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West Linn explores new revenue streams

New regulations may produce income from water plant

West Linn is exploring the possibility of banking some cash off of the proposed Lake Oswego water plant expansion and pipeline installation.

Lake Oswego, through a partnership with Tigard, is planning to expand its water treatment plant in West Linn's Robinwood neighborhood and install a larger pipeline from the Willamette River all the way to the plant.

'The pipeline is anticipated to result in significant construction impacts and to occupy a sizable portion of the rights of way in which it is installed,' stated a Feb. 8 West Linn staff report to the city council. 'The project triggered staff's evaluation of current city regulations governing utilities.

Though West Linn may not literally own the roads, sidewalks and easements in the city, it still must manage them and can receive compensation for use of them from utility payments.

Historically, cities in Oregon granted franchises to utilities using the rights of way to provide services like electricity, gas, telephone and cable.

The franchise agreements set terms of use, including construction, restoration and permitting, and compensation for use of the property. A franchise agreement is a legal contract between the city and a utility that sets the terms of use of a right of way.

Some cities, including West Linn, are experiencing difficulties with franchise agreements, with utilities dragging their feet or outright refusing to renew agreements. West Linn is currently experiencing this with Comcast, whose contract expired in 2009.

Another complication with franchise agreements is that they can vary from utility to utility, so West Linn could have a different agreement with each utility, 'complicating staff's effort to manage permits, construction, restoration and inspection of work in the rights of way,' according to the report.

Because of the upcoming pipeline proposal, West Linn staff explained franchise options to the city council at its work session after its regular meeting Feb. 13.

The council was presented with three options to consider.

The first option is to create a new uniform regulation for right of way use that would govern over all utilities in the city.

The pros of creating a right-of-way ordinance include flexibility in compensation, security in legal obligation, the fact that each ordinance can be adjusted and fees can be scaled, better right of way management, the ease of amending and eliminating time and expense in franchise negotiations.

The downsides are that utilities can pass the costs on to customers, can challenge the city's authority and ordinances can be complex to manage.

'It can be complicated to first implement this,' said city attorney Pam Beery of Beery, Elsner and Hammond, adding that the League of Oregon Cities has a model ordinance on its website that the city could adapt.

The second option would be to devise a license fee or privilege tax that the city could apply without needing an agreement with the utilities. A privilege tax is a charge or fee for the use of operating within the city and using public rights of way. A privilege tax is adopted by city ordinance.

If the council goes with a privilege tax, it could charge a fee based on the linear footage of the pipeline, which is around 9,000 feet. Comparing what other cities charge per linear foot, ranging from $2.50 to $4.50 a foot, the city could stand to take in $22,500 to $40,500.

The benefits of a privilege tax are the ease of implementation, allowance for exceptions and potential revenue increases. The major con is that it does not address right of way management concerns.

'It does not have the robust protection,' Beery said.

The final option is a hybrid of both the first and second options.

'There's a huge range of what that could be,' said Chris Kerr, assistant city manager.

Currently, West Linn only applies a privilege tax of 1.5 percent to electrical utilities.

City code allows franchise agreements with solid waste and recycling collection, natural gas, electricity, telecommunications and cable television. The current agreements are with Portland General Electric, Northwest Natural Gas, Qwest and Comcast (which expired). The agreements range from 3.5 to 7 percent of income the utilities earns from West Linn customers.

'This is one area … we really need to have some mechanisms … to get appropriate usage fees,' said city councilor Jody Carson. 'I think it's a good thing to look at.'

The council has many questions to consider before deciding on a course of action. The council must determine the city's goals, consider all the option to achieve the goals and how to implement the changes.

'We will try to move fairly quickly through this process,' said city manager Chris Jordan to the council.

The council will further discuss franchise agreements at a future work session and then it will be placed on the council's agenda.




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