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Multnomah Circuit Court ruling calls for 'true up' after EPA-ordered cleanup project is finished.

PORTLAND TRIBUNE FILE PHOTO - The U.S. Environmental Protection Agency is finalizing work on a Portland Harbor Superfund cleanup plan it estimates at $746 million, although some say it will cost a lot more.The City Council was justified in paying for most of the Portland Harbor Superfund costs so far with sewer ratepayer funds — and may use them to pay for the majority of the potentially higher cleanup costs required by the United States Environmental Protection Agency, according to a Multnomah County Circuit Court ruling released Thursday.

However, in the final ruling in the long running utility ratepayer lawsuit against the City of Portland, Judge Stephen Bushong also ruled the council must eventually "reallocate" all of the city's Superfund spending by assessing any other bureaus deemed liable contributing to the pollution.

Mayor Ted Wheeler said the ruling showed the council was acting responsibly with the resources of the Bureau of Environmental Services, which operates the city's sewer system and is overseen by Commissioner Nick Fish.

"Commissioner Fish and I share a vision for our utility bureaus that focuses on the responsible use of public resources. I am pleased that the Court agrees that Council has acted appropriately in its use of ratepayer funds," said Wheeler, who agreed the council will reallocate the costs once the process is farther along.

Ratepayer attorney John DiLorenzo said Bushong's affirmation of the reallocation process is important because it means the council's final spending decisions could end up back in his court.

"This means that the court will hold the City Council to a reallocation process among bureaus, that the City Council will perform it in the first instance subject to a challenge by the ratepayers," said DiLorenzo, who filed the lawsuit in 2011.

The EPA has released a preliminary $746 million cleanup plan that it is expected to finalize on Friday. Some harbor related businesses believe the final cost will be much higher, perhaps $1.5 billion to $2 billion or more.

In an earlier ruling, Bushong found that the City Charter requires that water and sewer ratepayer spending must be "reasonably related" to the missions of BES and the Portland Water Bureau and the Bureau of Environmental Services, which operates the city's sewer system and stormwater management programs. The lawsuit filed by several ratepayers charged that the council had illegally spent hundreds of millions of dollars over the years on projects and programs with little or no connection to the bureaus.

In a series of previous rulings on challenged spending, Bushong found in favor both both side. He sided with the ratepayers by finding that up to $14 million was spent illegally. Projects and programs included up to $9 million for work at Powell Butte not directly related to a new reservoir built there, $2 million for renovating Dodge Park outside the city limits, $1.1 million for creating "hydroparks" at water storage tanks, $650,000 for the public toilets known as Portland Loos, $550,000 on the now-defunct Voter Owned Elections program, and $400,000 for Hurricane Katrina relief.

"Next steps include appointment of a referee to make the detailed accountings and determination as to whether interest will apply to these amounts," DiLorenzo says.

In addition, after the lawsuit was filed, the council voluntarily paid the water bureau back $1.2 million for money spent on a new Rose Festival headquarters and paid BES back $950,000 for money spent on the long-stalled Centennial Mills redevelopment project.

But Bushong has ruled that a far larger amount of challenged spending was legal under the charter, including $6 million in BES funds used to buy an undeveloped portion of the River View Cemetery for a park and stormwater management.

The Superfund spending will easily be the largest single category of challenged spending by the time the cleanup is complete. The council has already spent over $58 million preparing for the EPA's final plan, with over $50 million coming from BES.

Lawyers representing the ratepayers had argued all of the costs should have been paid with unrestricted general fund dollars, with a final "true up" occurring when the project was complete. City attorneys argued that if Portland is liable for any of the cleanup costs, it will be because the sewer system dumped pollution in the harbor.

Although Bushong said there was "some logic" the ratepayer's position, he sided with the city in his Jan. 5 ruling, in part because it is premature to determine the extent to which the BES spending is "sufficiently related" to the city's sewer services.

"Accordingly, at this juncture, the court rules in favor of the City on the challenged Portland Harbor Superfund expenditures to date, subject to a future reallocation of all Portland Harbor Superfund costs among responsible city bureaus, agencies and funds and further consideration by the City Council on the extent to which the Portland Harbor Superfund costs should be borne by taxpayers and not sewer ratepayers," the ruling says.

Bushong also sided with the city on most of the remaining challenged expenditures in the suit. They include system development charges waived to encourage affordable housing, grants to nonprofit environmental organizations, and funds spent for public art.

However, Bushong ruled that BES funds provided to Portland Parks & Recreation for a number of years for such things as a tree inspector and a park ranger were not authorized by the charter. That amount has yet to be determined.

City attorneys have already said Portland will challenge Bushong's "reasonably related" before the Oregon Court of Appeals.

You can read the ruling here.

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