AT & T COMMUNICATIONS v. City of Eugene

• Decision Date: 31 October 2001
• Citation: 35 P.3d 1029,177 Or. App. 379
• Court: Oregon Court of Appeals
• Parties: AT & T COMMUNICATIONS OF THE PACIFIC NORTHWEST, INC., a Washington corporation, and AT & T Wireless Services of Oregon, Inc., a Nevada corporation, Respondents, v. CITY OF EUGENE, an Oregon municipal corporation, Appellant.

35 P.3d 1029

177 Or. App. 379

AT & T COMMUNICATIONS OF THE PACIFIC NORTHWEST, INC., a Washington corporation, and AT & T Wireless Services of Oregon, Inc., a Nevada corporation, Respondents, v. CITY OF EUGENE, an Oregon municipal corporation, Appellant.

16-98-12672; A105861

Court of Appeals of Oregon.

Argued and Submitted January 22, 2001.

Decided October 31, 2001.

William F. Gary, Eugene, argued the cause for appellant. With him on the briefs were Linda J. Kessel, Eugene, and Harrang Long Gary Rudnick P.C.

Stephen F. Crew, Portland, and Howard J. Symons argued the cause for respondents. With them on the brief were T. Chad Plaster, Ramis Crew Corrigan & Bachrach, LLP, and Mintz Levin Cohn Ferris Glovsky and Popeo, PC, Washington, DC.

Zachary W.L. Wright, Kristin Hazard Hamilton, Portland, and Tonkon Torp LLP, filed a brief amicus curiae for Oregon Telecommunications Association.

Sandra L. Arp filed a brief amicus curiae for League of Oregon Cities.

Before LANDAU, Presiding Judge, and LINDER and BREWER, Judges.

LANDAU, P.J.

At issue in this case is the validity of a City of Eugene (city) ordinance that imposes various fees and regulatory requirements on telecommunications providers that offer telecommunications services in the city. AT & T Communications of the Pacific Northwest, Inc. (AT & T Communications), and AT & T Wireless Services of Oregon, Inc. (AT & T Wireless), complain that the ordinance is preempted by state and federal law. The trial court agreed and entered summary judgment declaring the ordinance invalid and enjoining the city from enforcing it. The city appeals, arguing that the trial court erred in concluding that the ordinance is preempted by either state or federal law. We agree and reverse and remand.

I. FACTUAL BACKGROUND

The relevant facts are not in contention. The city is a home rule municipality, governed by a charter enacted by the people in 1976. Among other things, that charter grants the city the following authority:

"(2) The city has all powers that the constitution or laws of the United States or of this state expressly or impliedly grant or allow cities, as fully as if this charter specifically stated each of those powers.

"(3) In this charter no mention of a particular power may be construed to be exclusive or to restrict the scope of the powers that the city would have if the particular power were not mentioned. The charter shall be liberally construed, to the end that the city have all powers necessary or convenient for the conduct of its affairs, including all powers that cities may assume under state laws or the provisions of the state constitution regarding municipal home rule."

Eugene Charter, ch II, § 4 (1976).

Before 1997, the city regulated the use of its rights-of-way to provide telecommunications services by means of franchise agreements. Those agreements, some of which are still in force, typically grant each telecommunications service provider a nonexclusive privilege to use city rights-of-way to provide service. In exchange for the privilege to use the rights-of-way, the telecommunications service providers are required to pay a fee, calculated by the linear foot of communications facilities located within the city.

AT & T Communications is authorized to provide local and long distance telecommunications services throughout the state. It has been designated a "competitive telecommunications services provider" by the Public Utility Commission (PUC).¹ In 1988, AT & T Communications entered into a franchise agreement with the city to use local rights-of-way to provide long distance telecommunications services. The agreement runs for a 15-year term and, unless terminated earlier, will expire on April 11, 2003. AT & T Wireless provides cellular telephone service throughout the state as a "radio common carrier."² It has one tower located on public property in the city.

In 1997, the city adopted Ordinance 20083, which was codified at Eugene Code (EC) section 3.400 et seq., intended to create a "coordinated regional information infrastructure that provides accessible and affordable high-speed connectivity for citizens, public institutions, and businesses" by ensuring that rights-of-way are used efficiently and that the city is fairly compensated for the use of those rights-of-way. Two parts of the ordinance are pertinent to this case: its registration and its right-of-way licensing provisions.

The registration requirement applies broadly to any person who "engage[s] in any telecommunications activity through a communications facility located in the city." EC § 3.405(1). Such a person must register with the city and pay an annual registration fee equal to two percent of its "gross revenues derived from its telecommunication activities within the city." EC § 3.415(1). Revenues from the registration fee are used to "implement programs which will advance universal service, quality of telecommunications services, and protect the rights of consumers."

The right-of-way licensing provision applies to any person not operating under an existing franchise agreement who proposes to "construct, place or locate any facility in, upon, beneath, over or across any public right-of-way or on other public property" in order to provide telecommunications services. EC § 3.410(1). Such a person must submit a right-of-way license application that provides certain information to the city, including the identity of the applicant, a description of the services to be provided, the location of the proposed facility that will be located in or on the right-of-way, a description of the manner in which the system will be installed, the time required for construction, identification of the area to be served, and proof that the applicant is both financially capable and technically qualified to complete the project. Telecommunications Administrative Rule § 3.400C(2). The applicant also must pay a right-of-way licensing fee equal to seven percent of the provider's gross revenues derived from the provision of telecommunications services within the city. EC § 3.415(2). The license fee is intended to compensate the city for, among other things, the use of the rights-of-way, accelerated deterioration of streets, and the public inconvenience associated with telecommunications provider construction crews and equipment.

The revenues generated from the registration and license fees is kept in a separate subfund of the city's general fund. They are earmarked for covering the costs of the registration and licensing programs and paying for a number of new telecommunications-related construction projects, including updating and maintaining the public library's computer systems, purchasing a new live-scan fingerprinting system, and providing citizens with greater Internet access to city hall services.

AT & T Communications and AT & T Wireless initiated this action to obtain a declaration that the registration and licensing provisions of the ordinance are invalid. They alleged that the ordinance is preempted by various state and federal statutes and the state constitution, specifically:

(1) ORS 221.515, which authorizes local governments to impose a right-of-way tax on telecommunications carriers not to exceed seven percent of gross revenues earned within their boundaries;

(2) ORS 307.215, which prohibits the imposition of a tax "on amounts paid for exchange access or other telephone services";

(3) ORS chapter 759, which authorizes the PUC to regulate telecommunications services generally and, according to AT & T Communications and AT & T Wireless, leaves little authority to local governments;

(4) Former Article XI, section 11(g)(8)(a), of the Oregon Constitution, which, although repealed in 1997, AT & T Communications and AT & T Wireless contend invalidates the ordinance by virtue of its prohibition of new product or service taxation to fund services that previously were funded by ad valorem property taxation;

(5) Article IX, section 3, of the Oregon Constitution, which requires that "every law imposing a tax [must] state distinctly the purpose to which the revenue shall be applied;" and

(6) 47 USC § 253 (Supp 2001), which bars state or local regulation that prohibits or has the effect of prohibiting the ability of any entity to provide telecommunications service.

In addition, AT & T Wireless contends that the city's telecommunications ordinance violates 47 USC § 332 (Supp 2001), which prohibits state and local governments from regulating entry of and rates charged for commercial mobile radio services, such as cellular telecommunications.

AT & T Communications and AT & T Wireless moved for summary judgment. The city also moved for summary judgment. The trial court granted the motion of AT & T Communications and AT & T Wireless, denied the city's motion, and entered judgment accordingly. The court did not spell out the basis for its decision; that is to say, it did not explain which of the state or federal laws preempted the registration and licensing provisions of the ordinance.

II. PRELIMINARY ISSUE: JUSTICIABILITY

The city argues that, before we address the merits of the parties' contentions, we must address the extent to which there is a justiciable controversy. In particular, the city argues that AT & T Communications's and AT & T Wireless's challenges to the right-of-way licensing fee—as opposed to the registration fee—is not ripe, because neither party currently is required to pay the fee. According to the city, AT & T Communications currently is exempted from the right-of-way licensing fee requirement because it operates under a franchise agreement. As for AT & T Wireless, the city contends that it is not subject to the fee because it has interpreted the fee not to apply.

AT & T Communications concedes that it currently is exempt from paying the license fee. It argues that its challenge to the fee nevertheless is ripe because the franchise agreement is set to expire in little...