would allow a city

to exercise authority beyond its boundaries. It contends that

such “extramural” or “extramunicipal” activity is not within

the scope of a city’s home-rule powers and is impermissible

unless authorized expressly by statute.

RVS is correct that this court has recognized some

limits on a local government’s authority to compel or coerce

another government to take some affirmative action. See

2

At oral argument, RVS also argued that the ordinance cannot be said to

provide for a “use fee” because such fees are charged in exchange for some service,

right, or privilege. RVS claims that the city had already transferred the right to

use the right-of-way to RVS by consenting to the annexation. See ORS 450.815(7)

(a sanitary authority has the power to “[l]ay its sewers and drains in any public

street, highway or road in the county, and for this purpose enter upon it and

make all necessary and proper excavations, restoring it to its proper condition”).

That is, RVS argues, no benefit is conferred on RVS in exchange for the franchise

fee, and therefore the ordinance cannot be characterized as a fee. We disagree.

As noted, a fee is “ ‘used for the regulation or benefit of the [assessed] parties.’ ”

McCann, 355 Or at 262 (quoting Qwest Corp., 434 F3d at 1182 (emphasis added)).

Although there may be circumstances where the terms of conferring the benefit

on an assessed party precludes the later imposition of a fee in the name of regu-

lation, that is not the situation in this case. Even if we were to accept RVS’s argu-

ment that authority to use the right-of-way was transferred with the annexation,

the ordinance provides for a fee for “regulation” of RVS; there is no requirement

that the ordinance also confer some additional benefit.

Cite as 357 Or 437 (2015) 449

City of Eugene v. Roberts, 305 Or 641, 649-650, 756 P2d 630

(1988) (home rule did not provide city with authority “to

compel action by state and county officials” to put an advi-

sory question on the state primary election ballot); DeFazio

v. WPPSS, 296 Or 550, 582, 679 P2d 1316 (1984) (cities lack

authority to “assert coercive authority over persons or prop-

erty outside [their] boundaries”). For example, in Kiernan

v. Portland, 57 Or 454, 111 P 379, recons den, 57 Or 454,

112 P 402 (1910), dismissed for lack of jurisdiction, 223 US

151, 32 S Ct 231, 56 L Ed 386 (1912), the City of Portland

amended its charter to provide for construction of the

Broadway Bridge and that, “upon completion of the bridge[,]

the executive board shall surrender and deliver the posses-

sion thereof to the county court of Multnomah County.” Id.

at 462. This court held that it was “beyond the power of the

[C]ity [of Portland] to impose the care and maintenance

of a public bridge upon Multnomah County without the

county authorities[’] consent thereto.” Id. at 463. That was

so because Portland was attempting to compel Multnomah

County to assume a new governmental function—bridge

maintenance—and local governments cannot interfere with

another government’s exercise of its own governmental

power and functions. See also Orval Etter, Municipal Home

Rule On and Off: “Unconstitutional Law in Oregon” Now and

Then 103 (Sourcebook ed 1991) (describing Kiernan as “the

first ruling that home rule does not enable a city to change

a power or duty of a governmental entity other than the

city”); Letter of Advice dated Dec 24, 1985, to Senator Ken

Jernstedt (OP-5863) (concluding that city could impose an

excise tax or municipal surcharge on bridge tolls, but could

not compel the port to collect a tax on tolls because “a munic-

ipality, absent statutory authority, may not impose a duty

upon any other political subdivision or agency of the state to

collect municipal taxes”).

Those principles, however, do not go so far as to pro-

hibit the city’s fee in this case. While City of Eugene and

Kiernan demonstrate that a city cannot, on the basis of its

home-rule authority, impose a duty on or impair a power of

another governmental entity, nothing in those cases would

prevent a city from exercising the same kind of regulatory

authority over specific services provided by another local

450 Rogue Valley Sewer Services v. City of Phoenix

government entity on the same basis as services provided

within the city by a private business. In this case, the fran-

chise fee of five percent of RVS’s revenue places RVS on an

equal footing with other utilities operating within the city.

As discussed further below, the legislature has provided a

framework for cities to collect a franchise fee from utilities,

both public and private, operating within their rights-of-

way. See ORS 221.420; ORS 221.450. Where cities and util-

ities have not entered into an agreement for a different fee

arrangement, the legislature provides for a five percent fee.

ORS 221.450. Although RVS correctly points to limits on

the home-rule doctrine that prohibit local governments from

compelling affirmative conduct by other government enti-

ties, the limitations that it has identified do not restrict the

city’s authority to pass the ordinance at issue in this case.

C.  Home Rule

Under a city’s home-rule authority, “the validity of

local action depends, first, on whether it is authorized by the

local charter or by a statute[, and] second, on whether it con-

travenes state or federal law.” LaGrande/Astoria, 281 Or at

142. The parties do not contend that the ordinance was not

authorized by the city’s charter, which provides that the “city

has all powers that the constitutions, statutes, and common

law of the United States and of this state now or hereafter

expressly or impliedly grant or allow” and that the charter

is to “be liberally construed so the city may exercise fully all

powers possible under this charter and under United States

and Oregon law.” City of Phoenix Charter, § 4-5. Therefore,

we must determine “whether the local rule in truth is incom-

patible with the legislative policy, either because both can-

not operate concurrently or because the legislature meant

its law to be exclusive.” LaGrande/Astoria, 281 Or at 148.

In making that determination, we assume that “the

legislature does not mean to displace local civil or admin-

istrative regulation of local conditions by a statewide law

unless that intention is apparent.” LaGrande/Astoria, 281

Or at 148-49 (footnote omitted). A state statute will displace

the local rule where the text, context, and legislative his-

tory of the statute “unambiguously expresses an intention

to preclude local governments from regulating” in the same

Cite as 357 Or 437 (2015) 451

area as that governed by the statute. Gunderson, 352 Or at

663 (emphasis added); see also US West Communications v.

City of Eugene, 336 Or 181, 186, 81 P3d 702 (2003) (applying

standard statutory interpretation methodology to a question

of home-rule city’s authority to impose fee on telecommuni-

cations company).

RVS argues that ORS 221.420 and ORS 221.450

establish a comprehensive, statewide scheme that the legis-

lature intended to be the exclusive basis for city imposition

of fees upon utilities for using public rights-of-way. The city

responds that those statutes do not address sanitary author-

ities and, therefore, the legislature has not unambiguously

expressed any intention to preempt the ordinance at issue

here.

ORS 221.420(2)(a) provides that a city may:

“Determine by contract or prescribe by ordinance or other-

wise, the terms and conditions, including payment of

charges and fees, upon which any public utility, electric

cooperative, people’s utility district or heating company, or

Oregon Community Power, may be permitted to occupy the

streets, highways or other public property within such city

and exclude or eject any public utility or heating company

therefrom.”

RVS, as a sanitary authority organized under ORS

chapter 450, is not a “public utility” under ORS 221.420.

ORS 221.420(1)(a) provides that “public utility” is to be given

the meaning provided in ORS 757.005, which defines “public

utility” to include only those entities furnishing “heat, light,

water or power.” ORS 757.005(1)(a)(A). RVS does not provide

heat, light, water or power; it provides sanitation services.

Therefore, ORS 221.420(2)(a) does not affirmatively provide

authority for the city to impose the fee at issue in this case,

but neither does it, standing alone, unambiguously preclude

the city from imposing the fee.

RVS also points to ORS 221.450, which provides:

“[E]very incorporated city may levy and collect a privilege

tax from Oregon Community Power and from every elec-

tric cooperative, people’s utility district, privately owned

public utility, telecommunications carrier as defined in

ORS 133.721 or heating company. The privilege tax may

452 Rogue Valley Sewer Services v. City of Phoenix

be collected only if the entity is operating for a period of

30 days within the city without a franchise from the city

and actually using the streets, alleys or highways, or all

of them, in such city for other than travel on such streets

or highways. The privilege tax shall be for the use of those

public streets, alleys or highways, or all of them, in such

city in an amount not exceeding five percent of the gross

revenues of the cooperative, utility, district or company

currently earned within the boundary of the city. However,

the gross revenues earned in interstate commerce or on

the business of the United States Government shall be

exempt from the provisions of this section. The privilege

tax authorized in this section shall be for each year, or part

of each year, such utility, cooperative, district or company,

or Oregon Community Power, operates without a fran-

chise.”

Like ORS 221.420, ORS 221.450 does not explicitly apply to

sanitary authorities like RVS.

Read together, RVS argues, ORS 221.420 and ORS

221.450 provide statutory authority that, for the enumer-

ated entities to which they apply, permits a city to either

enter into a franchise agreement with a utility or impose a

privilege tax in lieu of negotiating a franchise agreement.

The legislative history of House Bill (HB) 3021—the 1987

revision to ORS 221.420 and ORS 221.450—suggests that

the legislature was told that the statutes would operate so

that ORS 221.450 functioned as a “penalty clause,” such

that,

“if * * * [y]ou, as a private utility * * * don’t sit down and

negotiate a franchise regulation ordinance or agreement so

that we’re working together, then you’re going to pay more.

You’re going to pay five percent. If you come in and get a

franchise, and you sit down at the table * * * and we mutu-

ally regulate it together, basically, then [you pay less].”

Tape Recording, House Committee on Environment and

Energy, HB 3021, Apr 22, 1987, Tape 122, Side B (statement

of Larry Shaw).

RVS argues, therefore, that the legislature intended

to occupy the field and preempt cities from imposing fees

on public utilities other than through the comprehensive

scheme established by ORS 221.420 and ORS 221.450. In

Cite as 357 Or 437 (2015) 453

particular, RVS argues that the legislature intended the

list of utility service providers in ORS 221.420(2)(a) to be

construed as an exclusive list of utility service providers

that a city may target for such charges and fees—and that

all other nonenumerated entities cannot be charged simi-

lar charges or fees. Put differently, from those affirmative

statutory authorizations of privilege taxes that a city may

charge for certain utilities operating within the city, RVS

draws the negative implication that a city may not impose

such taxes or fees on other utilities.

Even if ORS 221.420 and ORS 221.450 establish a

comprehensive scheme as to municipal regulation of some

entities—an issue that we do not decide—that conclusion

would not preclude the city’s fee in this case. RVS essen-

tially argues that, because sanitary authorities are not

specifically enumerated in ORS 221.420, the legislature

intended to exempt sanitary authorities from franchise fees.

Although RVS does not explicitly use the Latin term, that

argument invokes the logic of expressio unius est exclusio

alterius, literally “the expression of one is the exclusion of

others.” See Black’s Law Dictionary 701 (10th ed 2014) (“A

canon of construction holding that to express or include one

thing implies the exclusion of the other, or of the alternative.

For example, the rule that ‘each citizen is entitled to vote’

implies that noncitizens are not entitled to vote.”). Expessio

unius arguments are most powerful when there is reason

to conclude that a list of enumerated terms was intended to

be exhaustive. See Colby v. Gunson, 224 Or App 666, 671,

199 P3d 350 (2008) (“the expressio unius guide to legisla-

tive intent corroborates, rather than supplies, meaning to a

statute”).

To show that the legislature intended the list to be

exhaustive, RVS points to legislative history from HB 3021

relating to a proposal to add certain publically owned utili-

ties to the lists of already-enumerated privately owned enti-

ties in ORS 221.420 and ORS 221.450. In the hearings on

HB 3021, a representative wondered whether the bill would

apply to telephone cooperatives and was told it would not

“affect” entities that fell outside the definition of “public util-

ity.” Tape Recording, House Committee on Environment and

Energy, HB 3021, Apr 22, 1987, Tape 122, Side B (statement

454 Rogue Valley Sewer Services v. City of Phoenix

of Larry Shaw). From that slim legislative history, RVS con-

cludes that the franchise fee at issue here is invalid because,

if the statutes were not intended to apply to telephone coop-

eratives, they also were not intended to be applied to other

nonenumerated public entities.

A party that challenges a home-rule city’s author-

ity as preempted by state law is required to show that the

legislature “unambiguously” expressed its intent—a high

bar to overcome. Gunderson, 352 Or at 663. As noted above,

in the context of the home-rule doctrine, we begin with

the assumption “that the legislature does not mean to dis-

place local civil or administrative regulation of local condi-

tions by a statewide law unless that intention is apparent.”

LaGrande/Astoria, 281 Or at 148-49. Only where the legis-

lature “unambiguously expresses an intention to preclude

local governments from regulating” in the same area gov-

erned by an applicable statute can that presumption against

preemption be overcome. Gunderson, 352 Or at 663 (empha-

sis added); cf. State ex rel Haley v. City of Troutdale, 281 Or

203, 211, 576 P2d 1238 (1978) (because any legislative intent

to preempt local action exceeding state “minimum” construc-

tion standards was “not unambiguously expressed[,] local

requirements compatible with compliance with the state’s

standards are not preempted”).

The legislative history of HB 3021 does not rise to

the level of “unambiguously” expressing legislative intent to

occupy the field. See State v. Gaines, 346 Or 160, 172-73 n 9,

206 P3d 1042 (2009) (reliance on “the beliefs of a single leg-

islator or witness” is “fraught with the potential for miscon-

struction”). Notably, the legislature has expressly preempted

local regulation of certain areas of law by using the word

“preempt” itself. See ORS 731.840(4) (“[t]he State of Oregon

hereby preempts the field,” and “[n]o county, city, district,

or other political subdivision or agency in this state shall so

regulate”); ORS 203.090 (“The[se] provisions * * * preempt

any laws of the political subdivisions of this state relating

to the regulation of private security providers.”). In other

statutes, it has expressed its disapproval of conflicting local

laws in equally clear terms. See ORS 461.030(1) (“no local

authority shall enact any ordinances, rules or regulations

Cite as 357 Or 437 (2015) 455

in conflict with the provisions hereof”). However, we see no

reason to imply such broad preemption of the entire field of

utility regulation from the explicit authorization of regula-

tion of certain other utilities.

Further, ORS 221.420 and ORS 221.450 do not cre-

ate a statutory scheme that prevents the state law and local

ordinance from operating concurrently. LaGrande/Astoria,

281 Or at 148. Rather, the state regulates less extensively

than the local ordinance, and leaves it to cities to enact rea-

sonable conditions of consent for sanitary authorities. See

ORS 450.815(7); cf. State ex rel Haley, 281 Or at 205, 211

(state building code providing for single wall construction

did not indicate that legislature intended to prevent cities

from enacting additional safeguards—such as requiring

double wall construction—and at minimum such an inten-

tion was not “unambiguously expressed”); Thunderbird

Mobile Club v. City of Wilsonville, 234 Or App 457, 474, 228

P3d 650 (2010), rev den, 348 Or 524, 236 P3d 152 (2010)

(“Under LaGrande/Astoria, * * * the occupation of a field of

regulation by the state has no necessary preemptive effect

* * *. Instead, a local law is preempted only to the extent

that it ‘cannot operate concurrently’ with state law, i.e., the

operation of local law makes it impossible to comply with a

state statute.”).

That conclusion is strengthened by two other

expressions of the legislature’s intent. First, in HB 3021

the legislature provided that, by enacting ORS 221.420 and

ORS 221.450, it was simply “reaffirm[ing] the authority of

cities to regulate use of municipally owned rights of way”

and that it “recognize[ed] the independent basis of legisla-

tive authority granted to cities in this state by municipal

charters.” ORS 221.415 (emphasis added).3 That is, the leg-

islature apparently thought that HB 3021 was not neces-

sary to provide cities with authority to impose taxes and

fees because they already possessed that authority. Rather,

the legislature passed that bill in response to a then-recent

3

Although ORS 221.415 goes on to also affirm the authority of cities to

“impose charges upon publicly owned suppliers of electrical energy, as well as

privately owned suppliers,” we do not read that subordinate clause as negating

the broader affirmation of the authority of cities to regulate their rights-of-way.

456 Rogue Valley Sewer Services v. City of Phoenix

circuit court decision that had held to the contrary with

respect to a people’s utility district.4

Second, in a different statute, the legislature appears

to have anticipated the kind of fee at issue in this case

and provided that such conditions on the use of the public

rights-of-way by a sanitary authority are appropriate. ORS

450.815(7), in defining the powers of a sanitary authority,

provides that a sanitary authority may:

“Lay its sewers and drains in any public street, highway or

road in the county, and for this purpose enter upon it and

make all necessary and proper excavations, restoring it to

its proper condition. However, the consent of the proper city,

county or state authorities, as the case may be, shall first be

obtained and the conditions of such consent complied with.”

(Emphasis added.) The legislature apparently intended

that use of public rights-of-way by a sanitary authority be

contingent upon its compliance with reasonable conditions

imposed by a city.

Because neither ORS 221.420 nor ORS 221.450

unambiguously express a legislative intent to preempt local

4

Specifically, the legislature was reacting to the then-recent circuit court

decision in Columbia River People’s Utility District v. City of St. Helens et al, No.

85-2236 (Columbia County Circuit Court, July 15, 1986). In that case, the circuit

court held that “the legislature has declared by inference that People’s Utility

Districts are not subject to franchise fees (excise taxes) such as defendant cities

desire to impose.” Id. at 3. The legislature passed HB 3021 “just [as] a legislative

emergency fix for the problem [presented by the circuit court case] and [did not

go] beyond that.” Tape Recording, House Committee on Environment and Energy,

HB 3021, Apr 22, 1987, Tape 122, Side B (statement of Larry Shaw). Specifically,

the legislature was told that the “bill only affects electrical utilities” and that

other entities, such as telephone cooperatives, were “not affected by this bill at

all.” Id. Because Columbia River was pending before the Court of Appeals at the

time, a representative noted that, if the cities wanted to continue their appeal “on

a home rule issue that says that the city has the right to [impose a fee]—that’s

up to them—but that issue stands aside from this bill. The home rule issue is

a little broader, I think, than what we are dealing with here.” Tape Recording,

Senate Agriculture and Natural Resources Committee, HB 3021, Apr 29,

1987, Tape 138, Side A (statement of Rep Bruce Hugo). Therefore, it appears

that the legislature did not intend HB 3021 to impact the home-rule authority of

cities, but, instead, merely to clarify that such a fee could be imposed on People’s

Utility Districts. See also ORS 221.415 (“Recognizing the independent basis of

legislative authority granted to cities in this state by municipal charters, the

Legislative Assembly intends * * * to reaffirm the authority of cities to regulate

use of municipally owned rights of way and to impose charges upon publicly

owned suppliers of electrical energy, as well as privately owned suppliers for the

use of such rights of way.”).

Cite as 357 Or 437 (2015) 457

action, and also because the statutes and legislative history

suggest that the legislature in fact did not intend to preempt

local governments from imposing such conditions on the use

of their rights-of-way by sanitary authorities, we conclude

that the franchise fee at issue in this case is not preempted

by state law.

D.  Reasonableness of the Fee

Finally, RVS argues that the Court of Appeals

erred in ruling that its argument challenging the reason-

ableness of the franchise fee was not preserved. RVS asks

that we remand the case to the trial court to resolve mate-

rial questions of fact relating to the amount of the fee that

may be imposed. See Eugene Theatre et al. v. Eugene et al.,

194 Or 603, 613, 243 P2d 1060 (1952) (fee “far in excess of

what might be deemed reasonably necessary for purposes

of regulation” is invalid). The city responds that the issue is

unpreserved because RVS’s complaint did not state a sep-

arate claim for relief regarding the amount of the fee and

RVS’s motion for summary judgment focused on whether

the city had authority to impose the fee, not whether the fee

was reasonable. On that basis, the city argues that the trial

court and the Court of Appeals properly declined to reach

the issue whether the amount of the fee was reasonable.

Even if the affidavits and cross-motions for sum-

mary judgment in this case “might provide a basis for an

amendment to the pleadings to make it an issue,” a court

may not “award relief outside the issues of the case.” Heintz v.

Sinner et ux, 232 Or 529, 533, 376 P2d 478 (1962). As noted,

RVS did not seek a declaration that the fee was unreason-

able in amount. Rather, RVS’s complaint asked the court to:

“1.  Declar[e] whether the ordinance * * * is valid and

whether RVS is required to collect and pay over the fee

described in said ordinance.

“2.  Grant an injunction prohibiting [the city] from col-

lecting the franchise fee * * *.

“3.  For other such relief as the court may deem

equitable.”

Moreover, RVS did not seek to amend its complaint during

or after the summary judgment proceedings.

458 Rogue Valley Sewer Services v. City of Phoenix

Here, as the trial court stated, “nothing in the

complaint * * * challenged the reasonableness of the fee, in

the event [the city’s] authority was upheld.” This court has

explained that

“a decree or judgment must be responsive to the issues

framed by the pleadings and a trial court has no authority

to render a decision on issues not presented for determina-

tion. In absence of amendment of the pleadings, evidence

received without objection will not provide a basis for such

a decree.”

Brown v. Brown, 206 Or App 239, 248, 136 P3d 745 (2006),

rev den, 341 Or 449 (2006) (internal quotation and cita-

tion omitted); see also Central Oregon Fabricators, Inc.

v. Hudspeth, 159 Or App 391, 403, 977 P2d 416, rev den,

329 Or 10 (1999) (trial court erred in granting relief on

unpleaded theory, where plaintiffs never sought leave to

amend pleadings). Because RVS did not move to amend the

pleadings, it was not error for the trial court to overrule

RVS’s objection to the proposed judgment.5 We conclude

that the trial court correctly declined to rule on an issue

not properly before it.

III. CONCLUSION

We hold that the city was authorized, under its

home-rule authority, to adopt the ordinance at issue in this

case. The franchise fee that the ordinance prescribes is not

preempted by state law. RVS did not present the issue of the

5

Although RVS acknowledges that its complaint did not state a separate

claim for relief regarding the amount of the fee, and that it did not otherwise

amend its pleading, it nevertheless argues that that issue was tried by consent

during the summary judgment proceedings. Under ORCP 23 B, “When issues

not raised by the pleadings are tried by express or implied consent of the parties,

they shall be treated in all respects as if they had been raised in the pleadings.”

ORCP 23 B; Navas v. City of Springfield, 122 Or App 196, 201, 857 P2d 867 (1993)

(“Generally, a trial court has no authority to render a decision on an issue not

framed by the pleadings. * * * ORCP 23 B states a limited exception to this rule:

if the parties expressly or impliedly consent, they may try issues not raised in the

pleadings.”). Here, the amount of the fee was discussed in the summary judgment

proceedings in connection with characterizing the ordinance as a tax or fee, but

not in seeking a declaration as to whether the amount of a fee was reasonable. We

therefore agree with the Court of Appeals that the issue of the reasonableness of

the fee was not tried by express or implied consent of the parties. Rogue Valley,

262 Or App at 201.

Cite as 357 Or 437 (2015) 459

reasonableness of the amount of the fee to the trial court in

its pleadings.

The decision of the Court of Appeals and the judg-

ment of the circuit court are affirmed.