Jacksonville prevails in surcharge suit

JACKSONVILLE ' Oregon Tax Court has ruled against a dozen property owners who filed suit against the city's public safety surcharge ' with one exception.

Part or all of the money the city collected from June through October 2003 may violate property tax limits and therefore have to be refunded.

In his conclusion, Judge Henry C. Breithaupt ordered the case to be continued for further consideration of the appropriate remedy, if any, following application of Measure 5 limitations to the surcharge.

The surcharge was enacted in June 2003. But after facing a legal challenge by residents claiming the surcharge was an unconstitutional tax that violated property tax limitation measures 5 and 50, the city rewrote the ordinance in October 2003.

Measure 50, passed in 1997, sets a permanent tax rate for jurisdictions. Measure 5, passed in 1990, has a more complicated tax structure and is based on assessed property value.

— On the advice of City Attorney Kurt Knudsen, the City Council amended the surcharge to ensure it was a fee and not a tax. The amendment changed the fee burden from property owners to users, eliminated owner liability and lien provisions and added financial hardship relief and appeal rights.

The judge ruled the city proved its case in the Measure 50 challenge. But there are still questions regarding the fees collected between the surcharge's inception and its revisions, said City Administrator Paul Wyntergreen.

The judge will be determining the remedy, which may or may not include refunding surcharge money, said Wyntergreen.

Either way, Wyntergreen considers the judge's ruling a victory for the city.

Our amended surcharge withstood all tests and therefore is valid, Wyntergreen said. So that's a victory.

The citizens say the monthly fee is an end run around a failed November 2002 levy to fund police and fire. They hired Portland attorney Karen Williams, the daughter of one of the claimants, Al Reiss, who filed suit in September 2003.

The city says the surcharge is a necessary and legal funding source for both the fire and police departments, and fought back to protect its &

36;230,000 annual income source.

The plaintiffs have the right to request Breithaupt to reconsider his final order. If he declines, they can appeal to the Oregon Supreme Court.

With the fate of the surcharge still undecided, November's ballot brings another levy decision before Jacksonville residents. The city's public safety committee persuaded the City Council to place a five-year, &

36;230,000 fire department levy before voters.

The proposed levy would impose &

36;1.06 per &

36;1,000 of assessed property value, or &

36;212 a year on a &

36;200,000 home. The levy will go into effect only if the city does not ultimately prevail in its surcharge defense.

While the initial ruling is favorable for the city, said Wyntergreen, the final resolution is still unknown. What is known, he said, is that the lawsuit has cost the city &

36;20,000 in legal fees so far.

However, the city has also accrued close to &

36;300,000 in fees since the surcharge went into effect 16 months ago. The city has been allowed to collect but not spend the funds. They remain in an interest-bearing account awaiting final decision.

Unfortunately, we're still in limbo, said Wyntergreen. We have to assume the levy is still a valid proposal.

Williams is out of the office until Oct. 14, and attempts to contact plaintiffs were unsuccessful.

Reach reporter Sanne Specht at 776-4497 or e-mail .