Title: Northwest Natural Gas Co. v. City of Gresham

State: oregon

Issuer: Oregon Supreme Court

Document:

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.
Jesse E. Cowell, Davison Van Cleve, PC, Portland, filed 
the brief for amici curiae Industrial Customers of Northwest 
Utilities and the Northwest Industrial Gas Users. With 
him on the brief were Melinda J. Davison and Edward A. 
Finklea.
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.