Council expected to pay $10 million to settle utility suit Wednesday
The City Council will pay $10 million to settle a long-running lawsuit that claimed it had illegally misspent water and sewer funds.
In a settlement announced Friday, Portland agreed to repay the water and sewer funds $7 million. Lawyers representing several ratepayers will receive $3 million.
The settlement was announced by Mayor Ted Wheeler, Water Commissioner Nick Fish, and ratepayer attorney John DiLorenzo. It will be formally considered by the council as an ordinance on Wednesday, Dec. 20.
The settlement requires the council to repay the water fund $5.54 million and the sewer fund $1.46 million with general fund dollars by Sept. 30, 2019. The Davis Wright Tremaine law firm where DiLorenzo works will be paid $3 million by Dec. 29, 2017.
The city does not admit any wrongdoing in the settlement. Nor is it obligated to accept an early ruling by Multnomah County Circuit Court Judge Stephen Bushong that the City Charter requires ratepayer spending to be "reasonably related" to the missions of the Portland Water Bureau and the Bureau of Environmental Service, which operates the city sewer system and stormwater management programs.
City attorneys had argued the charter gives the council more flexability in deciding how to spend utility ratepayer funds. Ratepayer attorneys had sought a stricter standard.
"I applaud Commissioner Fish, our City Attorneys, and all parties for ending a years-long dispute by
arriving at a fair settlement," Wheeler said in a prepared statement.
City Attorney Tracy Reeve said the settlement is a fair resolution after years of active litigation.
"While the City continues to respectfully disagree with some of the court's rulings in this matter, I am satisfied that this settlement is fair and equitable to the City and its ratepayers. I also believe that there is substantial value in resolving this matter without the inherent risk and time commitment of an appeal."
DiLorenzo said, "This settlement is fair for the ratepayers. It brings to a conclusion a 6-year effort to protect dedicated ratepayer funds. I thank Mayor Wheeler and Commissioner Fish for their good faith and take this as a sign that future City Councils will be circumspect when they approve expenditures from those dedicated funds, and will consider the spirit of Judge Bushong's rulings during the 6-year course of this case."
The suit charged the council was illegal using the water and sewer fund for pet projects and unrelated programs. Examples ranged from partial financing for the now-defunct Voter Owned Elections public campaign funding program to over $50 million already paid by BES to help study pollution in the Portland Harbor Superfund site.
On June 22 of this year, Bushong ruled that approximately 90 percent of the challenged spending was legal. However, he ordered the council to repay the two bureaus more than $17 million for ratepayer funds spent on several projects in violation of the charter.
The largest amount was over $5.5 million spend on a reservoir project in Powell Butte not related to the reservoir itself. It included over $1.2 million spent on a visitors center.
Other notable expenditures included a little more than $2.5 million in pass-through funds for Portland Parks & Recreation, over $2 million spent renovating Dodge Park in Clackamas County, and nearly $1.3 million spent on the public toilets known as Portland Loos.
Bushong also awarded bureau overhead charges for the disputed projects and 4 percent interest.
"I'm pleased that the Court upheld the vast majority of the City's investments — including on the Portland Harbor Superfund site — and that this settlement brings an end to years of expensive litigation. My top priority continues to be providing basic services at a fair price, and investing ratepayer dollars wisely," said Fish, who is in charge of both the water and environmental services bureau.
During the course of the suit, the council resolved a number of challenged expenditures. Among other things, it sold the so-called Water House that had been built with water funds as a demonstration project and reversed a land swap between the water bureau and Portland Parks & recreation that supported a new home for the Portland Rose Festival in Tom Mccall Waterfront Park.
You can read the settlement agreement here.