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Qwest withholds fees owed to 50 cities

From wire and staff reports

PORTLAND - Despite a federal judge's oral ruling that franchise fees are legal, Qwest Communications International is withholding $2 million in payments to about 50 Oregon cities for use of public property until a written opinion is issued.

"We can't do anything until we see that written order," said Mary Healy, a spokeswoman for the Denver-based phone company.

The fees were due Friday, under an oral opinion that was expedited earlier this month by Federal Magistrate John Jelderks, who said a written ruling would follow.

Some cities have been counting on the fees to show up, having already budgeted them into city spending.

Ashland usually receives $200,000 in such fees annually from Qwest; Medford gets $600,000. Officials with both cities said they expect Qwest to appeal and the fees would not be included in their respective budgets.

Central Point Finance Director Bill Brugger told the Mail Tribune earlier this month that the city was expecting a roughly $80,000 payment from Qwest this month, and without it, budgeted spending for road work would have to be put off.

Qwest has yet to say whether it will pay the fees after the judge issues a written opinion, which Qwest is expected to appeal.

"We feel they are legally obligated to pay unless they are able to get the court to relieve them of that expectation," said Pamela Beery, a Portland-based attorney representing eight Oregon cities that have challenged Qwest. "The judge made a verbal ruling for a reason. Our view is he intended Qwest to respond to that verbal ruling."

The fees range from a $425,000 quarterly payment to Eugene, to a $900 annual payment to Adams.

Qwest challenged Portland's revenue-based franchise fees June 29, saying they violate the federal Telecommunications Act of 1996, as interpreted by an April appellate court decision involving a dispute between Qwest and Washington municipalities.

Since then, it has withheld millions of dollars in scheduled payments.

Qwest has said it would apply the court's ruling to all 88 cities, even though the lawsuit is only against Portland, to which Qwest pays about $6 million a year in fees.

In 2000, Qwest said, it paid Oregon cities between $12 million and $15 million in fees.

On April 2, the cities will ask Jelderks to order Qwest to show proof of the escrow account, Beery said.

"We've seen nothing to confirm it," Beery said. "What bank is it? How much is in it? How are they keeping track of the money?"