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Clackamas County Circuit Court Judge Michael C. Wetzel: State law gives power to the Oregon City's elected commission, not to voters, to shut down the city's urban-renewal program

In voting for Measure 3-514, Oregon City voters thought that they were making the city give up its urban-renewal program, but a judge has ruled that state law overpowers the directive now in the Oregon City Charter to shut down the program.

Clackamas County Circuit Court Judge Michael C. Wetzel The judge's ruling essentially reduced Measure 3-514 to an advisory measure. Clackamas County Circuit Court Judge Michael C. Wetzel said that state law gives power to the Oregon City Commission, not to voters, to shut down the city's urban-renewal program.

Calling the measure constitutional (a ruling that went against the objections of the city's attorneys), Wetzel still affirmed the right of citizens to vote on a measure that is now part of the Oregon City Charter as Section 59E.

"I recognize that a majority of the voters of Oregon City adopted Section 59E, and I do not overturn their will lightly," Wetzel wrote. "If the citizens of Oregon City now wish to depart urban renewal, they will need to exit through the same door they entered, by utilizing the provisions of ORS chapter 457."

City Commission used this chapter of state law to adopt the downtown urban-renewal plan in 1990. A majority of city commissioners still supports using tax-increment financing for development projects in the downtown area, so they won't be willingly giving up on urban renewal. City Commission has authorized the spending of more than $180,000 in taxpayer money so far on legal fees to keep their right to use urban-renewal financing.

Wetzel declined to take a political position as to whether city commissioners should now follow the will of voters in shutting down the urban-renewal program.

"Of course, I express no opinion as to the wisdom of urban renewal or tax-increment financing, as those are policy decisions beyond the purview of this court," Wetzel wrote.

There were no big celebrations at City Hall due to the judge's decision, said Mayor Dan Holladay. The subdued attitude of city officials is in part due to an impending appeal from Measure 3-514 proponents, and in part due to the city's limited ability to spend urban-renewal dollars until the legal fight is over.

"The court merely affirmed that the law is what the law is," Holladay said. "Urban renewal is a tool in our toolbox, and you could say that urban renewal, especially the storefront grants, was a major part of the revitalization of downtown."

Co-chief petitioner John Williams said that the decision was actually a partial win for the proponents of Measure 3-514. Williams pointed out that the measure was ruled constitutional, so it will enshrined in the City Charter as a reminder to future city commissioners to encourage them to follow the state-authorized procedure for abandoning tax-increment financing schemes.

"It's important that we got the first part of that trial settled in our favor, and that was a big positive step," Williams said.

Limited victory

After the July 18 decision by Wetzel in circuit court, city attorney Bill Kabeiseman said, "Urban renewal is no longer constrained by the provisions that were added to the charter, so it can continue to operate as it was." 

In practice, though, it's still in the charter, and the city will have to keep in mind that it could go either way on appeal.

A small change will be implemented through the city's budgeting process. Normally, half of the budget for Oregon City's Economic Development Manager Eric Underwood and his assistant is paid for out of the urban-renewal budget. After the success of the urban-renewal measure with voters, Oregon City started paying their salaries entirely out of the general fund.

"After this [July 18] decision, that will revert back to being the case," Holladay said.

Although the mayor said that potential developers of the Rossman Landfill were encouraged to hear that state law is pre-empting the Oregon City Charter, Holladay doubted that the city would be able to start any major projects funded using urban-renewal dollars in this timeframe.

"I think we could, but it's unlikely that we would move forward on a major project while this is out on appeal," Holladay said.

City commissioners could be personally on the hook for a financial decision that goes against the appeals court. In Umrein v. Nelson (1984), the Oregon Court of Appeals said that substantial changes to urban-renewal plan without proper authorization could make the public officials who authorize such expenses personally liable.

"Those dollars [now going to the city's Economic Development Department] aren't big enough that they couldn't be paid back out of the general fund if we somehow lose on appeal," Holladay said.

Measure 3-514 proponents are looking forward to the Oregon Court of Appeals potentially giving teeth to the will of voters, both for urban renewal and for annexation of land into city boundaries. While Oregon City declined to join the fight to defend its citizens' rights to vote on proposed annexations, the concept of local control or home rule is hotly contested statewide.

Oregon City used to be one of many cities in state that required voter approval of proposed annexations, but Oregon Gov. Kate Brown signed legislation in March 2016 to limit voter-approved annexations. Joined by the League of Oregon Cities in a lawsuit to keep its voters' rights, the city of Corvallis lost in circuit court earlier this year. Corvallis appealed the state's pre-emption of annexation laws to the Oregon Court of Appeals.

"Somebody needs to make a definitive judgement as to what home rule really means," Williams said. "The general principal here is that home rule and the state's urban renewal chapter 451 are not compatible."

Oregon City's mayor said he was confident that higher courts would also affirm the right of city commissioners to make the decisions regarding urban renewal.

"The only way for John to change urban renewal is to go to Legislature," Holladay said. "I think he's going to lose on appeal as well."

Attorney fees

In January 2016, Oregon City had tried to revoke the right to circulate a legal petition for Measure 3-514. The city had itself approved the petition for circulation in May 2015.

Saying that the city had illegally attempted to infringe on the petitioners' constitutional rights, Wetzel cited a similar case in awarding attorney fees to the chief petitioners of the anti-urban-renewal measure.

"Similar to the plaintiff's in Umrein v. Heimbigner (1984), [the Oregon City] plaintiffs' statutory argument was pursued to vindicate plaintiffs' substantive initiative rights under the Oregon Constitution," Wetzel wrote.

Asked to quantify the judge's decision to award attorney fees, Williams said Oregon City was successfully sued for about $18,000.

Holladay said that asking the court to rule on the constitutionality of the measure was the only financially responsible thing for the city to do. He defended City Commission's decision to spend $166,029.14 in taxpayer money on legal bills since the measure was filed. He pointed out that the $18,000 in additional attorney's bills that the city will now have to pay its opponents' attorney is minimal compared to the overall legal bills.

Oregon City spent more than $50,000 between the time that the petition was originally filed in April 2015 and March 2016, just prior to a hearing determining that the city should not have reversed its decision to allow the petition ("Urban-renewal petitioners successfully sue Oregon City for attempting to block ballot measure," May 2, 2016). Public records show that the city has spent $115,373.64 since March 2016 (through April 2017, when the last hearings were held on the measure's constitutionality). To review the ballot measure for legality, write a ballot title/caption and draft an official summary of what the measure would do, less than $3,000 would be total legal bill that would have had to have been spent for a normal petition filed in a city in Oregon.

Williams questioned whether it's a financially smart decision for the City Commission to continue fighting the will of voters on legal grounds. He encouraged elected officials to close the urban-renewal district as voters intended when they voted for the measure.

"The real financial responsibility is obey the City Charter as amended and stop spending taxpayer money on more coffee shops, wine bars and downtown storefronts," Williams said. "Leave taxpayer money where it is intended to go: to schools, police, parks and public services."