Opinion ID: 1254414
Heading Depth: 1
Heading Rank: 7

Heading: city authority

Text: The ratepayers and four municipalities, Bandon, Cascade Locks, Drain, and the Canby Utility Board, contend that the cities had no authority by charter or by statute to enter into the Participants' Agreements. The cities of Springfield, McMinnville and Milton-Freewater, along with WPPSS, defend their authority to do so. The trial court held as a conclusion of law that Municipal Participants do not have charter authority, either express or implied, to enter into the Participant's Agreement. More specifically, the court concluded that the agreements were a guaranty and a pledge of systems revenues to secure the obligations of WPPSS, and it held the agreements ultra vires because Municipal Participants do not have statutory or charter authority to enter into such guaranty, security relationship or pledge, nor do they have statutory or charter authority to exercise extramural powers. As stated earlier, it is inaccurate to treat the law of the cities' charter powers collectively rather than individually. To paraphrase what we said of debt limitations, the definition of charter powers is an individual matter for each city, a form of local legislation to be interpreted by the same means as any other legislation, including attention to the intent and purpose of those who adopted it. The briefs devote much space and attention to quotations from past opinions, which in turn quoted treatises quoting caselaw, on strict or liberal construction of charter powers. But such supposed judicial rules of construction, though fairly quoted, are of limited utility in interpreting a particular city charter. Again, charter authority is not a matter of common law, to be resolved by consulting case law or encyclopedic summaries of caselaw. Supra, pp. 1329-1330. Adoption of a charter is a political act of a particular community at a particular time. A court's decision that one city did not have authority to undertake a project does not decide whether another city has such authority, or the same city at another time. A city can write or amend its charter or ordinance to define for itself what functions and services it wants its agencies to perform, consistent with statutes and the constitution. Within those constraints, a city may empower its government to operate utilities, including the distribution or the generation of electricity, or it may deny or limit that power. An earlier case involving the sale of electric power by one of the present parties, for instance, hinged on a provision of the McMinnville city charter that allowed it to sell such power to citizens of the city and vicinity. Yamhill Elec. Co. v. City of McMinnville, 130 Or. 309, 274 P. 118, 280 P. 504 (1929). A charter also may specify whether it means to authorize only acts expressly mentioned, or others implied in order to achieve wider objectives, or perhaps specify different principles depending upon the function. In fact, the charters of several cities in this case contain directives that they be liberally construed. To repeat, under home rule these are political choices for the cities; they will not be imposed by courts in the name of judicial doctrines. The court can only try to determine what political choice is expressed or implied in the charter or other source of authority. Each of the cities here has charter provisions pertinent to the purchase of electricity. The Canby, McMinnville, and Springfield charters create separate utility boards or commissions. In the case of the Springfield Utility Board, whose authority is disputed by the Springfield ratepayers, the charter authorizes the board to act for the city in connection with all matters relating to the management, operation, acquisition, and financing of all electric ... properties now owned or hereafter acquired by the city of Springfield. The properties referred to may be either generating or distributing facilities. It is unnecessary to construe the properties as including electricity, because actions taken to secure a future supply of electric power plainly relate to the management and operation of a distributing system. Some of the other cities may have undertaken to distribute electricity under older terminology authorizing them to provide street lighting or furnishing their inhabitants with gas or other lights, or under more general authority to provide services for their citizens. Their authority to provide electric utility service has long gone unchallenged and is not challenged here. The opponents do not put in issue any of the cities' authority to provide electric service and to obtain the necessary electric power from others. Understandably, none of the cities themselves nor the ratepayers argue that any of the respective charters do not permit the city to operate an electric utility system, to acquire electric power from distant suppliers, or to secure such supplies by long term contracts. They deny only that the authority to contract for future supplies of power extends so far as to enter into the Participants' Agreements used in this instance. One of the arguments made by the opponents and accepted by the circuit court is that the agreements involve an extramural exercise of municipal power for which cities need authority from the state as well as from their own charters. They cite cases of an earlier generation that recited this rule in general terms, although the decisions rarely invalidated the particular activity in issue. See, e.g., City of Salem v. O.-W. Water Serv. Co., 144 Or. 93, 23 P.2d 539 (1933) (sale of city water outside the city authorized by law and charter); Yamhill Elec. Co. v. City of McMinnville, supra, 130 Or. 309, 274 P. 118 (1929) (same for sale of electricity); State v. Port of Astoria, 79 Or. 1, 154 P. 399 (1916) (sustaining legislation for operations of port). Richards v. City of Portland, 121 Or. 340, 255 P. 326 (1927), denied the city's power to sell water beyond its boundaries, but that was in defense against a claim of nonresident plaintiffs that the city was bound to sell them water, and in Yamhill Elec. Co. v. City of McMinnville, supra , two years later the court said that all expressions in the opinion in that case must be construed with reference to the issue there being tried. 130 Or. at 340, 274 P. 118. A broad generalization that a city has no power or authority beyond its borders does little to explain what constitutes an exercise of power or authority. It does not explain, for instance, why these terms apply to a city's sales of goods or services outside its borders more than to its purchases. Nor is it always clear whose interests the rule is meant to protect, that of the citizens who have authorized the city's action or that of the surrounding governmental entities and their inhabitants. Possibly the early opinions reflect concern about competitive encroachments by municipal enterprises or private business more than legal analysis. See, e.g., Yamhill Elec. Co., supra . Perhaps also the installation of permanent city facilities, even if accomplished by ordinary proprietary transactions, may sometimes represent an extension of the city's presence beyond its borders that should be authorized by the state rather than only the city's own citizens. See, e.g., Riggs v. Grants Pass, 66 Or. 266, 134 P. 776 (1913). Primarily, however, the concept of extramural power, power outside the walls, is relevant when a city undertakes to assert coercive authority over persons or property outside its boundaries. It has little relevance to a city's contracts or other consensual transactions in goods or services, although an exercise of eminent domain outside city limits, for instance, would be an exercise of extramural power. The opponents attack as extramural authority the provisions of the agreement that afford the participants certain privileges in supervising the construction and operation of the projects by means of a Participants' Committee. Without setting out these provisions here, we agree that they would be a significant exercise of authority if a city attempted to impose them upon any enterprise not its own. In such a case the location of the projects outside the city could be significant. But the cities did not impose these provisions on WPPSS as an exercise of municipal power. Rather, their inclusion in the agreement between WPPSS and the participants clearly was a safeguard designed to give the participants a means to protect their interests in the success and the cost of the new source of power that WPPSS was contracting to provide for them. If the agreements survive the other attacks made upon them, the cities needed no additional authorization to share this protective function merely because the projects would be built outside their boundaries. The circuit court also concluded that the agreements constituted an unauthorized guarantee of debts incurred by WPPSS, which were secured by a pledge of the municipal utility systems' revenues. We do not agree. In Part VI above, we discussed essentially the same characterization of the agreement in rejecting the contention that the agreements were a forbidden loan of credit to WPPSS. There we noted that any long-term contract to buy a supplier's unspecified output at a price tied to the supplier's cost might serve as the economic basis for financing the supplier's purchase or construction of the requisite facility, and that the opponents distinguished the present agreement from such a contract only because the participants unconditionally obligated themselves to pay their share of those costs even if WPPSS was unable to deliver any power in return. We were not persuaded that the legal character of the transaction (as a purchase contract or a loan of credit) should differ if the power plants were completed at great cost but produced only a small fraction of the expected electricity rather than none. A legal distinction between a little electricity and none is even less apparent when the issue is charter authority, because here we deal with grants of power to responsible city officials rather than the meaning of a limiting term such as loan of credit. If a city may commit itself to purchase at cost whatever a supplier using its best efforts can produce from facilities which will be financed in reliance on the city's contract, however small the production and however expensive the product turns out to be, then we see no reason why this authority stops at contracting to pay the costs if small and costly deliveries should turn out to be none at all. These agreements proved unwise in retrospect, and with the benefit of hindsight they may appear to have been unwise when made. But that is no reason to find them unauthorized. When a city has authority to provide electric power or other public services, that authority cannot well be construed to permit wise but to exclude unwise contracts. A long-term commitment to pay the cost of a needed source of supply could prove to be a financial calamity in many imaginable situations. A city might contract to assure itself of a supply of oil in a period of shortages and high prices only to have the market price collapse in a subsequent oil glut. (Conversely, if McMinnville in the Yamhill Electric Co. case, supra, had made a firm contract to sell power it considered surplus, it later might have found itself having to pay far higher market price to replace it.) A city college might enter a long-term lease in order to have an apartment building converted to a dormitory for which there turns out to be no student demand. A desert city in need of a water supply might contract with some other entity to cover the costs of drilling wells in search of such a supply irrespective how little water was found. In the first example the price is excessive, the second acquisition proves superfluous, and the third may produce nothing in return for the money, but with respect to the issue of the cities' authority they are the same in principle. What distinguishes the present case is only the magnitude of the sums involved. A separate question remains whether the cities gave an unauthorized guarantee of the obligations, not of WPPSS, but of their fellow participants, when their unconditional obligation to pay regardless of deliveries is coupled with their agreement to pick up the shares of defaulting participants up to 25 percent of each participant's original share. We return to that question below.